NBTY prices $1.08 billion; new Protection 1 busy; Fortescue stays firm; oil names better

By Paul A. Harris and Stephanie N. Rotondo

Seattle, April 21 – The U.S. high-yield market saw a single new deal on Thursday but it was a substantial one: NBTY, Inc. priced $1.08 billion of 7 5/8% five-year senior notes.

Primary news also emerged about a roadshow start. PQ Corp. began marketing a $500 million offering of 6.5-year springing-maturity senior secured notes (B2/B+).

Meanwhile trading in the high-yield market on Thursday was dominated by recently priced deals, notably Protection 1’s $3.14 billion of 9¼% senior secured notes due 2023 that priced on Wednesday, according to traders. In addition to being busy, the Protection 1 notes also showed a firm performance, adding a point.

Away from those issues, there continued to be a fair bit of activity in commodity-linked credits, such as Fortescue Metals Group Ltd.

“Those have continued to trade well just because of what iron ore has been doing,” a trader said.

And while the name remained on an upward track in Thursday trading, the trader noted that the company’s bonds – and even some of the recently priced debt issues – gave back a little bit of the day’s gains, “just with what equities were doing.”

But even the troubled oil and gas space managed to post more ups than downs on Thursday, even as domestic crude oil prices gyrated throughout the session. Oil started the day higher after the International Energy Agency said production from non-OPEC producers would decline this year by the most in a decade, which would help rebalance the oversupplied market. But the commodity turned weaker after Genscape reported a build of over 840,000 barrels at the Cushing, Okla.-based delivery point.

Also tempering the IEA’s somewhat bullish report was comments made by Russia’s energy minister that indicated the country wanted to increase its production levels. Saudi Arabia was meantime threatening to push more of its product into the market as well.

NBTY prices tight

NBTY priced Thursday’s sole new issue in the United States, a $1,075,000,000 issue of 7 5/8% five-year senior notes (Caa1/CCC+) that came at par to yield 7.624%.

The yield printed at the tight end of yield talk in the 7¾% area.

Joint bookrunner Barclays will bill and deliver for the debt refinancing deal. BofA Merrill Lynch, Credit Suisse, Morgan Stanley, UBS, Jefferies and Mizuho are also bookrunners.

PQ starts roadshow

PQ Corp. began a roadshow on Thursday in Los Angeles for a $500 million offering of 6.5-year springing-maturity senior secured notes (B2/B+).

Citigroup is the left bookrunner. Credit Suisse, Morgan Stanley, JP Morgan, Jefferies, Goldman Sachs, Deutsche Bank and KeyBank are the joint bookrunners.

The notes are being issued with a springing maturity six months inside of Eco Services Operations LLC’s existing 8½% senior notes due Nov. 1, 2022 if those notes have not been refinanced.

Proceeds from the new deal will be used to refinance the existing PQ and Eco Services credit facilities and PQ’s second lien notes concurrent with the merger of PQ and Eco Services.

Elsewhere in the primary

Also in new deal news on Thursday, YUM! Brands announced that it would bring new bonds and loans. No syndicate names were disclosed in the press release. However look for Barclays to be involved, a portfolio manager said.

Elsewhere, Fresh Market is set to price its $800 million offering of seven-year first-priority senior secured notes due 2023 (Ba2/B) on Friday.

Books were scheduled to close at the end of business on Thursday.

Talk is 9½% to 9¾%. There is probably enough demand to get it done at the tight end, the portfolio manager said, but added there are some people who are pushing for more yield.

And RegionalCare Capella Healthcare is also marketing $800 million of senior secured notes due 2023 (CCC+).

There is no official talk or timing yet on that deal, although it is possible as Friday business, sources say.

The deal has been guided at 8½% but the market likes 8¾% better, the portfolio manager said.

Loxam upsized and tight

In the European session, Paris-based equipment rental company Loxam SAS priced an upsized €250 million issue of seven-year senior secured notes due 2023 (BB-) at par to yield 3½%.

The issue size was increased from €210 million.

The yield printed at the tight end of yield talk in the 3¾% area.

The deal was at par ½ bid in the secondary market, a source said.

Deutsche Bank managed the sale.

Loxam intends to use the proceeds to redeem its 7 3/8% senior subordinated notes due 2020.

$410 million inflows

Dedicated high-yield funds saw $410 million of inflows for the week to Wednesday’s close, according to Lipper US Fund Flows.

The lion’s share of that amount, $386 million, came into high-yield ETFs, a market source said.

The most recent inflow follows the previous week’s $84.6 million inflow.

Meanwhile dedicated bank loan funds were negative during the most recent week, sustaining $93 million of outflows during the week to Wednesday’s close.

New issues top activity

High-yield investors continued to focus on recently priced issues, market sources reported on Thursday.

From Wednesday’s business, Protection 1’s $3.14 billion of 9¼% senior secured notes due 2023 were deemed “by far the most actively traded [security] in [the high-yield] universe, by about $200 million.”

The trader who made the remark saw the debt ticking up “around a point” to 101 7/8. He added that the issue traded as high as 103.

Another trader agreed that the paper was “very active,” placing the issue at 101¾. He also noted that the bonds got as high as a 102¾ to 103 context before giving up some of the day’s gains.

As for deals priced Tuesday, Altice-Cequel/Suddenlink’s $1.5 billion of 5½% senior secured notes due 2026 were seen slightly weaker at 97 5/8.

The quick-to-market deal came on the heels of Altice Financing SA’s $2.75 billion offering of 7½% senior secured notes due 2026 on Monday. That issue saw “heavy volume,” a trader said, but ended unchanged at 101.

Fortescue firms

A trader said Fortescue Metals’ debt “continued to trade well” on Thursday.

He commented that that has been the trend of late, as iron ore prices have improved.

He said the 9¾% notes due 2022 ticked up to 107 on Thursday, before settling back in to 106½. That was up from a 105¾ to 106 ZIP code on Wednesday.

Another trader pegged the issue at 107.

“Some of these [mining] names just seem like they continue to trade better,” the first trader remarked.

That was true for Teck Resources Ltd., as its 5.4% notes due 2043 put on a point to close at 69½.

However, it was not the case for Freeport-McMoran Inc. debt.

A trader said the company’s 3.55% notes due 2022 fell 1½ points to 81¾. The 5.45% notes due 2043 meantime dipped a point to 72¼ and the 5.4% notes due 2034 declined over 2 points to 72½.

Oil debt trends up

Oil names were also mostly better on the day, even as oil prices traded off by the bell.

California Resources Corp.’s 8% second-lien notes due 2022 improved over a point to 60¼, one trader said. Another trader deemed the issue “a little bit better” at 60 bid, 60½ offered.

Sanchez Energy Corp. was also on the rise, as a trader said the 6 1/8% notes due 2023 gained 3½ points to close at 72.

At another shop, a market source saw Chesapeake Energy Corp.’s 6 5/8% notes due 2020 jumping 2½ points to 55.

Some oil names, however, failed to take advantage of the day’s firm tone.

A trader said WPX Energy Inc.’s 6% notes due 2022 were “on a lot of bid-wanted lists” on Thursday, following a downgrade from Standard & Poor’s. As such, the debt drifted off 1½ points to 86½.

Early in the day, crude prices were slightly better after the IEA predicted that non-OPEC production would slow this year by enough to rebalance the oversupplied market. However, oil eventually drifted off almost 1.5% after Genscape reported another build at the Cushing delivery point.

Also weighing on the commodity were comments made by Russian, Saudi Arabian and Libyan officials about the potential for their respective nations to up production.

For its part, Nigeria is planning to try to talk some of said producers down in an effort to reach a production freeze agreement at the next OPEC meeting in June.

Strength seen in high yield

Market indexes were slightly mixed on the day, trading up to just slightly off during the session.

Still, high-yield debt fared better than the equity markets.

The KDP High Yield Index rose to 67.44 from 67.4 on Wednesday. Yields meantime narrowed to 6.18% from 6.19%.

The CDX North American High Yield Series 26 Index, however, traded off a shade to 103.62 bid, 103.76 offered.

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