Tenneco drives by, gains in trading; Yum!, other recent issues gain; energy up as oil price jumps

By Paul Deckelman and Paul A. Harris

New York, June 6 – The high yield primary sphere opened the new week on Monday – the first full trading week in June – with one quickly shopped and well-executed offering of $500 million of 10-year notes from automotive components manufacturer Tenneco Inc.

Traders said that the new bonds were actively traded at higher levels when they hit the aftermarket.

Syndicate sources meantime reported two issues in the market for likely pricing this week, from computer maker Dell Inc. – which recently did a huge multi-tranche investment-grade-rated deal as part of the funding for an acquisition it is making – and from steel pipe and tubing manufacturer Zekelman Industries, Inc., the latter offering a secured deal that could get done as soon as Tuesday.

Among recently priced offerings, last week’s megadeal from fast-food giant Yum! Brands, Inc. was still whetting appetites in Junkbondland, with active trading at higher levels on both halves of that big deal.

Traders were also reporting brisk activity, at better levels, for such other recent offerings as those from real estate services firm Realogy Holdings Corp., and from nitrogen fertilizer manufacturer CVR Partners, LP.

Away from the new or recently priced issues, a jump in world crude oil prices was seen fueling gains in such familiar energy names as Chesapeake Energy Corp., California Resources Corp. and Sanchez Energy Corp.

Statistical market performance measures were higher for a second consecutive session on Monday, their fourth stronger session out of the last 10. They had turned upward on Friday, after having been mixed on Thursday and lower all around on Wednesday.

Tenneco tight to guidance

Tenneco Inc. priced Monday's sole junk deal, a $500 million issue of 10-year senior notes (Ba3/BB/BB+) that came at par to yield 5%.

The yield printed at the tight end of the 5% to 5¼% guidance, a market source said.

BofA Merrill Lynch was the left bookrunner for the debt refinancing deal. Barclays, Citigroup, J.P. Morgan, Morgan Stanley and Wells Fargo were the joint bookrunners.

Dell roadshowing junk

Dell Inc. began a roadshow on Monday for the speculative grade portion of its massive acquisition financing, a $3.25 billion two-part offering of senior notes (expected ratings Ba2/BB/BB+).

The deal is coming in tranches of five-year notes and eight-year notes, with tranche sizes to be determined.

Early guidance has the five-year notes coming with a yield of 6½% to 7%, and the eight-year notes with a yield of 7½% to 8%.

The deal was announced as Thursday, although it could come on Wednesday, according to a New York-based trader who added that the eight-year notes are seeing the greatest amount of investor interest, early on.

J.P. Morgan, Credit Suisse, BofA Merrill Lynch, Barclays, Citigroup, Goldman Sachs, Deutsche Bank and RBC are managing the sale.

On May 17 Dell priced $20 billion of investment grade-rated secured notes (Baa3/BBB-/BBB-) in six tranches.

Zekelman secured deal

Zekelman Industries, Inc. plans to price a $425 million offering of seven-year senior secured notes (Caa2/B) on Tuesday.

The deal was scheduled to roll out on a mid-morning investor conference call on Monday.

Goldman Sachs is the left bookrunner. JP Morgan is the joint bookrunner.

The Chicago-based company plans to use the proceeds, together with its term loan and cash on hand, to take out all of its outstanding 2018 notes, and for general corporate purposes and working capital purposes.

ContourGlobal €550 million

The European primary market rocketed into the new week with five new deal announcements and a buzz about a couple more high yield offerings in the wings.

Chalk up Monday's flurry to haste, on the part of issuers and dealers, who are keen to get business done before the June 23 “Brexit” vote – in which voters in England will decide whether or not to remain in the European Union – commandeers more attention and potentially throttles up volatility, a London-based debt capital markets banker said.

Next week, the June 12 week, may be too late due to the uncertainty of the vote, as the market parses the implications of a possible “exit” decision, the banker said.

On Monday, ContourGlobal Power Holdings SA began marketing a €550 million offering of five-year senior secured notes via Goldman Sachs.

The Luxembourg-based developer and operator of wholesale electric power generation businesses plans to use the proceeds to refinance debt, including its senior secured notes due 2019, and for general corporate purposes.

Monier roadshow

Braas Monier Building Group SA is conducting an investor roadshow for a €435 million offering of five-year senior of secured notes due 2021, according to a market source.

The roadshow is set to run through Wednesday, and the deal is expected to price thereafter.

BNP Paribas has the books.

The Luxembourg-based building materials supplier plans to use the proceeds, together with cash on its balance sheet and a draw on its revolver, to pay off its existing senior facilities agreement, redeem its outstanding senior secured floating rate notes due 2020 in full, and fund certain hedging agreements.

eircom starts roadshow

Dublin-based telecom eircom Finance DAC began a brief roadshow on Monday in London for a €350 million offering of six-year senior secured notes (B2/B/B+).

Joint global coordinator and joint bookrunner Deutsche Bank will bill and deliver for the debt refinancing deal. Credit Suisse is also a joint global coordinator and joint bookrunner. Barclays, BNP Paribas, DNB Markets, Goldman Sachs, JPMorgan and Morgan Stanley are also joint bookrunners.

Titan Cement five-year bullet

Titan Cement Co. SA plans to start a roadshow on Tuesday for a €250 million offering of non-callable five-year senior notes.

The HSBC-led deal is expected to price on Friday.

The Athens, Greece-based building materials company plans to use the proceeds to refinance debt.

Outokumpu secured deal

Outokumpu oyj is in the market with a €200 million offering of five-year fixed-rate senior secured notes.

An investor roadshow is underway and is expected to wrap up on Wednesday, with the deal pricing thereafter.

Danske Bank A/S and Nordea Bank Finland plc are the coordinators and lead managers for the offer. OP Corporate Bank plc, Skandinaviska Enskilda Banken AB, Svenska Handelsbanken and Swedbank AB are also lead managers.

The Espoo, Finland-based stainless steel producer plans to use the proceeds primarily to prepay debt.

In addition to the euro-denominated business above, Finland's Stora Enso oyj was scheduled to hold an investor call arranged by Deutsche Bank ahead of a possible deal.

And a Tuesday save-the-date from BNP Paribas circulated, the subject being a possible deal from a high yield industrial name.

Mixed flows on Friday

The dedicated high yield bond funds saw mixed cash flows on Friday, the most recent session for which data was available at press time, a trader said.

High yield ETFs sustained $30 million of outflows on Friday.

However actively managed funds saw $45 million of inflows.

Dedicated bank loan funds, meanwhile, were positive on Friday, seeing $55 million of inflows on the day.

Tenneco trades up

In the secondary market, a trader said that the issue of new Tenneco notes due 2026 was a standout performer when it hit the aftermarket, with over $35 million having changed hands, topping the high yield Most Actives list.

He saw the Lake Forest, Ill.-based automotive components manufacturer’s quick-to-market offering going home at 100¾ bid, up from the par level at which that transaction had priced earlier in the session.

Investors yearn for Yum!

Among the deals that came to market last week, the big two-part offering from fast-food chain operator Yum! Brands definitely remains on investors’ menus.

“Yum was pretty active today,” a trader said, locating both its 5% notes due 2024 and its 5¼% notes due 2026 in a 101 to 101¼ bid context.

At another desk, a market source said that the 5% notes were finishing up ½ point on the day at 101 3/8 on volume of about $35 million, putting the notes on a par with the new Tenneco paper, volume-wise.

He said that the 5¼% notes were 3/8 point better, also at 101 3/8 bid, with over $29 million having traded.

The Louisville, Ky.-based corporate parent of the KFC, Pizza Hut and Taco Bell fast-food restaurant chains had priced its $2.1 billion two-part offering – downsized from an originally announced $2.3 billion – on Thursday afternoon, breaking the week-long new-issuance drought that had begun the previous Friday.

The regularly scheduled forward calendar transaction was split into equally sized $1.05 billion tranches of the eight-year and 10-year notes, each pricing at par.

Investors showed a healthy appetite for the new bonds from the get-go.

A market source said that more than $46 million of the 5% notes traded during the relatively short time between their pricing and Thursday’s market close, and more than $55 million of the 5¼% notes. Most of the trades in both were in a 100½ to 101 bid context.

On Friday, demand for the notes increased, with over $105 million of 5¼% notes having traded, easily topping the day’s Most Actives list, and going home somewhere between 100 7/8 and101 bid.

More than $75 million of the company’s new 5% notes were also changing hands, trading in a 100 3/8 to 101 1/8 bid context.

CVR, Realogy active

Among other recently priced issues, the new CVR Partners 9¼% senior secured notes due 2023 inched up by around ¼ point, to 100¼ bid, a trader said.

He said that volume was around $12 million.

CVR, a Sugar Land, Texas-based producer of nitrogen-based fertilizer, and its wholly-owned CVR Nitrogen Finance Corp. subsidiary priced $645 million of those notes on Friday at 97.499 to yield 9¾ points, after the regularly scheduled offering was upsized from an originally announced $625 million.

More than $30 million of the new bonds had traded in initial aftermarket dealings on Friday, gaining more than 2 points from their deeply discounted issue price, to finish around 99 ¾ bid.

Going back a little further, Realogy Holdings’ 4 7/8% notes due 2023 gained ½ point on the day Monday to end at 99¼ point, with over $14 million traded.

The Madison, N.J.-based provider of real estate services had priced $500 million of the notes at 99.169 in a drive-by offering back on May 26, yielding 5%.

The notes have continued to trade around that issue price since then.

Oil gains boost energy bonds

Away from the new or recent deals, a trader noted that Chesapeake Energy’s 8% notes due 2022 “were fairly active today, on both volume and price action.”

He saw the Oklahoma City-based oil and natural gas exploration and production company’s notes up some 2 ¾ points, at 83 ¾ bid, with more than $21 million traded.

He also saw Los Angeles-based oiler California Resources’ 8% notes due 2022 about 1½ points better at 73½ bid, with over $18 million traded.

Sanchez Energy’s 6 1/8% notes due 2023 gained 1½ points to end at 72½ bid, on volume of over $16 million.

“I think it was a move in tandem with oil [prices]” he opined.

Major crude oil grades firmed smartly on Monday, after having posted losses on Friday.

West Texas Intermediate for July delivery jumped by $1.07 per barrel in New York Mercantile Exchange trading on Monday, ending at $49.69, while Brent crude for August delivery shot up by 91 cents per barrel on the London ICE Futures Exchange to settle at $50.55.

Indicators continue rise

Statistical market performance measures were higher for a second consecutive session on Monday, their fourth stronger session out of the last 10. They had turned upward on Friday, after having been mixed on Thursday and lower all around on Wednesday.

The KDP High Yield Daily index jumped by 16 bps on Monday to close at 67.62, its fifth gain in the last nine sessions, including a recent four-session winning streak. The index had been unchanged on Friday after having dropped by6 bps points on Thursday.

Its yield came in by 5 bps on Monday to 6.10%, its third narrowing in the last four sessions. The yield had also eased by 1 bp on Friday.

The Markit Series 26 CDX North American High Yield index posted its second straight gain on Monday, firming by almost 9/32 point to end at 103 7/32 bid, 103¼ offered. It had edged up by 1/16 point on Friday, after having suffered six straight losses, which, in turn, had followed four successive gains before that.

The Merrill Lynch North American High Yield Master II index rose by 0.377% on Monday – its third gain in a row after one loss , which in turn had followed eight straight upside sessions before that. On Friday, it had improved by 0.120%.

Monday’s gain raised the index’s year-to-date return to 8.598% – a second straight new peak level for the year so far. It was up from the previous zenith of 8.189%, reached on Friday.

Monday’s year-to-date return is the index’s highest closing level since Dec. 31, 2012, when the index had closed out the year with a 15.583% return.

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