Dollar primary quiet, euro market busy; new Viacom, Ardagh bonds active; Intelsat jumps on merger talk

By Paul Deckelman and Paul A. Harris

New York, Feb. 27 – The high-yield primary market quieted down on Monday – or at least the dollar-denominated domestic portion of it.

Syndicate sources said there was new-deal action in the euro-denominated segment, with German industrial conglomerate Thyssenkrupp AG and French electrical equipment company Rexel SA bringing new issues to market. European metals company Nyrstar NV was heard planning to hit the road on Tuesday to market a seven-year transaction, with pricing expected later in the week.

Back in the dollar market, things were quiet, with many portfolio managers and other investment decision-makers in Florida this week for the annual J.P. Morgan High Yield Conference – although sources were saying that there could be some deals hitting the radar screens in the latter part of the week.

In the secondary realm, traders saw busy dealings in some of the new issues that came to market last week, notably the big two-part offerings from media giant Viacom Inc. and packaging manufacturer Ardagh Group.

There was also secondary market excitement away from the new-deal arena, as Intelsat SA’s various bonds moved up across the communications satellite company’s capital structure, on news reports that Japanese technology powerhouse SoftBank Group Corp. is in talks to merge its OneWeb Ltd. satellite start-up company with Intelsat – and pay down Intelsat’s hefty debt load as part of any transaction.

Statistical market performance measures turned mixed on Monday after having been mixed for two straight sessions before that; it was the indicators’ third higher session in the last five trading days.

ThyssenKrupp 1 3/8% print

Germany's ThyssenKrupp made the day's biggest take in what turned out to be a news-heavy session in the European primary market.

The Essen, Germany-based industrial group priced a €1.25 billion issue of 1 3/8% five-year senior bullet notes (Ba2/BB/BB+) at a 137 basis points spread to mid-swaps.

The spread priced through initial guidance in the mid-swaps plus 160 bps area.

The reoffer price was 99.588, rendering a yield of 1.461%.

Citigroup, Commerzbank, Santander and UniCredit managed the quick-to-market deal.

Rexel prices tight

Paris based Rexel SA talked a €300 million offering of seven-year senior notes (Ba3/BB-/BB) at par to yield 2 5/8%.

The yield printed tight to the 2¾% final yield talk, and through earlier talk of 3% to 3¼%.

Global coordinator BNP Paribas will bill and deliver. Credit Agricole CIB was also a global coordinator. BofA Merrill Lynch, HSBC and Natixis were bookrunners.

The electrical equipment company plans to use the proceeds to repay debt.

Elsewhere Naviera Armas SA announced that it privately placed a €50 add-on add-on to its floating-rate senior secured notes due 2023.

Nyrstar roadshow

Nyrstar NV plans to start a roadshow on Tuesday for a €350 million offering of seven-year senior notes.

The roadshow is scheduled to wrap up on Thursday.

Global coordinator Deutsche Bank will bill and deliver for the debt refinancing deal. Goldman Sachs is also a global coordinator.

NatWest and SG CIB are joint bookrunners.

BMO and Credit Suisse are co-managers.

Slow start in dollar market

The dollar-denominated remained quiet heading into the final session of February, in part because a sizable portion of the market's focus is JP Morgan Global High Yield & Leveraged Finance Conference, which was scheduled to start Monday in Miami.

That should change, sources say.

The present week could generate $6 billion of new issuance, a trader said, adding that much of it is expected to come during the latter part of the week, and some of it is expected to emanate from the JP Morgan conference.

Meanwhile in the crossover market Cheniere Energy Partners, LP’s wholly owned subsidiary, Sabine Pass Liquefaction, LLC began marketing a $1.35 billion private offering of senior secured notes due 2028 (Ba1/BBB-/BBB-) on a Monday investor call.

The deal, which is being transacted on the investment grade desk, is set to price later in the week, a trader said.

BofA Merrill Lynch is the lead.

ETFs see Friday outflows

The cash flows of the dedicated high-yield bond funds were mixed on Friday, the most recent session for which data was available at press time.

The high-yield ETFs sustained $285 million of outflows on the day.

The actively managed funds, however, saw $63 million of inflows on Friday.

The dedicated bank loan funds were also positive on Friday, seeing $153 million of inflows on the day.

Conference calms the market

In the secondary arena, a trader characterized Monday’s market as “a little sleepy.”

Besides the usual end-of-the-month considerations that routinely keep some investors on the sidelines and sitting on their returns until the calendar page turns, he noted that Monday marked the opening of the annual J.P. Morgan high yield bond and leveraged finance conference in Miami, always a highlight on the Junkbondland annual calendar.

“It’s the perfect time to host this event there” in warm and sunny South Florida, “at the end of winter,” the trader observed.

The conference, slated to last three days, always hosts a big crowd of portfolio managers and other investment decision-makers and usually results in lessened activity in the high yield market in the short term.

Friday deals move up

A trader saw Friday’s big two-part offering from Ardagh Packaging Finance plc and Ardagh Holdings USA Inc. “moving around,” particularly its 4¼% senior secured notes due Sept. 15, 2022.

He quoted the issue at 101¼ bid.

That was well up from the par level at which that $715 million tranche of notes had priced in a quick-to-market offering on Friday, after having been upsized from an originally announced $700 million.

A market source at another desk pegged those bonds at 101 3/8 bid, calling that up 5/8 point on the session, with over $23 million having changed hands.

He also saw the Luxembourg-based glass and metal packaging company’s add-on to its existing 6% senior unsecured notes due Feb. 15, 2025, at 102½, calling that about unchanged, with about $18 million having traded.

That $700 million addition to the company’s existing $1 billion of those notes priced on Friday at 101.5 to yield 5.761% and quickly moved up to around the 102 to 102½ bid context in brisk trading of more than $32 million.

A third trader saw the stand-alone 5.5-year secured notes at 101¼ bid, 101 5/8 offered, calling them up ½ point on the day.

He also saw the add-on notes unchanged at 102½ bid, 103 offered.

Friday’s other offering – from Cleveland-based aircraft components maker TransDigm Inc. – was seen by a trader up 3/8 point, at 102 1/8 bid, 102 5/8 offered.

Another trader located those bonds at 102¼ bid.

TransDigm priced that $300 million addition to its existing $450 million of 6½% senior subordinated notes due May 15, 2025 at 101.5 on Friday to yield 6.156%.

Viacom still very busy

Friday’s volume leader – the $1.3 billion two-part issue of hybrid junior subordinated debentures from New York-based movie and television program producer Viacom – remained active on Monday, traders said.

One saw its 5 7/8% due 2057 at 102 bid, up nearly 1¼ points on the day, on volume of more than $42 million, while its 6¼% debentures due 2057 were seen having eased slightly, around 1/16 point, to just under 100¾ bid. More than $24 million changed hands.

On Thursday, Viacom had priced $650 million of each series of notes at par. They had been particularly active on Friday, with over $100 million of each tranche having traded.

Intelsat improves sharply

Away from the new deals, a trader said that Intelsat’s bonds were easily the standout performers in Monday’s market.

“Intelsat, man, that’s the mother of all mothers,” he exclaimed, seeing the Luxembourg-based communications satellite company’s bonds gyrate around at higher levels in response to the news that Intelsat was in talks with SoftBank, which is looking to possibly merge its OneWeb Ltd. satellite start-up with Intelsat or perhaps another company in that same industry.

He saw the most active Intelsat bond, the Intelsat Jackson 7¼% notes due 2019 first print around 92¼ to 92½ bid, but then push as high as 97, before coming off that peak to end at 96 bid, with over $26 million traded.

Its 7¼% notes due 2020 rose nearly 7 points, to 93½ bid, with over $24 million of volume.

Intelsat’s 7¾% notes due 2021 were the big gainers on the day, jumping by 10 point to close at 54 bid, with over $7 million traded.

Indicators turn higher

Statistical market performance measures turned mixed on Monday after having been mixed for two straight sessions before that; it was the indicators’ third higher session in the last five trading days.

The KDP High Yield Daily index jumped by 10 basis points on Monday to close at 72.67, its fifth straight advance after one loss and six gains in a row before that. On Friday, it had firmed by 2 bps. Monday’s finish also marked its fifth successive new high point for the year and over the past 52 weeks.

Its yield came in by 4 bps to end at 4.94%, its fifth narrowing in a row and sixth such tightening in the last seven sessions. It had also narrowed by 1 bp on Friday.

The Markit CDX Series 27 High Yield index posted its first gain after two losses in a row, rising by 3/32 point to end at 107 11/16 bid, 107 23/32. On Friday, it had retreated by around that same amount. Monday was its third gain in the last five sessions.

The Merrill Lynch High Yield index rose by 0.153% on Monday, its sixth consecutive improvement after one loss and its 11th such upturn in the last 13 days. The index had risen by 0.011% on Friday.

The latest gain upped its year-to-date return to 2.833% – its sixth straight new peak level for 2017, up from the previous zenith of 2.675% on Friday.

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