Intrepid Aviation prices; Ken Garff, Willscot on tap; Hi-Crush struggles; Party City weakens

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 30 – The domestic primary market saw some action on Monday with the forward calendar building.

However, the new paper did little to spur trading volume in the secondary space, which remained light, sources said.

Intrepid Aviation Group Holdings, LLC and Intrepid Finance Co. priced a downsized $500 million issue of three-year senior notes (/B/B+) at par with a coupon of 8½%.

While the new notes were seen above their issue price, they were slow to trade, sources said.

The forward calendar also grew with Ken Garff Automotive Group planning to price a $350 million offering and Willscot Corp. planning to price a $300 million offering of five-year senior secured notes during the July 30 week.

While the European primary market was quiet on Monday, the deals to price on Friday had mixed secondary performances with some seen well above and others hovering at their issue price.

The dollar-denominated paper to price last week remained in focus in the secondary space.

Hi-Crush Partners LP’s newly priced 9½% senior notes due 2026 (B3/B-) were “struggling” in secondary trading with the notes seen below their issue price, according to a market source.

While Party City Holdings Inc.’s new 6 5/8% senior notes due 2026 (B1/B-) were above their issue price, the notes continued to weaken from their initial high in the secondary market.

California Resources Corp.’s 8% senior notes due 2022 were again active and on the rise as the barrel price of West Texas intermediate crude oil for September delivery shot up more $1.30.

Goodyear Tire & Rubber Co.’s 4 7/8% senior notes due 2027 (Ba3/BB) were also up about ¾ point in active trading on Monday.

Intrepid Aviation downsized

Intrepid Aviation priced a downsized $500 million issue of three-year senior notes (/B/B+) at par with an initial coupon and yield of 8½ %.

The deal size was decreased from $515 million.

The initial yield printed on top of yield talk.

The coupon and yield would step up 50 basis points if debt to equity leverage is above 3.5-times in 12 months and step back down to 8½% when debt to equity leverage is below 3.5-times.

The debt to equity test starts with third quarter 2019 financials.

Jefferies was the left bookrunner for the debt refinancing deal.

Ken Garff Auto five-year deal

The active forward calendar saw a modest buildup on Monday.

Ken Garff Automotive Group plans to sell $350 million of high yield notes during the July 30 week.

Initial price talk has the deal coming with a yield in the 7¼% to 7½% area.

JP Morgan is managing the sale.

The Salt Lake City-based auto sales group plans to use the proceeds to fund the acquisition of Leucadia National Corp’s share of jointly owned Garcadia Auto Services.

WillScot secured dealerships

Willscot plans to price $300 million of five-year senior secured notes during the July 30 week.

Initial guidance has the deal coming with a yield in the 7¼% to 7½% area.

Deutsche Bank is managing the sale.

Proceeds, together with funds from other sources, will be used to finance the pending acquisition of Modular Space Holdings, Inc.

Intrepid’s short duration

Despite the lack of new paper in the secondary space, Intrepid Aviation’s newly priced 8½% senior notes due 2021 were slow to trade.

The notes were seen above their issue price at par ½ bid, par ¾ offered. However, only $12 million of the bonds were on the tape by late afternoon, market sources said.

“It’s three-year paper, what’s the point,” a market source said. Other sources also pointed to the short duration of the notes for their lack of demand in the secondary space.

The 8½% notes priced to refinance the company’s 6 7/8% senior notes due 2019 with holders of the 2019 notes most likely rolling into the new ones, a market source said.

Europe’s deals

The European primary market saw no new deals price on Monday. However, the euro-denominated paper to price in an active session on Friday saw mixed performances in secondary trading.

CEVA Logistics AG’s newly priced 5¼% senior secured notes due 2025 (B1/BB-) “flopped,” a market source said. The notes were seen trading at par.

CEVA Logistics priced a €300 million issue of the notes at par on Friday.

WFS Global Holding SAS’ two tranche issue of five-year senior secured notes (B3/B-) were mixed in secondary activity on Monday.

The 6¾% senior secured notes due 2023 were seen well above their issue price at 101 1/8 bid.

However, the floating rate notes were seen hovering at their issue price of par.

WFS Global priced €400 million of the fixed-rate notes at par and €260 million of Euribor plus 625 basis points floating-rate notes at par on Friday.

Schenck Process Holding GmbH’s 6 7/8% senior notes due 2023 (B3/B) were also seen well above their issue price at 98 bid. Schenck priced a €125 million issue of the notes at 97.01 on Friday.

Hi-Crush struggles

Hi-Crush’s newly priced 9½% notes due 2026 were among the most active in the secondary space on Monday. However, the new paper had a lackluster performance.

“They’re moving down,” a market source said.

The notes were seen at 99 1/8 bid, 99 5/8 offered with most trades around 99½, sources said. About $29 million of the bonds were on the tape by late afternoon.

“There’s some hair on it,” a market source said.

The high coupon of the notes in the current rate environment and their secondary market performance are indicative of some issues with the credit, the source said.

Other sources said the deal should have priced with a higher coupon.

Hi-Crush Partners priced a $450 million offering of the 9½% senior notes at par on Friday.

The yield printed at the wide end of the 9¼% to 9½% yield talk and well wide of initial guidance in the 8½% area.

Party’s over

Party City’s newly priced 6 5/8% senior notes due 2026 remained active in the secondary space although the notes continued to come in from their initial high after pricing.

The notes were seen at par ½ bid, par ¾ offered on Monday with most trades at par ½, sources said. About $24 million of the bonds were on the tape by late afternoon.

The notes were down another ¼ point from Friday.

Party City priced a $500 million issue of the notes at par on July 26.

The notes were initially at 101 bid, 101½ offered after breaking for trade but having been coming in since.

California Resources gains

California Resources 8% senior notes were seeing gains alongside the price of crude oil on Monday.

The 8% notes were up ¾ point as crude oil surpassed $70 a barrel. The notes were seen at 90 bid, 90½ offered with most trades around 90¼, a market source said.

About $12 million of the bonds were on the tape by late afternoon.

The price of crude oil was up $1.30 to settle around $70.13 on Monday.

Goodyear gains

Goodyear’s 4 7/8% senior notes due 2027 were also making gains in active trading on Monday. The notes were up about 1 point to trade at 91 3/8, according to a market source. About $12 million of the bonds were on the tape by late afternoon.

Goodyear reported second-quarter earnings prior to the market open on Friday that were in line with analyst expectations.

The 4 7/8% notes held onto their gains late in the session despite a report published in the late afternoon by Jalopnik stating the U.S. Department of Transportation’s Office of Inspector General had opened an investigation into Goodyear’s RV tires.

Negative Friday flows

The daily cash flows of the dedicated high-yield bond funds were negative on Friday, according to an investor.

High yield ETFs sustained $95 million of outflows on Friday.

Actively managed funds saw $20 million of outflows on the day.

Factoring those numbers, the dedicated high-yield bond funds have seen $24 billion of net outflows, or 7.9% of assets under management, in 2018 to Friday's close, the source said.

Indexes mixed

Three benchmarks for the high-yield secondary market opened the week mixed.

The KDP High Yield Daily index was up 11 basis points to close Monday at 70.44 with the yield now 5.87%.

The Merrill Lynch High Yield index crossed further past a 1% year-to-date return on Monday firmly planting itself in the black after several months in the red.

The index was up 5.3 basis points on Monday with the year-to-date return now 1.085. The index moved to the black on July 6.

However, the CDX High Yield 30 index saw losses on Monday. The index was down 22 basis points to close Monday at 106.92.

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