Uber, Nine Energy, JBS price; CBL active; Golden Nugget gains, Caesars drops; funds add $447 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 18 – The domestic and European primary market saw a burst of activity on Thursday after a quiet start to the week, although much of the new deal activity saw out-of-the-ordinary executions.

Uber Technologies Inc. privately placed an upsized $2 billion two-tranche offering of junk bonds.

The notes were allocated on Wednesday and freed to trade on Thursday.

While trading well above their issue price, the new paper saw light volume, which sources attributed to the secrecy surrounding the company’s financial information.

Nine Energy Service, Inc. priced a $400 million issue of five-year senior notes (B3/B) at par to yield 8¾%.

In an emerging market deal eyed by high-yield accounts, JBS SA priced a $500 million issue of 7% senior notes due Jan. 15, 2026 (Ba3/BB-/BB-) at 99.319 to yield 7 1/8%.

In the European primary market, UGI International, a subsidiary of UGI Corp., priced an upsized €350 million issue of seven-year senior notes (Ba1//BB+) at par to yield 3¼%.

While new paper from Uber was slow to trade, CBL Properties’ 5.95% senior notes due 2026 were among the most actively traded issue of the day.

The notes were making gains after the company announced a sale of one of its properties and plans for the redevelopment of locations occupied by Sears.

Golden Nugget, Inc.’s junk bonds were also active and making gains as Caesars Entertainment Corp.’s junk bonds dropped on news of a potential merger of the gaming companies.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw inflows of $447 million for the week ended Oct. 17, after a record-setting outflow the previous week, according to fund-flow statistics generated by AMG Data Services Inc.

The inflow dwarfed in comparison to the outflow of $4.928 billion seen in the week ended Oct. 10, which was the third largest outflow on record and the second largest outflow of 2018.

The cumulative outflow for the year now totals $22.07 billion, according to a Prospect News analysis of the reports by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division.

Uber completes private placement

Uber Technologies privately placed an upsized $2 billion amount of junk bonds in two tranches.

The deal included $500 million of five-year notes that priced at par to yield 7½% and an upsized $1.5 billion (from $1 billion) of eight-year notes that priced at par to yield 8%.

The overall size of the placement was increased from $1.5 billion.

Both tranches came on top of guidance that remained unchanged since word of the novel private deal hit the market a week ago.

Morgan Stanley was the placement agent.

In part, Uber's novel execution was undertaken in order to limit the circulation of the San Francisco-based ride sharing company's private financial information, sources say.

Ultimately, there was likely an element of reverse inquiry in the deal, a New York-based trader remarked, adding that investors who participated in Uber's $1.5 billion bank loan, earlier in the year, were believed to be seeking greater exposure to the credit.

The execution got the attention of issuers around the market who might benefit from the kind of discreet, exclusive invitation-only marketing Uber undertook, the trader said.

One of the names that came up in that context was Netflix, Inc., the source said.

JBS at a discount

JBS SA launched and priced a $500 million issue of 7% senior notes due Jan. 15, 2026 (Ba3/BB-/BB-) at 99.319 to yield 7 1/8% on Thursday, according to market sources.

The yield printed tight to initial price talk in the low-to-mid 7% area.

The deal played to real-money high-yield accounts in addition to emerging markets investors, sources said.

Joint bookrunner Barclays will bill and deliver. BB Securities, Bradesco BBI, BTG Pactual and Santander are also joint bookrunners.

The meat processing company, which maintains corporate headquarters in Sao Paulo, plans to use the proceeds to refinance the JBS SA 7¾% senior notes due 2020.

Nine Energy accelerates timing

Nine Energy Service priced a $400 million issue of five-year senior notes (B3/B) at par to yield 8¾%.

The yield printed in the middle of yield talk in the 8¾% area, and inside of initial guidance in the 9% area.

Timing was accelerated. The offer had previously been expected to remain in the market until Friday, sources say.

J.P. Morgan, Wells Fargo and Goldman Sachs were the joint bookrunners for the acquisition deal.

UGI upsizes

In the European market, UGI International, a subsidiary of UGI Corp., priced an upsized €350 million issue of seven-year senior notes (Ba1//BB+) at par to yield 3¼%.

The issue size was increased from €300 million.

The yield printed at the tight end of the 3¼% to 3½% yield talk.

Joint global coordinator and physical bookrunner BNP Paribas will bill and deliver.

Joint bookrunner HSBC Securities was also a joint global coordinator.

Credit Agricole, ING, Mediobanca, Natixis and SG were also joint bookrunners.

Proceeds will be used to pay off UGI International's credit facilities.

The additional proceeds resulting from the €50 million upsizing of the deal will be used for general corporate purposes.

The issuer is a European distributor and marketer of energy products, primarily liquified petroleum gas (LPG). It is a subsidiary of King of Prussia, Pa.-based UGI Corp.

Uber trades light

While Uber’s new junk bonds were trading well above their issue price in secondary activity, trading volume was light, which was a surprise given the size of the deal, sources said.

Uber’s 7½% senior notes due 2023 were quoted at 101 1/8 bid, 101 5/8 offered early in the session. They were changing hands between 101½ and 101¾ in the afternoon.

However, only $12 million of the bonds were on the tape by the late afternoon.

Uber’s 8% senior notes due 2026 were trading slightly higher than the shorter duration tranche.

The notes were seen at 101½ bid, 102 offered early in the session and were trading up to 101 7/8 in the afternoon.

While the 8% notes saw heavier volume with $23 million, sources were surprised by the lack of activity surrounding the notes given the deal’s size and the dearth of new paper in the market.

The secrecy surrounding the deal and the company’s financial information most likely dampened trading activity, a market source said.

“There was less talk abut the issue in general,” a market source said.

CBL Properties in focus

CBL Properties 5.95% senior notes due 2026 were among the most actively traded issue of the day with more than $53 million bonds on the tape by the late afternoon.

The 5.95% notes were making gains in the high-volume activity. They were seen up 1½ points to trade at 82 7/8.

The real estate company leased several of the properties in its portfolio to Sears. Six of those locations will close as part of Sears Chapter 11 bankruptcy filing.

There has been a smattering of headlines over the past few days related to CBL Properties future plans for the Sears locations with the belief the company will be able to charge higher rents, a market source said.

In addition to the headlines regarding its Sears locations, CBL Properties announced Thursday it had sold a community center in Georgia to United Properties Corp. for $16.5 million in cash, the source said.

Proceeds from the sale will be used to repay debt.

Gaming gains and losses

Golden Nugget’s 8¾% senior notes due 2025 were active and trading up in the secondary space as Caesars Entertainment’s 5¼% senior notes due 2025 were losing ground on news of a possible merger between the two gaming corporations.

The 8¾% notes were seen up about 5/8 point to trade at 105 3/8. They were at 104¾ bid, 105 offered on Wednesday. About $20 million of the bonds traded during Thursday’s session.

While not as active, Caesars’ 5¼% notes were down about 1 point, a market source said.

News broke Wednesday that Golden Nugget and Landry’s Restaurant owner Tilman Fertitta is in talks with Caesars about a potential merger.

The cash and stock deal values Caesars at $13.00 a share, CNBC reported.

Mixed Wednesday flows

The daily cash flows of the dedicate high-yield bond funds were mixed on Wednesday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $76 million of inflows on the day.

Actively managed high yield funds sustained $50 million of outflows on Wednesday, the source added.

The combined funds saw $447 million of net inflows on the week to Wednesday's close.

Indexes continue to drop

Three benchmarks for the high-yield market continued to slide on Thursday after all posted losses on Wednesday.

The KDP High Yield Daily index was down 8 basis points to close the day at 69.86 with the yield now 6.04%.

The index slid 1 bps on Wednesday after remaining flat at 69.95 on Monday and Tuesday. While flat, the yield gained 2 bps to rise to 6.01% on Tuesday.

The ICE BofAML US High Yield index dropped 20.3 bps with the year-to-date return now 1.583%. The index slid 5.7 bps on Wednesday after a gain of 17.6 bps on Tuesday and 9.1 bps on Monday.

The CDX High Yield 30 index dropped 48 bps to close Thursday at 105.77. The index was down 13 bps on Wednesday after a 46 bps gain on Tuesday. The index dropped 29 bps on Monday.

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