Drive-by parade rolls on as Sabre, Central Garden and Summit price; new deals active, higher

By Paul Deckelman and Paul A. Harris

New York, Nov. 4 – The high-yield primary market extended its November activity streak to three-for-three on Wednesday as several more new issues of dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers got done during the session.

And was the case on both Monday and Tuesday, opportunistically timed and quickly shopped drive-by offerings dominated the proceedings.

Syndicate sources said that Sabre Corp., a provider of technology solutions to the travel and tourism industry, priced $500 million of eight-year secured notes via a financing subsidiary.

Central Garden & Pet Co., a maker of lawn and garden and pet-care supplies, did $400 million of eight-year unsecured notes.

Traders said that both of those new bonds pushed above the 101 bid level when they were freed for aftermarket dealings but that the Central Garden & Pet bonds were by far the busier of the two.

Very late in the session came word of another unscheduled pricing, construction supplies maker Summit Materials, Inc.’s upsized add-on to its existing eight-year notes, although full terms were not immediately available and no aftermarket activity was initially reported.

The traders meantime saw very active dealings in many of the bonds that had priced earlier in the week such as Monday’s offerings from T-Mobile USA, Inc., Huntington Ingalls Industries Inc., Ally Financial Inc. and Goodyear Tire & Rubber Co., as well as Tuesday’s deals from units of CNH Industrial NV and Platform Specialty Products Corp., with most of those credits trading at solidly higher levels versus their respective issue prices.

Away from the new deals, Chesapeake Energy Corp.’s bonds were under pressure after the oil and natural gas producer reported lackluster third-quarter results, missing analysts’ expectations on earnings and revenues, and announced a reduction in its capital spending plans, the second such capex cut Chesapeake has been forced into so far this year by continued weak oil and gas prices.

Statistical measures of junk market performance turned lower across the board on Wednesday for the first time in more than a week after having been higher on Monday and Tuesday, mixed last Thursday and Friday and higher last Wednesday.

Sabre GLBL prices tight

Two deals priced during Wednesday's primary market session.

The combined take was $900 million.

Both deals came as drive-bys.

Neither was upsized.

Both priced at the tight ends of talk.

Sabre GLBL Inc. priced a $500 million issue of eight-year senior secured notes (Ba3/B+) at par to yield 5¼%.

The yield printed at the tight end of the 5¼% to 5½% yield talk.

Goldman Sachs & Co. was the left bookrunner. Morgan Stanley & Co. LLC, BofA Merrill Lynch, Deutsche Bank Securities Inc., Natixis and Mizuho Securities were the joint bookrunners.

The Southlake, Texas-based travel services provider plans to use the proceeds to redeem $235 million of its 2016 notes, with excess proceeds to be used for general corporate purposes including potential acquisitions and certain potential repurchases of common stock.

Central Garden & Pet

Central Garden & Pet priced a $400 million issue of eight-year senior notes (B2/BB-) at par to yield 6 1/8%.

The yield printed at the tight end of yield talk in the 6¼% area and inside of the 6½% to 6¾% initial guidance, a trader said.

J.P. Morgan Securities LLC, BofA Merrill Lynch and SunTrust Robinson Humphrey Inc. were joint bookrunners for the debt refinancing.

Elsewhere, Summit Materials was in the market with a $275 million add-on to its 6 1/8% senior notes due July 15, 2023 (expected ratings Caa2/B).

The deal was talked at 99 to 99.5, rich to earlier guidance 99, according to a trader.

The deal was expected to price on Wednesday, but no terms were available at press time.

Molina talk 5½% area

Looking toward Thursday's session, Molina Healthcare, Inc. talked its $500 million offering of seven-year senior bullet notes (Ba2/BB) to yield in the 5½% area.

The deal is set to price late Thursday morning.

SunTrust is the left bookrunner. BofA Merrill Lynch and UBS are the joint bookrunners.

Cabot Financial upsizes

In the European primary market Cabot Financial (Luxembourg) II SA priced an upsized €310 million issue of six-year senior secured floating-rate notes (expected B2/confirmed B+) at 99. The coupon is three-month Euribor plus 587.5 basis points.

The Euribor spread came the tight end of spread talk in the 600 bps area. The reoffer price came on top of price talk.

Global coordinator JPMorgan will bill and deliver. Goldman Sachs International and Morgan Stanley were also global coordinators.

DNB Nor, HSBC Bank, Lloyds TSB and Royal Bank of Scotland were bookrunners.

The West Malling, England-based financial services provider plans to use the proceeds to repay a bridge facility and part of its super senior secured revolving credit facilities drawings.

Worldpay talk is 3¾% to 4%

Worldpay Group plc talked a €400 million offering of seven-year senior bullet notes (Ba2/BB) to yield 3¾% to 4%.

Books close at 5 a.m. ET on Thursday.

Global coordinator Barclays will bill and deliver. BofA Merrill Lynch, Credit Agricole CIB and Credit Suisse are also global coordinators. BOC, Goldman Sachs & Co., Lloyds Securities Inc., Medio, Mizuho Securities, RBC Capital Markets Corp., RBS Securities Inc., UBS Securities LLC and UniCredit are joint bookrunners.

Inflows on Tuesday

The dedicated high-yield funds saw positive cash flows on Tuesday, the most recent session for which data was available at press time, a market source said.

High-yield exchange-traded funds saw $537 million of inflows.

However, ETFs were better sellers on Wednesday, according to a trader who closely tracks their activities. Watch for daily outflows from ETFs when the Wednesday numbers are reported on Thursday, the trader advised.

Meanwhile, actively managed funds saw $170 million of inflows on Tuesday.

Feast or famine?

In the secondary realm, a trader characterized the session as “pretty busy,” which was something of an understatement.

“The major focus was on the new deals,” he said. “Call it a new-deal feast,” as opposed to the new-deal famine of just a couple of weeks ago, when it seemed like hardly anything was getting done.

Central Garden roars higher

The new Central Garden & Pet 6 1/8% notes due 2023 were right near the top of the day’s Most Actives list, a trader said, estimating that more than $75 million of those bonds had changed hands. He pegged them in a 101 7/8-to-102 bid context.

A second trader saw the Walnut Creek, Calif.-based pet-care and lawn-and-garden supplies maker trading at 101¾ in a locked market.

And yet another market source saw two-sided markets at 101¾ bid, 102¼ offered – all up from their par issue price.

Traders saw considerably less action in the day’s other standalone deal, Sabre’s 5¼% senior secured notes due 2023, which had priced at par via the company’s Sabre GLBL financing unit.

One trader quoted the notes at 100 7/8 bid but said that he had only seen a couple of large-sized transactions.

A second said the bonds were being offered at 101¼, while a third located them at 101¼ bid, 101¾ offered.

None of the traders reported any immediate aftermarket activity Wednesday in Summit Materials’ $300 million add-on to its existing $350 million of 6 1/8% notes due 2023. The Denver-based building supplies company priced the notes after upsizing them from the originally announced $250 million.

CNH, Platform Specialty busy

One of the traders said that Tuesday’s offering of 4 3/8% notes due 2020 from CNH Industrial Capital LLC topped the Junkbondland volume leaders’ chart on Wednesday, with over $80 million traded.

He saw the notes last in a 99 3/8-to-99½ bid context after having traded as high as just below par earlier in the session.

Instead, he said, “they went home wrapped around issue [price].”

The Racine, Wis.-based company – the captive financing subsidiary of CNH Industrial North America and the latter’s ultimate parent, London-based CNH Industrial NV – had priced its $600 million quick-to-market issue at 99.446 to yield 4½%.

Tuesday’s other deal, the new Platform Specialty Products 10 3/8% notes due May 2021, pushed up to the 103 bid area, a market source said, calling it a 5/16 point gain on volume of over $59 million.

At another desk, a trader saw some of the notes trading at 102 5/8 bid early in the session, but by the end of the day, he was seeing them at 103 bid, 103¼ offered.

On Tuesday, they had been quoted in the 102½-to-103 bid area.

That was well up from the par level at which the West Palm Beach, Fla.-based specialty chemical manufacturer’s upsized deal had come to market earlier in the afternoon [ET] via special-purpose funding vehicle PSPC Escrow II Corp.

Another trader meantime saw the company’s existing 6½% notes due 2022 gain up ¼ point, at 89¼ bid, with over $24 million traded.

Earlier issues hold gains

Traders said that the four new drive-by deals that had come to market during Monday’s $4.35 billion primary pricing binge were pretty much holding onto the gains that they had notched in their initial aftermarket dealings following their respective pricings and on Tuesday.

All four were seen among Wednesday’s busiest bonds led by Goodyear Tire’s 5 1/8% notes due 2023. A trader saw the bonds at 101 5/8 bid, 102 1/8 offered, with over $40 million having traded.

A second called them ¼ point better on the day at 102 bid.

That was up from around 101¾ bid on Tuesday and well up from the par level at which the Akron, Ohio-based tire manufacturing giant had priced its $1 billion issue on Monday.

T-Mobile USA’s 6½% notes due January 2026 circulated between 101½ and 102 bid on Wednesday, a market source said, estimating the day’s trading volume at about $37 million.

While busy, that was considerably calmer than the more than $168 million that had been seen trading around on Tuesday, when the bonds had begun trading.

The Bellevue, Wash.-based wireless provider’s $2 billion offering had priced at par on Monday after doubling in size from the originally announced $1 billion.

A trader saw around $17 million of the Huntington Ingalls Industries 5% notes due 2025 trading Wednesday in a range of 102-to-102¼ bid.

That was about where the bonds had gone home on Tuesday, when over $70 million had changed hands.

The Newport News, Va.-based government naval contractor’s$600 million deal had priced on Monday at par.

Ally Financial’s 3¼% notes due 2018 were seen holding steady at around 99 7/8-to-par bid, with over $17 million having traded.

That was about the level they had been seen at on Tuesday, which in turn was not much changed from the 99.858 level at which the Detroit-based banking and auto loan company had priced its $750 million issue on Monday to yield 3.30%.

Chesapeake cuts capex ... again

Away from the new-issue world, a trader said Chesapeake Energy’s 5¾% notes due 2023 were “very active” on news the company had cut its capex budget for the second time this year.

The trader pegged the issue at 64, down nearly a point.

At another desk, a trader estimated the bonds ¾ point lower, also at 64 bid, on volume of over $36 million.

The first trader meantime saw its 4 7/8% notes due 2022 fall 1½ points to 63, while its 6 5/8% notes due 2020 waned almost 2 points to 68.

Another market source saw the 6 5/8% notes at 68½ bid, down a point.

And another source located the 4 7/8% notes at 62 5/8 bid, calling them down 1 7/8 points, with over $23 million having changed hands. He said the 6 5/8% notes were off by 1¾ points,at 68 bid, on volume of over $16 million.

Oklahoma City-based oiler Chesapeake cut its capex program for the year to $3.4 billion to $3.9 billion on Wednesday. In March, the company had dropped its budget to $3.5 billion to $4 billion, compared with previous estimates of $4 billion to $4.5 billion.

Additionally, Chesapeake reported a net loss of $4.69 billion, or $7.08 per share. That compared with a profit of $169 million, or 26 cents per share, the year before.

The loss included a $5.42 billion writedown on the value of certain oil and gas assets.

Adjusted loss per share came to 5 cents. Analysts polled by Thomson Reuters had forecast a loss of 13 cents.

Revenues came in at $2.9 billion, versus Wall Street’s expectations of $3.01 billion.

Production, however, was up 3%, when adjusted for asset sales. The company also increased its production forecast to 670,000 to 680,000 barrels of oil equivalent per day from 667,000 to 677,000 previously.

Chesapeake’s New York Stock Exchange-traded shares lost 15 cents, or 1.97%, ending at $7.46. Volume of 45 million shares was more than twice the norm.

Indicators turn weaker

Statistical measures of junk market performance moved lower across the board on Wednesday for the first time in more than a week. They were higher on Tuesday and Monday, mixed Friday and Thursday and higher last Wednesday.

The KDP High Yield Daily index was unchanged on Wednesday at 67.40, the level it had moved up to on Tuesday when it had gained 10 basis points, its second straight rise following declines last Thursday and again on Friday.

Its yield was also unchanged on the day, finishing at the 6.46% at which it had finished on Tuesday, when it had risen by 3 bps. It was the second unchanged yield in the last five sessions, having also been flat last Thursday.

The Markit Series 25 CDX North American High Yield index lost 11/32 point on Wednesday to close at 103¼ bid, 103 5/16 offered, after having moved up the three straight sessions before that, including Tuesday’s 3/32 point gain. Wednesday’s downturn was thus its second setback in the last five sessions.

And the Merrill Lynch North American Master II High Yield index eased by 0.002% on Wednesday after having finished up by 0.15% on Tuesday, its second straight gain, making the loss its second in the last four sessions.

That dropped the index’s year-to-date return to 0.442% from 0.444% on Tuesday, although it remained well above the index’s worst 2015 year-to-date deficit, the 3.069% of red ink recorded on Oct. 2.

Stephanie N. Rotondo contributed to this review

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