Dollar primary quiet to close $6 billion week, Europe active; Bombardier off again, Caesars up

By Paul Deckelman and Paul A. Harris

New York, Jan. 16 – The domestic high-yield primary sphere took a step backward on Friday to admire its handiwork over the previous four days.

No new junk-rated, dollar-denominated came to market during the relatively quiet session leading into Monday’s Martin Luther King Day holiday, which will see the debt markets in the United States closed.

That stood in contrast to Thursday, when syndicate sources saw $2.1 billion of new paper from domestic or industrialized-country borrowers get done in two tranches, as a pair of megadeals priced.

The lack of any new pricings on Friday left the week’s tally of new issues at just under $6 billion in nine tranches, according to data compiled by Prospect News.

That was well up from the $450 million of such bonds that had come to market in just two tranches the week before, ended Jan. 9, which had been the first junk bond deals of the new year.

The week’s activity lifted year-to-date issuance so far to $6.43 billion in 11 tranches, according to the data.

However, that was down more than 51% from the new-deal market’s red-hot pace a year earlier, when some $13 billion of bonds had priced in 19 tranches by this point on the calendar, the data indicated.

With no new deals having priced in the dollar space, the only pricing of the day came from across the pond, as London-based travel company Thomas Cook Finance plc brought a €400 million issue of six-year notes to market.

The financing unit of another British issuer, Asian-themed restaurateur Wagamama, was heard getting ready to hit the road with a five-year sterling-denominated offering.

Back on the domestic front, clean-energy company Terraform Power Operating, LLC, was also heard preparing to start a roadshow for an $800 million eight-year deal.

Among the deals which priced during the week, a trader saw intense activity in Thursday’s two new billion-dollar-plus issues, from drugmaker Valeant Pharmaceuticals International, Inc. and midstream energy company Targa Resources Partners LP.

Away from the new deals, German healthcare company Fresenius SE & Co. KGaA’s bonds firmed after Standard & Poor’s lifted its long-term corporate credit rating into investment-grade territory, although its senior unsecured notes remain in Junkbondland, for now.

Bombardier Inc.’s bonds were on the slide for a second consecutive session in the wake of its decision to delay the rollout of one of the aircraft lines it has been working on for the past several years as well as its lower full-year guidance for 2014.

Troubled gaming giant Caesar’s Entertainment Corp.’s bonds headed higher for a second straight session following the bankruptcy filing by the company’s main operating unit.

For a second straight session, statistical measures of market performance were mixed versus where they had finished the previous day. But those market measures were lower across the board from where they had finished the previous Friday – the first such weekly loss after four consecutive weeks of gains before that

Thomas Cook atop talk

Most of the primary market news came out of Europe on Friday.

Thomas Cook Finance priced the session’s sole junk deal, a €400 million issue of senior notes due June 15, 2021 (/B/B+) that came at par to yield 6¾%.

The yield printed on top of yield talk.

Global coordinator Credit Suisse will bill and deliver for the debt refinancing deal. Royal Bank of Scotland was also a global coordinator. Barclays, BNP Paribas, CM-CIC Securities, DNB, Jefferies, KBC, Lloyds, Nordea and SG CIB were joint bookrunners.

Wagamama sets roadshow

One deal was added to a substantial euro- and sterling-denominated calendar teed up for the week ahead.

Wagamama Finance plc plans to roadshow a £150 million offering five-year senior secured notes (B2/expected B-).

Joint bookrunner JPMorgan will bill and deliver for the debt refinancing deal. Goldman Sachs is also a joint bookrunner.

The European calendar

Wagamama joins Hydra Dutch Holdings 2 BV, the Netherlands-based holding company of water and coffee solutions provider Eden Springs, in the market with a €160 million offering of 4.25-year senior secured notes (expected ratings B2/B) via global coordinator Credit Suisse and jiont bookrunner Rabobank.

Elsewhere Wisconsin-based Techniplas BV was scheduled to begin a roadshow on Friday for its €135 million offering of five-year senior secured notes (B3/B).

That roadshow is scheduled to wrap up in Amsterdam and Paris on Wednesday.

Physical bookrunner Barclays will bill and deliver. IKB is also a physical bookrunner. SEB is a bookrunner.

There is also a €350 million tranche of notes in a deal from Miami-based Platform Specialty Products Corp., which is selling $920 million equivalent of seven-year senior notes.

TerraForm starts Tuesday

There was only one deal announcement from the dollar-denominated primary market on Friday

TerraForm Power Operating brought the dollar market’s sole new issue news when it announced plans to start a roadshow on Tuesday for an $800 million offering of eight-year senior notes, set to price late in the week ahead.

The deal is guided in a low- to mid-6% yield context, a market source said Friday.

Joint bookrunner Barclays will bill and deliver. BofA Merrill Lynch, Morgan Stanley, Goldman Sachs, Citigroup and Macquarie are also joint bookrunners.

The Beltsville, Md.-based clean power company plans to use the proceeds to partially fund the purchase price and recapitalization of First Wind Holdings Inc., and to refinance term loans.

The dollar calendar

TerraForm climbs aboard a reasonably busy dollar-denominated new issue calendar which is sized at $2.33 billion heading into the holiday abbreviated Jan. 19 week (foreshortened due to the Monday national holiday in the United States commemorating Dr. Martin Luther King, Jr.).

In addition to the above-mentioned €350 million tranche, Platform Specialty Products’ $920 million equivalent offering of seven-year senior notes (/BB-/) will also include a $500 million tranche.

The dollar piece is shaping up in the 7% area, according to a market source.

A roadshow in the United States is scheduled to get underway on Tuesday and the acquisition deal is set to price late in the week.

Credit Suisse, Barclays, Nomura and UBS are the joint bookrunners.

Elsewhere Presidio is in the market with a $400 million offering of eight-year senior notes (Caa1/CCC+) set to price during the week ahead.

The deal is in the market with initial guidance of 9% to 9½%, according to a market source.

Joint bookrunner Barclays will bill and deliver. Credit Suisse, Citigroup, Goldman Sachs and RBC are also joint bookrunners.

Koppers Holdings Inc. is marketing a $400 million offering of five-year senior notes (B1/B+) on a roadshow scheduled to wrap up on Wednesday.

The deal has early guidance in the mid-6% yield context, a source said.

Deutsche Bank, Barclays, BofA Merrill Lynch, Fifth Third, PNC, RBS and Wells Fargo are joint bookrunners.

And Angus Chemical Co. is on the road with a $225 million offering of senior notes due 2023 (Caa1/B), expected to price late in the week.

Early guidance is 8¾% to 9%, a source said on Friday.

Morgan Stanley, J.P. Morgan and Deutsche Bank are the joint bookrunners.

Day-to-day primary

Pressed for deal tips for the week ahead, several often-helpful syndicate officials turned out empty pockets on Friday.

All cited the situation in the energy sector where the dramatic fall in the price of crude oil has eroded prices of junk bonds in the oil and gas spaces.

And there is uncertainty ahead in the oil patch, sources say.

“Right now the new issue market is day-to-day because of all the volatility,” one debt capital markets banker remarked on Friday.

“Things went pretty well this week but as to whether the solid executions that we tended to see this week will carry over into next week is anybody's guess.”

Upcoming holiday stills market

In the secondary arena, participants said that things were fairly quiet heading into the three-day weekend produced by Monday’s Martin Luther King Day holiday, which will see the U.S. debt markets closed that day.

“We could use a holiday,” a trader said, quipping that “it’s been a long two weeks since the last one.”

There had been no recommendation by the Securities Industry and Financial Markets Association for an early close ahead of the holiday as there sometimes is in front of other looming holidays, such as Thanksgiving, Christmas and New Year’s Day.

And despite the holiday, it was a pretty much a regular schedule time-wise, with no great droves of people either making an early beeline for the exits or playing hooky altogether.

But that still did not translate into any kind of a robust session – the Finra/Bloomberg U.S .High Yield Index volume fell to $3.123 billion on Friday, down from $3.985 billion at the close on Thursday, and down even further from Wednesday’s closing volume of $5.054 billion.

Thursday names trade busily

Despite the overall market quietude, traders did see some activity in recent new deals.

One of them quoted Targa Resources Partners’ 5% notes due 2018 at 100 3/8 bid, calling those bonds about unchanged from their late levels Thursday after they had priced earlier that afternoon. He said volume in the new credit topped the $60 million mark.

A second trader pegged the bonds at 100 3/8 bid, 100 5/8 offered.

The Houston-based midstream energy company, along with its Targa Resources Finance Corp. subsidiary, had priced its $1.1 billion issue at par in a quick-to-market transaction that was upsized from the $800 million originally announced.

Montreal-based specialty pharmaceuticals producer Valeant’s new 5½% notes due 2023, were going home at 101¼ , which the trader said was down ½ point from where they had closed on Thursday in initial aftermarket dealings. He said that close to $100 million of the notes had traded around, making it easily the busiest junk credit of the day.

At another desk, those bonds were seen going out at 101¼ bid, 101 5/8 offered.

Valeant had priced its regularly scheduled $1 billion offering at par and it subsequently moved as high as 101 bid, 101½ late in the day on Thursday.

The week’s other megadeal – Nashville-based hospital operator HCA Inc.’s $1 billion of 5 3/8% notes due 2025 – continued to trade at a hefty premium to their par issue price as trading desks headed for home.

A trader placed the bonds at 102½ bid, 103 offered, and a second also suggested that figure.

The company had priced its $1 billion transaction – the first really big deal of the new year – at par on Tuesday, after upsizing it from the originally announced $750 million. It immediately shot up to 101¾ bid, 102¼ offered when freed for aftermarket dealings and continued to firm further to above the 102½ level.

“They got as good as 103 to 103¼ bid,” a trader said. “Then they traded back down to 102½ – so they were trading pretty well.”

Fresenius bonds firmer

Away from the new deals, a trader said that Fresenius Medical Care AG & Co. KGaA’s 4¾% notes due 2024 had pushed up by more than 3½ points on the session to go home at 104 bid. He saw more than $5 million of those notes having traded.

The Bad Homburg, Germany-based kidney dialysis services provider’s paper popped after Standard & Poor’s raised its long-term corporate credit rating on Fresenius Medical Care and corporate parent Fresenius SE & Co. KGaA to BBB- from BB+, with a stable outook.

S&P assigned an A-3 short-term rating to both companies.

At the same time, S&P affirmed the BBB- issue ratings on the companies’ senior secured debt instruments and the BB+ issue ratings on their senior unsecured debt instruments.

S&P said the upgrade reflects, in part, an opinion that the group’s financial policy will now be less aggressive, based on management’s explicit statement to S&P that it intends to stabilize debt close to current levels.

Bombardier bopped again

On the downside, Canadian aerospace and railroad equipment maker Bombardier’s 4¾% notes due 2019 fell to 92 bid, a drop of 3 points. That came on top of Thursday’s 5 point plunge in heavy trading.

A trader said the company’s other bonds, such as the 6 1/8% notes due 2023 and the 6% notes due 2022, were also down another 3 points on Friday, in addition to the 5 points they lost on Thursday. He said volume in the 6 1/8s, which topped $100 million during Thursday’s sell-off, was about $20 million on Friday.

That slide began on Thursday after the planemaker announced a pause in the development of its new Learjet 85 medium-sized business jet, citing weaker demand for the aircraft.

That will lead to the loss of about 1,000 jobs at Learjet factories in Wichita, Kan. and in Mexico.

The company also issued lower guidance for its 2014 fiscal year ended Dec. 31 after taking a $1.4 billion fourth-quarter charge connected with Learjet.

Caesars climb continues

Back on the upside, traders saw Caesars Entertainment paper heading higher for a second straight session, although volume was not anything huge.

A market source saw its Caesars Entertainment Operating Co. 12¾% notes due 2018 rise by 2 points to end at 17½ bid, while its 10% notes due 2018 also ended at 17, up 1¾ points on the day. Volume was about $2 million.

More than $7 million of its 10¾% notes due 2016 had pushed up to 20¼ bid, a nearly 2 point gain on the day The bonds had risen about ½ point on Thursday.

“They’re up from where they had been,” a trader said, “but the volume was not a whole lot.”

He said that some of its paper, such as the 11½% notes due 2017 and the 9% notes due 2020, continued to trade in the 70s, “reflecting their better status in terms of security for the holders.”

With all of the bonds across the company’s capital structure having risen in the two sessions since Caesars’ announced that it was putting the operating company into Chapter 11 to restructure its $18 billion of debt, the trader noted that “that puts them in default,” causing the bonds to trade flat, or without their accrued interest, resulting in a nominal price rise.

Indicators mixed on day

Statistical indicators of junk market performance were mixed for a second consecutive session on Friday; they had turned mixed on Thursday, after having been lower on Wednesday. Friday was the third session in the last four that those market measures have been mixed.

However, they were down across the board versus where they had finished the previous Friday – the first such weekly loss seen after four straight weeks of Friday-to-Friday gains.

The KDP High Yield Daily Index moved up by 3 basis points to close at 70.67, on top of Thursday’s 4 bp gain, which had followed an 18 bp plunge on Wednesday.

Its yield was unchanged on Friday, after having come in by 1 bp on Thursday to 5.62%. It had widened by 6 bps on Wednesday.

Those levels compared unfavorably with the 70.75 index reading and 5.59% yield seen at the close of the previous week on Friday, Jan. 9.

The Markit Series 23 CDX North American High Yield Index posted its first gain after five consecutive losses, rising by 3/8 point on Friday to finish at 105 3/16 bid, 105¼ offered.

But it was down from 105 19/32 bid, 105 5/8 offered the previous Friday.

The Merrill Lynch U.S. High Yield Master II Index, though, lost 0.087% on the day Friday, after having risen by 0.097% on Wednesday.

Friday’s loss dropped its year-to-date return figure back into the red, down a cumulative 0.064% so far this year, after having shown a 0.023% year-to-date gain on Thursday.

For the week, the index was down by 0.297% – its first weekly loss after four straight weekly gains, including last week’s 0.212% rise, which had left its year-to-date return at 0.234%.

© 2015 Prospect News.
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