Upsized Pilgrim’s Pride prices; new Beazer, Seven Generations, Avantor busy; steel strengthens

By Paul Deckelman and Paul A. Harris

New York, Sept. 26 – The high-yield primary market was quieter on Tuesday, with just a single U.S.-dollar, fully junk-rated deal heard by syndicate sources to have priced – poultry producer Pilgrim’s Pride Corp.’s upsized $850 million two-part offerings, consisting of an add-on to the company’s existing $500 million of notes due in March of 2025, as well as a brand-new tranche of 10-year paper.

Tuesday’s single deal stood in contrast to Monday, which had seen four separate issuers each bringing a single-tranche deal to market, generating nearly $1.38 billion of new paper, according to data compiled by Prospect News.

Among those Monday deals, traders saw robust trading volume in the new 10-year notes from builder Beazer Homes USA, Inc. – Junkbondland’s busiest credit of the day – and oil and natural gas producer Seven Generations Energy Ltd. There was also a fair amount of activity in Friday’s big two-part deal from Avantor, Inc.

Away from newly priced or recent offerings, traders reported that United States Steel Corp.’s bonds were better in busy dealings amid several news developments from the giant metals manufacturer.

They saw wireline telecommunications names such as Frontier Communications Corp. and Windstream Holdings, Inc. doing better – the latter credit firming even after the company reported having received a default notice from one of its bonds holders.

But energy names like California Resources Corp. were off, against a backdrop of lower crude oil prices.

Statistical market performance measures were higher across the board for a second consecutive session on Tuesday; those indicators had strengthened on Monday, after having been mixed on Friday and lower all around on Thursday.

Pilgrim's Pride upsizes

In a relatively quiet Tuesday primary market Pilgrim's Pride Corp. priced an upsized $850 million amount of senior notes (B1/BB-) in two tranches.

The deal included a $250 million add-on to the 5¾% senior notes due March 15, 2025, which priced at 102.00 to yield 5.42%. The reoffer price came at the rich end of the 101.5 to 102 price talk.

In addition, Pilgrim's Pride priced $600 million of new 10-year senior notes at par to yield 5 7/8%. The yield printed 12.5 basis points inside of the 6% to 6¼% yield talk.

The combined amount of issuance was increased to $850 million from $700 million.

Joint bookrunner Barclays will bill and deliver. Rabo and RBC were also joint bookrunners.

The Greeley, Colo.-based poultry producer plans to use the proceeds, including the additional proceeds resulting from the $150 million upsizing of the deal, to repay seller note financing that JBS SA provided to fund a portion of the Moy Park acquisition and for general corporate purposes.

Santander €1billion bank capital

A European primary market that has lately gone quiet after a burst of early September issuance – €7.5 billion in 14 tranches and £1.6 billion in five tranches in the first two weeks of the month – flickered to life with a couple of preferred deals on Tuesday.

Both were expected to be junk rated.

Banco Santander SA priced €1billion of 5¼% perpetual non-call-six additional tier 1 capital (expected Ba1) at par.

The deal was launched to the market earlier in the day with initial talk in the low-to-mid 5% area, and played to €1.7 billion of orders.

Joint lead manager BofA Merrill Lynch will bill and deliver. Barclays and BNP Paribas were also joint lead managers.

Aroundtown taps perpetual

Aroundtown SA priced a $200 million add-on to its perpetual non-call-six subordinated notes (S&P: BB+) at par to yield 5¼%.

Morgan Stanley and Goldman Sachs managed the deal.

The Luxembourg-based real estate company plans to use the proceeds to fund its growth strategy and to repay debt.

The European market is set to heat up in the week ahead, said a London-based syndicate banker who added that the Oct. 2 week should see three-to-four deals totaling €1.5 billon to €2 billion.

The following week, the week beginning Oct. 9, should be a truly big one, with as much as €10 billion of new issuance possible during the period, the banker added.

Beazer bonds busy

In the secondary sphere, traders saw considerable volume on the new 5 7/8% notes due 2027 from Beazer Homes USA, Inc.

Two different traders quoted the notes at 100 1/8 bid, with one of them calling that a 1/8 point loss on the day, with over $59 million of the new paper having changed hands, topping the junk market’s Most Actives list.

At another shop, a market source pegged the bonds in a 100¼-to-100¾ bid range.

Beazer, an Atlanta-based homebuilder, priced $400 million of those notes at par on Monday, after the quick-to-market issue was upsized from an originally announced $400 million.

Seven Generation stays active

Another busy name on Tuesday was Seven Generations Energy’s 5 3/8% notes due 2025, which a trader quoted at 100¾ bid, while a second saw the bonds having moved up 1/8 point on the day to end at 100 7/8 bid, with over $36 million having traded.

The Calgary, Alta.-based oil and natural gas exploration and production company priced a quickly shopped $700 million of those notes at par on Monday.

Other recent deals trade up

The traders also saw continued improvement in some of the other recently priced issues, including both tranches of Avantor, Inc.’s offering, which came to market last Friday.

A market source saw the company’s 6% senior secured notes due 2024 up nearly ¾ point on the day, at 102¾ bid, on volume of over $14 million.

The other half of that big deal – its 9% senior unsecured notes due 2025 – were even more active on the day, with over $42 million having traded.

Those notes finished up ¼ point at 101 bid, a trader said.

Avantor, a Central Valley, Pa.-based supplier of ultra-high-purity materials for the life sciences and advanced technology industries, priced $1.5 billion of the 6% notes at par in a regularly scheduled forward calendar offering, upsizing that tranche from $1.401 billion originally, while also pricing $2 billion of the 9% notes at par, downsized from $2.25 billion previously.

NextEra a little firmer

Going back a little further, NextEra Operating Partners, LP’s 4¼% notes due 2024 and its 4½% notes due 2027, were each seen up 1/8 point on Tuesday, ending at 101 7/8 bid and 102 bid, respectively.

The Juno, Fla.-based wind and solar energy generating company had priced $550 million of each of those notes at par in a quickly shopped two-tranche offering on Sept. 18.

At an investor conference on Tuesday, the company’s chief financial officer said that big bond deal, as well as recently completed offerings of convertible preferred shares and convertible debt, have given the company ample liquidity and financial flexibility to pursue its growth goals (see related story elsewhere in this issue).

Energy names off

Away from the new issues, a trader said that “the oil names that were up yesterday [Monday] came off a little today [Tuesday],” in line with lower crude oil prices.

He saw California Resources Corp.’s sector benchmark 8% notes due 2022 – which had zoomed by nearly 3½ points on Monday as crude prices climbed – giving back almost half of that, ending down some 1¾ point on the session at just over 65 bid.

More than $24 million of the Los Angeles-based energy E&P operator’s notes changed hands.

November-delivery West Texas Intermediate crude oil fell by 34 cents per barrel in New York Mercantile Exchange trading Tuesday – a far cry from Monday’s $1.56 per barrel gain. It settled at $51.88.

Steel strengthens

Elsewhere, U.S. Steels’ 6 7/8% notes due 2025 shot up by nearly 1 point on the day, ending at just under 102 bid, with over $37 million seen having traded.

The Pittsburgh-based steel giant on Monday announced that its Ohio-based joint venture with Japan’s Kobe Steel Ltd. will invest $400 million to boost output of a light and strong grade of steel favored by automakers, amid increased demand from Detroit for the alloy.

Speculation meantime swirled in the press that the company might be close to inking a pact to selling a plant in Slovakia to a Chinese buyer for as much as $1.4 billion – although U.S. Steel said that no decisions have been reached yet on that potential transaction.

Telecom trades up

A trader said that telecom names seemed firmer, with Frontier Communications’ 11% notes due 2025 up 1½ points at 83¼ bid, with over $27 million traded.

Windstream Holdings’ 7¾% notes due 2020 were likewise 1½ points better, at 78 bid, with over $24 million traded, as investors shrugged off news of a default claim filed against the wireline operator by a disgruntled holder of one of its other series of bonds.

Indicators continue gains

Statistical market performance measures were higher across the board for a second consecutive session on Tuesday; those indicators had strengthened on Monday, after having been mixed on Friday and lower all around on Thursday.

The KDP Daily High Yield Index edged up by 1 basis point on Tuesday to end at 72.33, its second consecutive gain; the index had also firmed by 5 bps on Monday, its first advance after two straight losses of 3 bps each on Thursday and Friday.

Its yield came in by 1 bp, to 5.11%, after having been unchanged on Monday at 5.12%. The yield had widened by 3 bps on Friday.

The Markit CDX Series 28 High Yield Index rose by over 1/8 point on Tuesday, closing at 107 5/32 bid, 107 3/16 offered, its third gain in a row. On Tuesday, it had finished up 1/32 point, and had improved marginally on Friday, following two straight losses.

The Merrill Lynch North American High Yield made it three advances in a row, moving up by 0.082% on Tuesday. It had also risen by 0.092% on Monday and by 0.015% Friday – its first gain after two straight losses .had broken an eight-session winning streak.

Tuesday’s rise lifted the index’s year-to-date return to 6.915%, its second consecutive new peak level for the year, surpassing the former peak, Monday’s 6.827% finish.

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