Shelf Drilling prices add-on; Albertsons, Aleris on tap; Hertz firms; Callon drops below par

By Abigail W. Adams

Portland, Me., June 5 – While the domestic and European primary market saw the forward calendar fill in on Tuesday, only one dollar-denominated add-on priced.

Shelf Drilling Holdings, Ltd. priced a $300 million add-on to its 8¼% senior notes due Feb. 15, 2025 (expected B2/B-) at a reoffer price of 101.

The 8¼% notes were active in the secondary market with the notes seen trading above the issue price of the add-on but below their previous levels.

Mueller Water Products, Inc. launched a $425 million offering of eight-year senior notes in a Rule 144A and Regulation S deal late Tuesday, according to a company news release. Further details were not available as of press time.

Whispers were heard for Albertsons Cos., Inc.’s $500 million offering of 5.5-year senior secured floating-rate notes, with pricing expected Wednesday, and Aleris International, Inc. set price talk for its $400 million offering of five-year senior secured junior priority notes, which are expected to price Wednesday or Thursday, according to market sources.

The forward calendar in the European primary market is also filling in with InterXion Holding NV announcing a roadshow that will run Wednesday and Thursday for a €1 billion offering of seven-year senior notes.

Meanwhile, the secondary space was firm on Tuesday, sources said.

CDK Global, Inc.’s newly priced 5 7/8% senior notes due 2026 (Ba1/BB+) remained active in the secondary space with the notes continuing to see gains.

After “sloppy trading” over the past few days, Hertz Corp.’s junk bonds stabilized on Tuesday with the notes bouncing back about 1 point after dropping 2 to 3, a market source said.

Callon Petroleum Co.’s recently priced 6 3/8% senior notes due 2026 (B3/B+) dropped below par on Tuesday after hovering at par since hitting the market on May 31.

Shelf Drilling prices

Shelf Drilling priced a $300 million add-on to its 8¼% senior notes due Feb. 15, 2025 (expected B2/B-) at a reoffer price of 101 plus accrued interest from Feb. 7, according to a market source.

The yield to worst is 8.022%.

Pricing came within official talk for a reoffer price of 100.75 to 101.25 and initial guidance, which was whispered in the 101 area.

Credit Suisse Securities LLC was left lead for the Rule 144A and Regulation S for life deal. RBC Capital Markets Corp., HSBC Bank plc and ING Bank NV, London Branch are also bookrunners.

The add-on was immediately fungible with the existing 8¼% notes, which saw more than $20 million bonds trade by late Tuesday.

The notes were trading between 101¼ and 102 and were seen quoted at 101½ bid, 102 offered, a market source said.

Prior to the add-on, the 8¼% notes were quoted at 102 bid, 103 offered, a source said.

“They got dragged down a little bit,” the source said.

On tap

While Tuesday saw no new deals price, Albertsons $500 million offering of 5.5-year senior secured floating rate notes is expected for Wednesday.

The notes were whispered at Libor plus 425 with an offer price in the 99 range, according to a market source.

BofA Merrill Lynch is lead left on the Rule 144A for life offering. Credit Suisse Securities LLC, Goldman Sachs & Co., Morgan Stanley & Co. Inc., Barclays Capital Inc., Deutsche Bank Securities Inc., RBC Capital Markets Corp., Wells Fargo Securities LLC and MUFG are joint bookrunners.

Aleris set official price talk for its $400 million offering of five-year senior secured junior priority notes in the 11¼% area, in-line with initial guidance that was whispered for a yield in the 11¼% area, according to a market source.

Deutsche Bank is left lead for the Rule 144A and Regulation S deal. Barclays, BofA Merrill Lynch and JP Morgan are also bookrunners.

The deal is expected to price on Wednesday or Thursday.

Europe’s forward calendar

While the European primary market saw no new deals price on Tuesday, two large deals are expected to price Thursday.

InterXion will begin a roadshow on Wednesday for a €1 billion offering of seven-year senior notes that will run until Thursday with pricing expected thereafter, according to a market source.

BofA Merrill Lynch is the lead on the Rule 144A and Regulation S deal. Barclays Capital Markets, ABN Amro Inc., Citigroup Global Markets Inc. and Credit Agricole are also bookrunners.

Matterhorn Telecom SA’s CHF 2,085,000,000 billion equivalent offering of senior secured notes in four tranches (expected B2/B+) is also on deck with pricing expected on Thursday.

CDK strong

CDK’s newly priced 5 7/8% notes saw another day of active trading in the secondary space with the notes continuing to see gains.

The 5 7/8% notes were seen at 101 3/8 bid, 102 1/8 offered on Tuesday with trades at 101 3/8, according to market sources.

The 5 7/8% notes were seen at 101¼ bid, 101¾ offered on Monday.

“They’re trading well,” a market source said. More than $25 million of the bonds had traded by late afternoon.

The notes’ strong performance in the secondary space was attributed to the appetite for new paper in the market combined with the strong credit rating of the company.

CDK priced $500 million of the eight-year senior at par in a drive-by sale on Monday.

Pricing came tighter than price talk and initial guidance that were both set in the 6% area.

Callon below par

While new paper from CDK was strong in the secondary space, Callon Petroleum’s new 6 3/8% senior notes due 2026 were becoming weaker.

The notes were seen quoted at 99 bid, 99¾ offered with trades around 99½, market sources said. The notes have largely traded at par since breaking for trade, sources said.

Callon Petroleum priced an upsized $400 million offering of the eight-year senior notes on May 31.

Pricing came at the tight end of talk for a yield of 6 3/8% to 6½%.

The initial deal size was $300 million.

Hertz firms

After some “sloppy” trading, Hertz’s junk bonds stabilized on Tuesday with the notes gemerally up about 1 point after previously dropping 2 to 3 points, a market source said.

Hertz’s 6¼% notes due 2022 were quoted at 89 bid, 89½ offered on Tuesday with the notes seen trading at 89 3/8, according to market sources.

The notes were active with about $18 million on the tape and up about 1 point after dropping as low as 87 bid, 88 offered on Monday. Last week the notes were quoted at 91 bid, 92 offered, according to a market source.

Hertz’s 7 5/8% notes due 2022 were also active with about $16 million of the bonds traded on Tuesday. The notes were also up about 1 point to trade at 97 3/8.

While not as active, Hertz’s 5 7/8% notes due 2020 were up about ¾ point to 96¾, the 5½% notes due 2024 were up about 1½ point to trade at 78¾, the 7 3/8% notes due 2021 were up about ½ point to trade at 97¼, and the 7 5/8% notes due 2022 were up about 2 points to trade at 98.

The trading activity did not appear to be driven by headline news, a market source said.

Indexes mixed

Benchmarks for the high-yield secondary market were again mixed on Tuesday, as they were on Monday and at the close of last week.

The KDP High Yield index was up 11 basis points to close Tuesday at 70.43 with the yield now 5.91%. Tuesday’s gains outpaced the indexes losses from Monday, when it was down 3 bps, and Friday when it was also down 3 bps.

The Merrill Lynch High Yield index crossed into positive territory on Tuesday for the first time since May 15. The index was up 8.5 bps with year-to-date return now positive at 0.028.

The CDX High Yield 30 index was down on Tuesday after two consecutive trading days of gains. The index was down 4 bps to close Tuesday at 106.68. The index was up 22 bps on Monday.

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