Mueller, Navient price, dominate trading; Rent-A-Center gains; funds lose $2.42 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 7 – The domestic high-yield primary market saw $950 million price in two deals on Thursday with one more on tap for Friday.

Navient Corp. priced a $500 million issue of eight-year senior bullet notes (Ba3/B+/BB) at par to yield 6¾% in a drive-by.

Mueller Water Products, Inc. priced an upsized $450 million issue of eight-year senior notes (Ba3/BB) at par to yield 5½%.

The new paper dominated activity in the secondary market after breaking for trade.

While both were seen above their issue price, Mueller’s new paper was the outperformer of the two deals, which sources attributed to the issuers’ respective industries.

Aleris International, Inc.’s $400 million offering of five-year notes is on tap for Friday.

Friday also promises to be a big day for the European primary market with Salt Mobile SA’s CHF 2,085,000,000 equivalent four-part offering of senior secured notes (B2/B+), which includes a dollar-denominated tranche, InterXion Holding NV’s offering of €1 billion of seven-year senior notes and Outokumpu Oyj’s offering of €250 million of six-year senior secured notes on tap.

Meanwhile, Albertsons Cos., Inc.’s newly priced 5.5-year senior secured floating-rate notes with a coupon of Libor plus 375 basis points continued to perform well in the secondary space with the food and drug retailer’s other junk bonds active and making gains on Thursday.

Rent-A-Center Inc.’s junk bonds were up 2 to 3 points on Thursday amid rumors that the long-anticipated buy-out of the company is approaching.

Navient drives by

Navient priced a $500 million issue of eight-year senior bullet notes (Ba3/B+/BB) at par to yield 6¾% in a drive-by sale on Thursday.

The yield printed in the middle of yield talk that was set in the 6¾% area.

Joint active bookrunner Barclays will bill and deliver. BofA Merrill Lynch and RBC Capital Markets LLC are also joint active bookrunners.

The Wilmington, Del.-based financial services company plans to use the proceeds for general corporate purposes including the financing of operations and debt repurchases.

Upsized Mueller prices tight

Mueller Water Products priced an upsized $450 million issue of eight-year senior notes (Ba3/BB) at par to yield 5½%.

The yield printed at the tight end of talk for a yield in the 5 5/8% area and inside initial guidance in the high 5% to 6% area.

The deal, which was led by BofA Merrill Lynch, was heard to be substantially oversubscribed, an investor said.

The Atlanta-based manufacturer and distributor of water infrastructure products plans to use the proceeds, together with cash on hand, to repay its senior secured term loan.

Existing bondholders rolling into Aleris

Aleris International talked its upcoming $400 million offering of five-year senior secured junior priority notes (Caa2/CCC+) to yield 10¾% to 11%, according to market sources.

Official talk comes inside initial price talk that was announced in the 11¼% area.

The deal is heard to be two-times oversubscribed and is seeing a significant roll from investors being taken out of the company’s 7 7/8% senior notes due 2020 and 9½% senior secured notes due 2021, which are being redeemed in the refinancing deal.

In addition to the announcement of price talk, the deal saw covenant changes.

Deutsche Bank is left lead. Barclays, BofA Merrill Lynch and JP Morgan are also bookrunners.

Big Friday for Europe

The Friday session in the European market could see substantial new issue business.

On Thursday, the market focused on Salt Mobile’s planned CHF 2,085,000,000 equivalent four-part offering of senior secured notes (B2/B+).

Books were scheduled to close Thursday morning, New York time, however there were no updates on the deal.

To recap, the Salt offer includes euro-denominated seven-year floating rate notes talked Euribor plus 350 to 375 bps with a 0% Euribor floor, Swiss franc-denominated seven-year fixed-rate notes talked at 4% to 4¼%, euro-denominated eight-year fixed-rate notes talk ed at the 4¾% area and dollar-denominated eight-year fixed-rate notes talked in the 7% area.

Tranche sizes were not announced on Thursday, market sources said.

The euro-denominated tranches were not going well and the company was looking to raise more capital with its single dollar-denominated tranche, according to an investor who declined to play in the deal.

Elsewhere on the European calendar, InterXion Holding had been scheduled to roadshow €1 billion of seven-year senior notes through Thursday.

And Finland-based stainless steel producer Outokumpu Oyj is marketing €250 million of six-year senior secured notes on a roadshow that was also set to wrap up on Thursday.

Mueller versus Navient

Mueller Water Products new 5½% notes due 2026 dominated secondary market activity after breaking for trade with the notes seen more than 1 point above their issue price.

The notes were changing hands between 101 and 101½, market sources said.

More than $61 million of the bonds had traded by late afternoon.

Mueller Water Products is a decent name with good credit in a stable industry, a market source said, in explanation of the notes’ secondary market performance.

“There’s not a lot in the water treatment area,” the source added.

Navient’s new 6¾% senior notes due 2026 were also seen above their issue price in high volume trading, although they did not reach the same heights as Mueller Water Products’ notes.

Navient’s 6¾% notes were seen trading between par ½ and par ¾ with more than $50 million of the bonds on the tape by late afternoon.

While both notes carry a Ba3/BB credit rating, Muller priced with a spread of 258 bps while Navient priced with a spread of 382 bps.

The difference in the pricing of the notes and their performance in the secondary space was attributed to their different industries, a market source said.

Navient is coming from the consumer financial sector which is not well liked by investors, the source said. “Consumer finance will be cheaper than other double B credits,” the source said, which is why Navient’s deal carried a higher coupon than the new notes from Mueller Water Products.

However, Navient is a “nicer deal” if you are comfortable with the industry, the source said. “I think it’s attractively priced,” the source said.

Albertsons strong and active

Albertsons new 5.5-year floating-rate notes carrying a Libor plus 375 bps coupon continued to perform well in the secondary market.

While the notes “came in a little,” they were still trading up to 1 point above their issue price, a market source said.

The notes opened at par 3/8 on Thursday and were seen trading between par ¼ and par ½. Albertsons priced the upsized $750 million issue at 99.5.

The amount was increased from $500 million.

While Albertsons’ other junk bonds were not active on Wednesday when the floating rate notes priced, there was movement in the structure on Thursday.

Albertsons’ 6 5/8% senior notes due 2024 saw decent trading volume on Thursday, a market source said. The notes were quoted up ½ point at 96 bid, 96½ offered.

Albertsons’ 5¾% senior notes due 2025 were up about ¾ point and were seen at 89½ bid, 90 offered, a market source said.

It was not clear if there was a correlation between the floating-rate notes and the activity in Alberstons’ other junk bonds, sources said.

Rent-A-Center gains

Rent-A-Center’s bonds were making gains on Thursday amid speculation that the rent-to-own company is nearing being acquired.

Rent-A-Center’s 6 5/8% senior notes due 2020 jumped about 3 points. They were seen at 98 bid, 99 offered. Last week, they were at 95 bid, 96 offered, according to a market source.

The 4¾% senior notes due 2021 were up about 2 points to 95½ bid, 96½ offered, the source said.

Rent-A-Center has been under pressure to sell, with activist investors Engaged Capital and Marcato Capital pushing for a buyout.

The company has been in talks with bidders that have included Cerberus Capital Management LP and Vintage Capital Management LLC. A final decision expected in the second quarter of 2018, thestreet.com reported.

Indexes mixed

Benchmarks for the high-yield secondary market were mixed on Thursday after all saw gains on Wednesday.

The KDP High Yield index was up another 10 bps to close Thursday at 70.63 with the yield now 5.84%. The index was also up 10 bps on Wednesday.

The Merrill Lynch High Yield index climbed further into positive territory on Thursday. The index was up 13.5 bps with the year-to-date return now 0.245%.

The index crossed into positive territory on Tuesday for the first time since May 15.

The CDX High Yield 30 index saw losses on Thursday that wiped out its gains from Wednesday. The index was down 29 bps to close Thursday at 106.54. The index was up 15 bps on Wednesday.

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