TransDigm, Merlin price; Consolidated Energy on tap; recent deals mixed; McDermott gains continue

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 2 – The domestic primary market remained active on Wednesday with two deals pricing and two more expected on Thursday although the forward calendar has thinned.

TransDigm Group Inc. priced a $500 million issue of TransDigm UK Holdings plc eight-year senior subordinated notes (B3/B-) with a coupon of 6 7/8% at 99.24 to yield 7%.

Merlin Entertainment plc priced a $400 million issue of eight-year senior bullet notes (Ba2/BB) at par to yield 5¾%.

Both notes put in a strong secondary market performance after breaking for trade.

Consolidated Energy Finance SA set price talk in a revised deal that is expected to price on Thursday. Avation plc also set price talk for its $300 million offering expected on Thursday.

Nemaska Lithium, Inc. is marketing a $300 to $350 million offering in a Nordic-style execution with pricing expected on May 11.

While new paper from TransDigm and Merlin were seen well above their issue price after breaking for trade, recent deals from ABC Supply Co., Inc., Neptune Energy Group Midco Ltd. and Neptune Energy Bondco plc and Fair Isaac Corp. were mixed.

ABC Supply Co.’s 5 7/8% senior notes due 2026 (B3/B+) traded below their issue price while Fair Isaac’s 5¼% senior notes due 2026 (Ba2/BB+) traded above and Neptune Energy’s 6 5/8% senior notes due 2026 did not trade much at all.

McDermott International Inc.’s recently priced 10 5/8% senior notes due 2024 (B2/B-) dominated trading activity in the secondary market on Wednesday after shareholders approved its merger with Chicago Bridge & Iron Co.

The notes, which priced at a deep discount, climbed 2 points to trade up to 103.

TransDigm at a discount

TransDigm priced a $500 million issue of TransDigm UK Holdings plc eight-year senior subordinated notes (B3/B-) with a coupon of 6 7/8% at 99.24 to yield 7%.

The yield printed at the wide end of the 6¾% to 7% yield talk.

Citigroup was the left bookrunner. Credit Suisse, Morgan Stanley, RBC, Barclays, JP Morgan, KKR, Credit Agricole, HSBC, Goldman Sachs and PNC were the joint bookrunners.

The Cleveland-based aircraft components supplier plans to use the proceeds, along with proceeds from its incremental term loan, to replenish cash used to fund a portion of the Kirkhill and Extant Components Group Holdings, Inc. acquisitions.

The remainder of the proceeds will be used for general corporate purposes, including potential future acquisitions, dividends or repurchases under the company’s stock repurchase program.

Merlin Entertainment oversubscribed

Merlin Entertainment priced a $400 million issue of eight-year senior bullet notes (Ba2/BB) at par to yield 5¾%.

The yield printed in the middle of yield talk in the 5¾% area.

When books closed the $400 million debt refinancing deal was heard to be playing to $900 million of orders, a trader said.

Citigroup was the left bookrunner. Barclays was the joint bookrunner.

Consolidated Energy revises deal

Consolidated Energy set price talk in a revised $525 million two-part offering of senior notes (B3/BB), which is set to price Thursday.

The downsized $425 million of eight-year notes is talked to yield 6¼% to 6½%.

A $100 million add-on to the floating-rate notes due June 15, 2022 is talked with a 375 bps spread to Libor at par and a 0% Libor floor.

The deal structure was revised with the addition of the add-on tranche, prior to which it was in the market as a single $525 million tranche of eight-year notes.

Morgan Stanley and J.P. Morgan are the joint global coordinators and joint bookrunners.

Aviation on tap

Avation talked its $300 million offering of three-year senior notes (S&P: expected B/Fitch: expected BB-), which is also expected to price on Thursday, to yield 6¼% to 6½%.

Official talk comes tight to initial price talk in the 6½% area.

Wells Fargo is the left bookrunner.

Nemaska Lithium, Nordic style

The Wednesday session featured just one new deal taking a place aboard a thinning active forward calendar.

Nemaska Lithium is in the market with an offering of five-year senior secured notes expected to be sized from $300 million to $350 million.

The capital expenditures deal is coming in a Nordic-style execution and is expected to price on May 11 and settle on May 18.

Pareto Securities and Clarkson Platou Securities are the leads.

B2 mandate

In the euro-denominated market, Norway's B2Holding ASA mandated DNB Markets, Nordea and Swedbank to arrange a series of fixed income investor meetings starting Thursday.

A euro-denominated five-year senior unsecured bond may follow subject to market conditions, the company said.

Wednesday’s deals trade up

Merlin’s 5¾% senior notes due 2026 and TransDigm’s 6 7/8% senior notes due 2026 put in strong performances after breaking for trade with both notes seen about 1 to 1.5 point above their issue price.

The strong demand for Merlin’s 5¾% notes in the bookbuilding process carried into the secondary space with the notes seen trading between 101 3/8 and 101 7/8.

“They certainly moved right up,” a market source said.

There were about $21 million of the new notes trading during Wednesday’s session.

While priced with a discount of 99.24, TransDigm’s 6 7/8% notes quickly moved past par after breaking for trade.

The 6 7/8% notes were quoted at par ½ bid, par 5/8 offered with most trades around par ½, market sources said.

The notes were active with about $37 million on the tape by late afternoon.

Wednesday’s deals put in a strong secondary market performance on a day sources said was mixed. “The market’s feeling generally heavier lately,” a market source said.

ABC Supply down

ABC Supply’s new 5 7/8% senior notes due 2026 (B3/B+) were among the volume leaders of Wednesday’s session with the notes trading below their issue price.

“They struggled a bit,” a market source said. “They had trouble coming out of the gate.”

The notes started Wednesday at 99¾ but traded off to 99 bid, 99 3/8 early in the session. They were seen trading up to 99 5/8 in the afternoon, sources said.

More than $50 million bonds traded during Wednesday’s session. The notes also struggled during the subscription process.

ABC priced a downsized $600 million issue of the 5 7/8% notes at par in a quick-to-market trade on Tuesday. The issue size was decreased from $800 million.

The yield printed at the wide end of yield talk in the 5¾% area and in line with initial talk in the mid-to-high 5% area.

“It’s a single B credit,” a market source said. “It should have priced higher.”

Other sources also felt the yield was too low as well.

“It needed to widen out a bit,” another source said. “It was priced pretty tight.”

Tuesday’s deals

While ABC Supply’s notes struggled, Fair Isaac’s 5¼% senior notes due 2026 (Ba2/BB+) were trading up to 1 point above their issue price.

The notes traded up to 101 in active trading on Tuesday with more than $35 million on the tape.

Fair Isaac priced a $400 million issue of non-callable eight-year senior notes (Ba2/BB+) at par to yield 5¼% at the tight end of yield talk in the 5 3/8% area.

New paper from ABC and Fair Isaac saw steady trading volume in the secondary space.

However, Neptune Energy’s 6 5/8% senior notes due 2026 (B2/BB-) were quiet with less than $6 million of bonds traded.

While the 6 5/8% notes were slow to trade, they did improve.

The notes were seen quoted at par ¼ bid, par ¾ offered with most trades between par ¼ to par ½ on Wednesday after dipping below par on Tuesday.

Neptune Energy priced an upsized $550 million issue of the 6 5/8% notes at par on Tuesday.

The yield printed tight to yield talk in the 6¾% area and tight to initial talk in the high 6% to 7% area.

The issue size increased from $500 million. While only $5 million of bonds were seen trading on Tuesday, they were quoted at 99½ bid, 99 7/8 offered.

McDermott dominates

While most new deals were active on the tape, McDermott’s recently priced 10 5/8% senior notes due 2024 dominated trading activity in the secondary space with about $60 million of bonds in play.

The 10 5/8% notes climbed 2 points to trade up to 103, more than 8 points above their issue price of 94.75.

The 10 5/8% notes struggled during the bookbuilding process, with the deal downsized to $1.3 billion from $1.5 billion. However, they have performed well in the secondary market since pricing in early April.

The notes returned to focus on Wednesday after McDermott shareholders approved the company’s merger with Chicago Bridge & Iron Co. With the merger also approved by CBI shareholders, the deal is expected to close on May 10.

The 10 5/8% notes were marketed in connection to the merger with proceeds used to pay down debt at both entities.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $37 million of inflows on the day.

However, actively managed funds sustained $90 million of outflows on Tuesday.

Meanwhile, the dedicated bank loan funds also saw inflows, $65 million, on Tuesday, the trader said. Of that amount $54 million flowed into bank loan ETFs.

Indexes mixed

The KDP High Yield index was flat on Wednesday at 70.46 on Tuesday with the yield remaining 5.85%.

The current index price comes after two consecutive days of losses with the index down 4 basis points on Tuesday and 1 basis point on Monday.

While the KDP index was flat, the Merrill Lynch High Yield index was up 10.3 basis points with the negative year-to-date return now 0.284.

The Merrill Lynch index recouped most of Tuesday’s losses when the index was down 13.3 basis points.

The CDX High Yield 30 index closed Tuesday down slightly. The index slid 1.3 bps to close Wednesday at 106.8 after closing Tuesday at 106.93.

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