Restaurant Brands megadeal drives by; GFL also prices; new bonds firm; Frontier falls

By Paul Deckelman and Paul A. Harris

New York, May 3 – The high-yield primary pricing parade resumed on Wednesday, after having paused on Tuesday, which had been the first session in over two weeks during which no U.S. dollar-denominated and fully junk-rated paper had come to market.

Wednesday saw a pair of such deals totaling $1.85 billion get done, both from companies based in the Canadian province of Ontario.

Restaurant Brands International Inc., an operator of quick-service eateries, did an upsized and quickly shopped $1.5 billion of seven-year secured notes.

Meanwhile, waste management company GFL Environmental Inc. priced $350 million of five-year notes in a regularly scheduled forward-calendar offering.

Secondary traders said that the latter bonds firmed smartly when they hit the aftermarket and were among the day’s most active issues.

Away from the new-deal sphere, Frontier Communications Corp.’s bonds were seen mostly lower in busy trading, in line with a plunge in the telecommunications company’s shares after it reported disappointing first-quarter results and cut its dividend.

Statistical market performance measures were mixed for a second straight session on Wednesday; they had turned mixed on Tuesday after strengthening across the board for three straight sessions last Thursday and again on Friday and Monday. It was the third mixed session in the last six trading days.

Restaurant Brands upsizes

Two dollar deals came tight to talk on Wednesday, in a market that continues to grind tighter, sources said.

Restaurant Brands International Inc. priced an upsized $1.5 billion issue of seven-year first-lien senior secured notes (Ba3/B+) at par to yield 4¼%.

The issue size was increased from $1 billion

The yield printed at the tight end of the 4¼% to 4½% yield talk.

JP Morgan, Wells Fargo, Morgan Stanley, RBC and BofA Merrill Lynch were the joint bookrunners.

The Oakville, Ont.-based quick service restaurant company plans to use the proceeds, together with proceeds from a $500 million incremental term loan and other sources of liquidity, to redeem all or a portion of its 9% class A cumulative compounding redeemable preferred shares and for general corporate purposes.

GFL plays to big book

GFL Environmental Inc. priced a $350 million issue of five-year senior notes (B3/B-) at par to yield 5.626%.

The yield printed tight to yield talk in the 5¾% area, and inside of initial guidance in the 6% area.

The deal played to a $2 billion order book, according to an investor who added that allocations were tough.

The new GFL 7 5/8% notes due 2022 were trading at par ¾ bid, 101 offered in the secondary market, said the investor who retraced the downward trajectory of price talk – from 6% area to 5¾% area, the ultimate 5 5/8% print – and asserted that “most of the juice” had been wrung from the deal.

“The market is just hot,” the source remarked, noting that the JP Morgan high-yield index is now yielding 6.04%.

Barclays was the lead left bookrunner for the GFL deal. BMO, Credit Suisse and Macquarie were the joint bookrunners.

The Vaughan, Ont.-based waste management services company plans to use the proceeds to refinance its 7 7/8% senior notes due 2020, to fund certain acquisitions, to repay drawn amounts under its revolving credit facility and to put cash on the balance sheet for general corporate purposes.

Amigo Loans taps 7 5/8% notes

In Europe, Amigo Loans priced a £50 million add-on to the Amigo Luxembourg SA 7 5/8% senior secured notes due 2024 (B1/B+) at 104.50 to yield 6.774%.

The reoffer price came at the rich end of the 104.25 to 104.5 price talk.

JPMorgan, Jefferies and NatWest were the bookrunners for the refinancing deal.

Elsewhere Saga plc is running a non-deal roadshow ahead of a possible benchmark sterling-denominated offering of notes.

The notes, which would represent the Kent, United Kingdom-based company's debut in the high yield bond market, are expected to come with an intermediate maturity; dealers are targeting seven years.

HSBC, Mizuho and NatWest have the mandate.

New GFL deal gains

In the secondary realm, traders said that the new GFL Environmental 5 5/8% notes due 2022 moved up solidly when the waste management company’s well-oversubscribed issue hit the aftermarket.

One saw the bonds heading home at 101 bid, after having priced at par.

He said that more than $34 million had changed hands, putting the new credit high up on the day’s Most Actives list.

A second trader said the bonds were in a 100 7/8 to 101 1/8 bid range late in the day, after having traded as high as 101¼ during the afternoon, “so it closed up ¾ to 1 point on the day, but down ¼ off the highs.”

Restaurant Brands unseen

Traders meantime did not immediately report any initial aftermarket dealings in the big new Restaurant Brands secured offering, citing the relatively late hour at which the deal priced.

USG activity dwindles

Among recently priced offerings, traders saw the USG Corp. 4 7/8% notes due 2027 that came to market Monday continuing to trade well up from their par issue price on Wednesday, but said that activity in the new credit fell off after two days of brisk-volume dealings.

One of the traders pegged the Chicago-based building supplies manufacturer’s issue between 101 1/8 and 101 5/8 bid.

A second located them in a 101 to 101 3/8 bid range.

But a market source at another desk noted that volume was well down from Tuesday, when more than $43 million had traded around the 101 3/8 bid area, and from Monday, which had seen more than $47 million of turnover, with the bonds moving up to 101¼ bid after having priced at par earlier in the day.

He declared that “they didn’t even break $10 million today.”

Frontier falters

Away from the new or recently priced names, a trader noted that several of Frontier Communications’ bonds were sharply lower on the session, seeing the Stamford, Conn.-based wireline telecom operator’s 9% notes due 2031 fall to 85¼ bid, 86¼ offered, down about 1¼ points on the day.

“They kind of moved up earlier this morning, then gave back everything they had, off around a point.

Another trader saw its 11% notes due 2025 fall to 96 bid, down 1 5/8 points, on volume of over $73 million, topping the Most Actives list, while its 10½% notes due 2022 retreated 5/8 point to 101 3/8 bid, with over $33 million traded.

Frontier fell in line with a stock slide after it reported a net loss attributable to common shareholders of $129 million, or 11 cents per share in the first quarter – far worse than the nickel-per share loss that market-watchers expected.

Customer monthly churn jumped to 2.37% – up sharply from the 2.08% seen last quarter.

Indicators stay mixed

Statistical market performance measures were mixed for a second straight session on Wednesday; they had turned mixed on Tuesday after strengthening across the board for three straight sessions last Thursday and again on Friday and Monday. It was the third mixed session in the last six trading days.

The KDP High Yield Daily index eased by 2 basis points on Wednesday to end at 75.23, after having risen by 6 bps on Tuesday, been unchanged on Monday and having firmed for six consecutive sessions before that.

Its yield was unchanged at 5.12% on Wednesday after having come in by 2 bps on Tuesday and widening by 2 bps on Monday – its first such rise after six straight sessions in which the yield had tightened.

The Markit CDX Series 28 index was off for a second session in a row, edging downward by 1/32 point Wednesday to 107¾ bid, 107 25/32 offered. It had also been marginally lower on Tuesday, after having firmed for two consecutive sessions before that, including Monday’s 5/32 point improvement.

However, the Merrill Lynch North American High Yield index posted its 11th consecutive advance, although it was not much of a gain – up by 0.007%. That followed Tuesday’s 0.091% improvement.

Wednesday’s upturn lifted the index’s year-to-date return to 3.987%, its eighth straight new year-to-date high point, surpassing the previous 2017 peak level of 3.979% set on Tuesday.

© 2015 Prospect News.
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