NOVA, PetSmart, GTT price in $4.2 billion session, PetSmart gains; funds lose $568 million

By Paul Deckelman and Paul A. Harris

New York, May 25 – The high-yield primary market had one of its busiest days of the year so far, with $4.26 billion of new dollar-denominated paper from domestic or industrialized-country borrowers pricing in five tranches.

All of the day’s action was in regularly scheduled offerings from the forward calendar, including a pair of two-part transactions in the $2 billion area, from NOVA Chemicals Corp. and retailer PetSmart, Inc.

Telecom services provider GTT Communications Inc. chimed in with a $150 million add-on to its existing 2024 notes.

In the secondary arena, traders saw the new PetSmart eight-year secured and unsecured notes move up in active aftermarket trading. The company’s existing bonds were meantime the Junkbondland volume leader on the session.

The traders also saw modest gains – though on lesser volume – in the new NOVA Chemicals and GTT Communications paper.

The recently priced Chesapeake Energy Corp., PBF Energy, Inc. and Navient Corp. notes were also actively traded Thursday.

Away from the new deals, energy issues such as California Resources Corp. were lower as world crude oil prices slid on investor disappointment that OPEC failed to enact larger global output cuts.

Statistical market performance measures turned mixed on Thursday, snapping a streak of four consecutive sessions dating back to last Friday during which the indicators were up across the board.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – once again faltered in the latest reporting week, posting its third outflow in the last four weeks, according to numbers released on Thursday. Some $568 million more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, versus last week’s $650 million net inflow.

Pair of bullets from NOVA

Thursday’s primary market put up the third highest total daily dollar amount for the year to date, as three issuers raised an overall $4.26 billion with a combined five tranches of junk bonds.

All three issuers had been in the market at least overnight.

None of them upsized their deals.

Executions appeared solid, as three of the five tranches came at the tight or rich ends of talk while the remaining two priced on top of talk.

NOVA Chemicals priced $2.1 billion of non-callable senior notes in two tranches (Ba2/BB+/BBB-).

The acquisition financing deal included $1.05 billion of seven-year notes which priced at par to yield 4 7/8%. The yield printed on top of talk for a yield in the 4 7/8% area.

In addition, NOVA Chemicals priced $1.05 billion of 10-year notes at par to yield 5¼%. The yield printed on top of yield talk that had been set in the 5¼% area.

Barclays and HSBC were the joint active bookrunners. Barclays will bill and deliver for the 10-year notes. HSBC will bill and deliver for the seven-year notes. TD, RBC and Scotia were the joint bookrunners.

PetSmart prices tight

PetSmart priced $2 billion of eight-year notes in two tranches, one secured and one unsecured.

The acquisition-financing deal included $1.35 billion of senior first-lien notes (Ba3/B+) which priced at par to yield 5 7/8%. The yield printed at the tight end of yield talk announced in the 6% area.

In addition PetSmart priced $650 million of senior notes (B3/B-) at par to yield 8 7/8%. The yield printed at the tight end of the 9% area yield talk.

The order book was two- to three-times the deal size, according to a trader, who added that interest in the senior unsecured tranche was said to be intense at 9%.

Joint bookrunner Citigroup was the left lead for the first-lien notes. Joint bookrunner Barclays was the left lead for the unsecured notes. Jefferies, Nomura and RBC were also joint bookrunners.

GTT prices rich

GTT Communications priced a $150 million add-on to its 7 7/8% senior notes due Dec. 1, 2024 (Caa1/B-) at 106.

The reoffer price renders a 6.568% yield to worst.

The reoffer price came at the rich end of the 105.75 to 106 price talk.

Credit Suisse, KeyBanc and SunTrust were the joint bookrunners.

The McLean, Va.-based cloud networking services provider plans to use the proceeds for general corporate purposes, including potential acquisitions.

Consolidated upsizes, talks

Looking to the Friday session, Consolidated Energy Ltd. upsized its two-part offering of senior notes (B2) to $550 million from $500 million and set price talk.

A $300 million minimum amount of eight-year fixed-rate notes is talked to yield in the 7% area, inside of the 7¼% to 7½% initial guidance.

A to-be-determined amount of five-year floating-rate notes, non-callable for one year, is talked with a 375 basis points spread to Libor and a 0% Libor floor at 99.75, atop initial guidance.

Morgan Stanley is the bookrunner for the debt refinancing deal.

Elsewhere it could be a quiet Friday, as dealers are expected to continue to clear what’s left of the present week’s calendar ahead of the three-day Memorial Day holiday weekend, a trader said.

There is an expectation in the market that a lot of people have taken Friday off in order to extend the three-day weekend to four days, the trader said.

KIRS fixes roadshow

Looking to Europe, KIRS Group plans to start a global roadshow on Monday for an £800 million equivalent three-part offering of five-year senior secured notes (expected ratings B3/B).

The deal includes sterling-denominated and dollar-denominated fixed-rate notes, and sterling-denominated floating-rate notes, with tranche sizes remaining to be determined.

The roadshow, with stops in Europe and the United States, is set to wrap up on June 2.

Global coordinator BofA Merrill Lynch is the sole physical bookrunner. Barclays, Credit Suisse, Goldman Sachs and KKR are bookrunners.

The United Kingdom-based insurance group plans to use the proceeds to refinance debt, as well as to finance the acquisitions of Ryan Direct Group1 and Chase Templeton, and to overfund cash on balance sheet.

Elsewhere Globalworth Real Estate Investments Ltd. (Ba2/BB+) mandated Deutsche Bank, J.P. Morgan, and UBS to arrange meetings with fixed income investors ahead of a possible offering of euro-denominated debt securities, according to a Thursday press release from the company.

PetSmart paper pops

In the secondary sphere, traders said that both tranches of the new PetSmart eight-year offering were up, in active dealings, after pricing earlier in the session.

A trader said that the 5 7/8% senior secured first-lien notes traded in a 100½ to 101¼ bid context, while a second trader saw them going home between 101 and 101½ bid.

At another desk, a market source pegged the new bonds at 101 bid and said that more than $27 million of the bonds had changed hands.

He also saw more than $16 million of the other half of that big deal – the 8 7/8% senior unsecured notes – trading, although he saw them right at their par issue price.

Another trader said the unsecured portion moved around between par and 100 5/8 bid.

One of the traders also reported brisk activity in the San Diego-based pet food and supplies retailer’s existing 7 1/8% notes due 2023, seeing them finishing at 95 bid and calling that up ¼ point on the day.

Turnover topped the $47 million mark.

Day’s deals move up

Among the other issues which priced during the session, a trader said that both halves of the new NOVA Chemicals offering were modestly better, seeing the two tranches in a 100¼ to 100½ bid context.

A second trader meantime said he saw a fair amount of secondary trading in the Calgary, Alta.-based chemical manufacturer’s new deal.

He saw its 4 7/8% notes due 2024 trading in a 100¼ to 100 7/8 bid context, up from their par pricing level.

He said that the 5¼% notes due 2027 traded between lows around par and highs around 101 bid, but levels had narrowed to a 100¼ to 100½ bid range by the end of the day.

He also saw the day’s other deal – GTT Communications’ add-on to its existing 7 7/8% notes due in December 2024 – going out in a 106 1/8 to 106 5/8 neighborhood. A second trader located them between 106¼ and 106¾ bid, up from their 106 issue price.

Year’s third-busiest day

According to data compiled by Prospect News, Thursday’s session, generating proceeds of $4.26 billion in five tranches, was tied for third-busiest session of the year with Jan. 12, which also saw $4.26 billion of new junk bonds come clattering down the chute, although in seven tranches brought by six separate issuers.

That volume was topped only by the $4.7 billion which priced in six tranches brought by five issuers on March 7 and by the biggest new-issuance day of any so far this year, March 9, when six issuers priced eight tranches of new paper, generating a whopping $6.64 billion of new junk.

Recent issues active

Away from the day’s new deals, traders saw some continued action in some – but by no means all – of the new issues which have priced so far this week.

The new PBF Energy 7¼% notes due 2025, which have been struggling in the secondary ever since the Parsippany, N.J.-based oil refinery operator priced its $725 million deal at par on Monday, were seen having moved up on Thursday, gaining ½ point to end at 99 1/8 bid on more than $18 million of volume.

Newark, Del.-based loan servicer Navient’s 6¾% notes due 2025, which priced at 99.99 on Tuesday, edged up by 1/16 point to 100½ bid, with around $12 million changing hands.

But a trader said that Chesapeake Energy’s new 8% notes due 2027 were about unchanged at par, with over $21 million moving around

Energy issues off

Another trader noted that the Chesapeake bonds at least held their own – unlike other energy names like California Resources’ 8% notes due 2022.

The latter dropped more than 2 points on the day to 76¾ bid, with over $29 million traded, as crude prices slid by more than $2.50 per barrel.

Analysts said the commodity markets were reacting bearishly after OPEC only extended its previously announced 1.8 million barrel-per day output curb rather than increasing it in order to prop up oil prices.

Indicators turn mixed

Statistical market performance measures turned mixed on Thursday, snapping a streak of four consecutive sessions dating back to last Friday during which the indicators were up across the board.

The KDP High Yield Daily Index lost 2 basis points to end at 72.61, its first such loss after four straight gains, including Wednesday’s 5 bps rise.

Its yield was unchanged at 4.93%, after having come in by 2 bps on Wednesday, its fourth straight narrowing.

The Markit CDX Series 28 Index eased by 1/32 point to 107 17 /32 bid, 107 9/16 offered, after being unchanged on Wednesday.

But the Merrill Lynch North American High Yield Index posted its fifth straight upturn, rising by 0.061% on top of Wednesday’s 0.046% gain. That lifted the index’s year-to-date return to 4.702%, its fifth straight new high for the year.

© 2015 Prospect News.
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