California Resources gains; GFL below par; B&G up on earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 4 – The primary market was all about Europe on Friday with three deals pricing and one postponing.

Nexi Capital SpA along with two emerging markets names that drew high-yield attention – Olympic Entertainment Group AS and Nitrogenmuvek Zrt. – priced euro-denominated deals on Friday with Aldesa Agrupacion Empresarial, SAU’s offering postponed.

There is currently only one deal on the active forward calendar but the week ahead promises to be busy for both dollar-denominated and euro-denominated issuance.

As the domestic primary market wound down from an active week, several of Thursday’s deals fell out of focus. There was limited trading activity in the new paper from Consolidated Energy Finance SA, Avation plc and HC2 Holdings, Inc.

However, the recent deal from GFL Environmental Inc. was a top volume mover in the secondary space with the notes seen dropping below par.

As new paper drifted from focus, California Resources Corp.’s 8% senior notes due 2022 returned to center stage and dominated trading activity in the secondary space as the price of crude oil rose $1.29 on Friday.

B&G Foods, Inc.’s 5¼% senior notes due 2025 (B2/B+) gained about 1¼ points on Friday after a first quarter earnings beat.

Nexi sees tight pricing

Italy’s Nexi Capital priced €2.2 billion of senior secured notes (B1/B+) in two tranches, both tight to talk.

The deal included €1,375,000,000 of floating-rate notes due May 1, 2023 which priced with a coupon of Euribor plus 362.5 basis points at par. The spread printed at the tight end of spread talk in the Euribor plus 375 bps area.

In addition, Nexi priced €825 million of fixed-rate notes due Nov. 1, 2023 at par to yield 4 1/8%, at the tight end of yield talk in the 4¼% area.

The deal underwent covenant changes, sources said.

Nexi’s new 4 1/8% 5.5-year fixed-rate notes were at par bid, par ¼ offered in the secondary market shortly after the London close on Friday, a source said.

An institutional investor, speaking off the record, disclosed having purchased Nexi bonds in the past.

However, the new deal looked somewhat rich, the source said, and he passed on Friday’s deal.

The investor’s team liked the new fixed-rate paper at 4½%.

The hardest thing to like about the deal was that Nexi was using paper with coupons of 3 5/8% – the Euribor plus 362.5 bps floating-rate note – and 4 1/8% to take out notes with toggle coupons of 8¼%/9% and 7 1/8%/7 7/8%, the investor remarked.

BofA Merrill Lynch, Goldman Sachs, UBS and Banca IMI were the global coordinators.

Olympic at a discount

Tallinn, Estonia-based Olympic Entertainment Group priced a €200 million issue of Odyssey Europe Holdco Sarl 8% five-year senior secured notes (B2/B) at 98.983 to yield 8¼% on Friday.

The deal came at the tight end of the 8% to 8¼% yield talk.

Morgan Stanley was the global coordinator.

Proceeds will be used to help fund the buyout of the gaming group by Novalpina Capital for €288 million.

As with Hungary’s Nitrogenmuvek, which priced €200 million of seven-year notes (expected ratings: B/B+) at par to yield 7% on Friday, the Olympic Entertainment deal played to a sizable crowd of high yield investors in Europe, sources say.

If Eastern European credits such as these have one foot in the emerging markets, the other is planted in European high yield where they generate interest, in part for the concessions they pay for their somewhat exotic geographic locations, sources say.

Nitrogenmuvek’s deal came at the tight end of talk of 7% to 7 ¼%.

Aldesa postpones

Aldesa Agrupacion Empresarial postponed its €300 million offering of seven-year senior secured notes (B2//B) on Friday due to unsatisfactory market conditions.

The deal was talked earlier in the week to yield 8¾% to 9%.

An execution at the wide end of that talk would have placed the Madrid-based firm among an exclusive 1% of euro-denominated issuers that have paid a coupon of 9% or higher since the beginning of 2017, according to Prospect News data.

The investor who took a flyer on Nexi also had a look at Aldesa and again passed.

The engineering and construction firm has peers that are easier to like, the investor remarked.

JPMorgan had the lead on Aldesa’s postponed deal.

Proceeds were to have been used to refinance the company’s 7¼% senior secured notes due 2021.

Active but not hectic

Both the dollar-denominated and euro-denominated new issue markets are expected to be open for business in the week ahead, sources say.

The deal pipeline ahead is expected to be active but not hectic, a debt capital markets banker said, adding that $3 billion to $5 billion weeks are much more likely than $10 billion to $12 billion weeks in the spring season ahead.

At Friday’s close the active forward calendar held just one deal thought to be in the market: a dollar-denominated offer from a Canadian company that will see a “Nordic-style execution,” sources say.

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

The deal is expected to price on Friday, May 11.

Pareto Securities and Clarkson Platou Securities are managing the sale.

The Quebec City-based chemical company plans to use the proceeds to fund capital expenditures.

Issuance stays in line

With Friday’s $0 of U.S. market issuance included, the week saw $4.28 billion of new deals in 12 tranches, almost matching the previous week’s $4.26 billion in six tranches.

The week brought the year-to-date total to $84.88 billion in 158 tranches, 19.8% below the $105.84 billion that had priced by the same point on the 2017 calendar.

Out of focus

After occupying the secondary market’s attention for most of the week, the deals that priced over the past week drifted from focus. Several of the deals that priced Thursday garnered little trading action.

Consolidated Energy’s 6½% senior notes due 2026 (B2/BB) that priced at par on Thursday as part of a resized, restructured two-part offering had only about $10 million on the tape by mid-afternoon.

The notes were seen trading in a range of 99.688 to par ¾. They were seen quoted at 99¾ bid, par 1/8 offered.

Consolidated Energy priced a resized, restructured $525 million two-part offering of senior notes (B2/BB) on Thursday.

The deal included a downsized $400 million issue of the 6½% notes, which was decreased from $425 million after previously downsizing from $525 million.

The offering also included an upsized $125 million add-on to the company’s floating-rate notes due June 15, 2022 with a Libor plus 375 basis points coupon and a 0% Libor floor. The add-on came at par.

The tranche was increased from $100 million and priced on top of talk.

The floating-rate notes were not seen trading on Friday.

There was also almost no trading of Avation’s 6½% notes due 2021 (B/BB-), a market source said. Only $2 million of bonds were seen on the tape by mid-afternoon with the notes wrapped around 101.

Avation priced a $300 million issue of the 6½% notes at par on Thursday.

There was also little trading activity in HC2 Holding’s add-on to its 11% senior secured notes due Dec. 1 2019 (Caa1/B-), which priced at 102 to yield 9.584% in a Thursday drive-by.

The new notes were quoted at 102 1/8 bid, 102 3/8 offered and were seen trading between 102¼ and 102 3/8, a market source said. Only $6 million of the new bonds traded by mid-afternoon.

GFL volatile

While most of Thursday’s deals were not active in the secondary space on Friday, GFL Environmental’s 7% notes due 2026 (Caa1/B-) were the exception.

The new 7% notes were among the top volume movers on Friday with $46 million of bonds traded by late afternoon. The notes were trading to a low of 98½ and a high of par ¼, a market source said.

They were seen at 99 3/8 bid, 99¾ offered at mid-afternoon. There was a lot of dealer-to-dealer trading that was lifting the notes, a market source said.

“I think people are getting out,” the source said.

GFL Environmental priced $400 million of the 7% notes at par in a quick-to-market trade on Thursday.

The yield printed at the wide end of both yield talk, in the 6 7/8% area, and initial price talk in the high 6% area.

The deal reportedly struggled during the bookbuilding process with some sources questioning whether pricing would be delayed.

While the deal was able to price on Thursday, the notes have a had a lackluster performance in the secondary space.

Crude oil in the spotlight

California Resources’ 8% senior notes were again a major volume mover during Friday’s session as the price of crude oil climbed more than $1.

The notes were seen at 88½ bid, 89 offered early in Friday’s session and were seen trading just north of 89 by mid-afternoon. More than $55 million of bonds traded by mid-afternoon.

They were seen at 84½ bid, 85½ offered mid-afternoon Thursday but climbed in the late afternoon to close the day at 88½.

The price of a barrel of West Texas intermediate crude oil for June delivery skyrocketed on Friday amid concerns over global crude oil supply. West Texas intermediate crude oil jumped to $69.78, an increase of $1.29 or 1.88%.

B&G’s earnings beat

B&G Foods’ 5¼% senior notes due 2025 were active on Friday with the notes up about 1¼ points after a first-quarter earnings beat.

The notes traded up to 94¼ after closing Thursday at 93.

While not as active as the 5¼% notes, B&G’s 4 5/8% notes due 2021 were up about 1 point to trade north of par after closing Thursday at 99.

The packaged food maker and distributor reported non-GAAP earnings per share of 55 cents for the first quarter, which beat analyst expectations of 53 cents per share.

B&G also affirmed that it was committed to maintaining the dividend on its common stock.

B&G stock surged on Friday closing the day at $24.95, an increase of 10.64%.

Thursday outflows

Daily cash flows for dedicated high-yield bond funds were negative on Thursday, a buyside source said.

High-yield ETFs sustained $74 million of outflows on the day.

Actively managed funds saw $35 million of outflows.

News of the Thursday daily flows came on the heels of a Thursday afternoon report that dedicated high-yield bond funds saw $526 million of net inflows in the week to the Wednesday, May 2 close.

Factoring that inflow, the funds have now seen six losses and four gains in the past 10 weeks, according to a Prospect News analysis of the data.

The most recent weekly inflow notwithstanding, aggregate high-yield fund flows remain firmly in the red at negative $14.08 billion year-to-date.

Indexes see gains

The KDP High Yield index closed Friday with a gain, the first upward move of the week. The index was up 6 basis points to 70.49 with the yield now 5.85%.

The index was down 3 basis points to 70.43 on Thursday after staying flat at 70.46 on Tuesday and Wednesday and dipping by 1 basis point to 70.50 on Monday.

The Merrill Lynch High Yield index closed Friday with gains after flip-flopping between positive and negative territory for most of the week.

The index was up 5.6 basis points with the year-to-date return now negative 0.322%.

The index was down on Thursday, up on Wednesday, down on Tuesday and up on Monday.

The CDX High Yield 30 index was also up on Friday. The index was up 12.7 bps at 106.713 bid, 106.793 offered in the early afternoon.

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