No junk pricings, but calendar builds; new Alcoa busy; Neiman Marcus off on earnings; Chemtura up on sale

By Paul Deckelman and Paul A. Harris

New York, Sept. 26 – The high yield primary sphere swung into the last trading week of September on a quiet note, with no new issues heard to have been priced.

However, syndicate sources said that the forward calendar grew, with new dollar-denominated transactions expected soon from Quality Care Properties, Inc., Mohegan Tribal Gaming Authority and Crescent Communities. LLC.

Among recently priced names, traders saw continued busy activity in last week’s two-part megadeal from Alcoa, Inc., as well as Friday’s issue from AMN Healthcare, Inc.

Away from the new deals, retailer Neiman Marcus Group Inc.’s bonds gyrated around at mostly lower levels after the high-end department store operator reported disappointing quarterly earnings.

News that Chemtura Corp. is being sold pushed that chemical company’s bonds and shares up on Monday.

Statistical market performance measures were mixed on Monday for a second straight session, which was the third mixed session in the last five trading days. They had turned mixed on Friday, after having been firmer across the board on Wednesday and again on Thursday.

Quality Care secured paper

New issue activity in the last week of September figures to be muted in the dollar-denominated high yield market, especially as issuers head into an earnings blackout period, a New York-based syndicate banker said on Monday.

Nevertheless the calendar saw a substantial build-out of dollar-denominated deals on Monday, all of them expected to clear before Friday's close.

Quality Care Properties Inc. plans to price a $750 million offering of seven-year senior secured second lien notes (B3/BB-) this week.

Morgan Stanley, Barclays and Deutsche Bank are the joint bookrunners for the spinoff financing.

Mohegan starts roadshow

Mohegan Tribal Gaming Authority began a roadshow for a $500 million offering of eight-year senior notes.

Credit Suisse, BofA Merrill Lynch, Citizens, SunTrust, Goldman Sachs, CIT and KeyBank are the joint bookrunners.

The Uncasville, Conn.-based operator of gaming and entertainment enterprises plans to use the proceeds to refinance its entire capital structure.

Crescent Communities notes

Crescent Communities, LLC, in conjunction with Crescent Ventures Inc. plans to roll out a $400 million offering of five-year senior secured notes (expected ratings Caa1/B+).

JP Morgan, Credit Suisse and RBC are the joint bookrunners for the debt refinancing deal.

Crescent Communities, Mohegan and Quality Care Properties came aboard an already-well-populated active forward calendar.

Confie (Confie Seguros Holding II Co.) was scheduled to meet with investors in New York, on Monday, to present its $350 million offering of senior notes (Caa2/CCC+), via RBC, a deal also slated to price this week.

The forward calendar also include dollar deals from Steak n Shake, Inc., inVentiv Health, Inc. and Vertiv, all expected to clear by the end of the week.

Cabot roadshows £350 million

The European high yield primary market also generated a strong news volume on Monday.

The blackout period expected to mute issuance in the dollar-denominated market should have less of an impact upon the European market, a London-based debt capital markets banker said.

Most of the week's business was announced on Monday, however look for at least one more deal in the European market – not a huge one – to be announced this week, the banker added.

In the sterling market Cabot Credit Management Ltd. plans to run a Tuesday through Thursday roadshow for £350 million of senior secured notes due 2023 (B+).

JP Morgan is leading the debt refinancing deal.

Virgin Media eight-year notes

Virgin Media Receivables Financing is roadshowing a £350 million offering of eight-year receivables-backed notes.

Credit Suisse, Citigroup, Deutsche Bank and ING are the leads for what is being seen as a securitization deal.

Global University Systems tap

Global University Systems BV plans to run a brief, Tuesday-Wednesday roadshow for a £75 million add-on to the Lake Bridge International plc 8% senior secured notes due July 23, 2020 (B3/B+).

Goldman Sachs is the lead bookrunner.

The Amsterdam-based private higher education provider plans to use the proceeds to fund its 2016 acquisitions including Arden University Ltd. and I.B.A.T. Ltd. and to repay amounts drawn under its bridge facility.

DEA debut

DEA Deutsche Erdoel AG (/BB-/BB) plans to run a Tuesday-Wednesday roadshow for is debut high yield bond deal, a €400 million offering of six-year notes senior notes.

Deutsche Bank is leading the deal.

The Hamburg, Germany-based oil and gas company plans to use the proceeds to repay debt.

Alcoa trades actively

In the secondary market, traders saw busy dealings in the new Alcoa two-part megadeal that came to market last Thursday.

The New York-based aluminum and aluminum products company’s new 6¾% notes due 2024 were seen holding steady at 102½ bid, the level to which they had moved after the $750 million issue had priced at par via its Alcoa Nederland Holding BV subsidiary in a regularly scheduled forward calendar transaction. More than $24 million traded, putting the credit among the most active junk bonds of the day, although that volume was down from the more than $169 million that had traded when the bonds first hit the aftermarket on Friday.

Alcoa’s new 7% notes due 2026 were in retreat on Monday, dipping by ¾ point to 101 1/8 bid, with more than $23 million changing hands.

The company had priced $500 million of those notes at par on Thursday; they had moved up to around a 101½ to 102 bid context on Friday, when over $130 million had traded.

AMN stays busy

Friday’s offering of 5 1/8% notes due 2024 from AMN Healthcare were seen off by ¼ point on Monday, at 100¾ bid, with around $10 million traded.

The San Diego-based healthcare staffing company had priced $325 million of those notes at par Friday after that scheduled forward calendar deal was upsized from an originally shopped $300 million.

It moved up to around a 100 5/8-to-101 bid context after pricing, with over $46 million traded at that time.

Traders also saw some transactions in Friday’s two other deals, both of them Chicago-based companies being spun off from R.R. Donnelley & Sons Co.

A trader saw Donnelley Financial Solutions Inc.’s 8 ¼% notes due 2024 about unchanged at 101¼ to 101½ bid, with around $14 million traded.

And he saw LSC Communications Inc.’s 8 ¾% senior secured notes due 2023 in a par to 100¾ bid context, with around $9 million moving around.

Both had priced at par on Friday.

Neiman Marcus mauled

Away from the new issues, Neiman Marcus Group was “one of the more active names,” a trader said, as the Dallas-based high-end retailer reported weak fiscal fourth-quarter and full-year results.

“I guess the market didn’t like them,” another trader said of the numbers. The bonds retreated at least 2 points on the day, though that was better than the day’s lows.

Another trader said that the company’s 8% notes due 2021 was “the one that dominated” activity, with over $24 million traded.

He noted that the paper was trading last week between 84 and 84¾ bid – but nosedived early Monday to as low as 77½ bid following the release of earnings.

“Then they bounced back,” to around the 82 bid level at which they finished the day, he said.

For the fourth quarter ended July 30, net loss was $407.2 million, which compared to a loss of $32.9 million the year before. Sales declined 3.3% to $1.13 billion.

The company attributed the much wider loss to higher markdowns amid declining traffic and demand. Neiman also noted that it wrote down its value by $466.2 million during the quarter.

For the fiscal year, net loss was $406.1 million versus a profit of $15 million the previous fiscal year. Sales dropped 2.9% to $4.95 billion.

The weak results renewed talk that the company could be sold again. Ares Management LLC and the Canada Pension Plan Investment Board bought the retailer in 2013 for $6 billion.

Chemtura gains on sale

On the upside, a trader noted that Chemtura Corp.’s 5¾% notes due 2021 “were up about a point or so,” to 105 bid, on volume of over $19 million, on the news that the Philadelphia-based maker of lubricant and flame-retardant compounds is being sold for $2.5 billion to German chemical manufacturer Lanxess AG.

The total enterprise value of the transaction is about $2.7 billion.

Chemtura’s New York Stock Exchange-traded shares jumped by $4.46, or 15.83%, on news of the sale, on volume of more than 20.5 million – 53 times the normal turnover.

Indicators stay mixed

Statistical market performance measures were mixed on Monday for a second straight session, which was the third mixed session in the last five trading days. They had turned mixed on Friday, after having been firmer across the board on Wednesday and again on Thursday.

The KDP High Yield index gained 2 basis points for a second straight session on Monday to end at 70.60, its sixth straight gain after six consecutive losses before that. On Thursday, the index had jumped by 41 bps.

Its yield, though, rose by 2 bps, to 5.30%, after having come in by 1 bp on Friday, which had been its fourth successive narrowing.

A trader saw the Markit Series 26 CDX index down by almost 7/32 point on Monday, the same size as Friday’s loss. It ended at 104 13/32 bid, 104½ offered.

The index is scheduled to “roll,” or begin a new series, this week.

The Merrill Lynch High Yield index fell by 0.084% on Monday, its first loss after five straight gains, including Friday’s 0.021% rise.

That dropped its year-to-date return to 14.746% on Monday, down from 14.842% on Friday.

It also remained down from the 14.992% cumulative return set on Sept. 8, its peak level for 2016 so far.

Stephanie N. Rotondo contributed to this review.

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