Parexel, Cable & Wireless price, Parexel gains; PetSmart pounded; funds gain $124 million

By Paul Deckelman and Paul A. Harris

New York, Aug. 10 – High-yield new issuance resumed at a brisk pace on Thursday as a pair of forward calendar offerings accounted for more than $1.4 billion of new dollar-denominated and junk-rated paper – well up from the $650 million which had gotten done in three tranches during Wednesday’s session, according to data compiled by Prospect News.

Biopharmaceutical services company Parexel International Corp. priced an upsized $770 million of eight-year notes, which later moved up in heavy initial trading.

British telecommunications operator Cable & Wireless Communications plc did a $700 million issue of 10-year notes, although traders did not immediately report any initial aftermarket activity in that new paper.

Primaryside sources meantime said that Tesla Inc. – billionaire tech entrepreneur Elon Musk’s electric car manufacturer – is expected to come to market during Friday’s session with a closely watched and greatly oversubscribed $1.5 billion offering of eight-year notes.

Back among the deals which have already priced, traders saw continued brisk volume among recent issues from fast-food eatery operator Restaurant Brands International Inc. and power generating company Dynegy Inc. – with the latter’s offering of 8.5-year notes continuing to struggle, as they have done pretty much from the get-go.

Away from the new deals, specialty retailer PetSmart Inc.’s several issues of bonds fell sharply on busy volume following the news that its chief executive officer will be leaving the company.

Statistical market performance measures were lower across the board for a third consecutive session on Thursday.

However, another numerical indicator – the flow of investor funds into or out of high-yield mutual funds and exchange-traded funds, which is considered a reliable barometer of overall junk market liquidity trends – rose moderately this week, its second consecutive weekly gain and the third upturn in the last four weeks. Some $124 million more came into those weekly reporting only domestic funds than left them during the week ended Wednesday, on top of the $195 million cash gain reported last week. Those two inflows, totaling $319 million, contrasted with the $21 million net outflow seen the week of July 26 (see related story elsewhere in this issue).

Parexel upsizes

In Thursday’s primary market, Parexel International priced an upsized $770 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 6 3/8% on Thursday, according to a market source.

The deal was increased from $720 million.

The yield printed at the tight end of yield talk that was set in the 6½% area and inside the 6½% to 6¾% early guidance.

Proceeds will be used with $2,365,000,000 of senior secured credit facilities and $2.7 billion of equity to fund the buyout of the company by Pamplona Capital Management LLP and to refinance existing debt.

Cable & Wireless 10-year deal

Cable & Wireless Communications priced a $700 million issue of 10-year senior notes (B2/B) at par to yield 6 7/8%.

The yield printed in the middle of the 6¾% to 7% yield talk. Earlier guidance was 6½% to 6¾%.

The debt refinancing deal had a significant following among emerging markets accounts, a trader said.

Goldman Sachs was the left bookrunner. Barclays, BNP Paribas, BofA Merrill Lynch and Scotia were the joint bookrunners.

Tesla talked at 5¼%

One deal was parked aboard the active forward calendar as business expected to clear before the coming weekend.

And it’s a deal that the market is following closely.

Tesla talked its $1.5 billion offering of eight-year senior notes (B3/B-) to yield 5¼% on Thursday.

Official talk comes smack on top of initial guidance.

The Palo Alto, Calif.-based company plans to use the proceeds to further strengthen its balance sheet during the present period of rapid scaling with the launch of its Model 3 and for general corporate purposes.

There is no shortage of quips in the market regarding possible uses of proceeds and no shortage of investors wanting to get in on the deal, a trader said, adding that the buzz in the market holds that the Tesla bond offer is playing to $3 billion to $4 billion of orders at 5¼%.

In addition to high-yield accounts, Tesla’s bond deal has sparked interest among equity investors and convertibles accounts, sources say.

The deal is set to price Friday.

There is an active calendar for the week ahead.

And there could be one last big burst of issuance before the junk bond primary market goes dormant until the Labor Day holiday weekend which gets underway following the Sept. 1 close

Parexel paper pops

In the secondary realm, a trader saw then new 6 3/8% notes due 2025 from Parexel push up to 100 3/8 bid in initial aftermarket dealings, improved form the par level at which that forward calendar offering had priced after upsizing.

A second trader pegged those bonds at 100½ bid.

More than $65 million of the Waltham, Mass.-based biopharmaceutical services company’s new deal changed hands by the close, a market source said – the day’s most active Junkbondland issue.

Traders meantime did not immediately report any initial aftermarket activity in the new Cable & Wireless Communications 6 7/8% notes due 2027.

The London-based telecommunications company – owned by Denver-based international communications conglomerate Liberty Global plc, the world’s largest non-U.S. broadband internet service provider – priced its forward calendar deal at par.

Restaurant bonds stay busy

Elsewhere among recently priced names, a trader said that Restaurant Brands International’s 5% senior secured notes due 2025 “were pretty active – but they didn’t go anywhere,” staying around the 100¼ bid mark.

A second trader also called those notes unchanged at 100¼ bid on volume of more than $25 million.

The Oakville, Ont.-based company – which operates and franchises the Burger King, Tim Hortons and Popeyes Louisiana Kitchen quick-service restaurant chains in the United States, Canada and internationally – priced $1.3 billion of the notes at par on Tuesday, after that quick-to-market transaction was upsized from an originally announced $1 billion.

Dynegy stays down

A trader said that Dynegy Inc.’s 8 1/8% notes due January 2026 “were lower again,” falling back by ½ point to end at 98 1/8 bid.

More than $19 million of those notes traded.

Houston-based power generation company Dynegy priced $850 million of the notes on Monday at 99.259, yielding 8¼%, after that quickly shopped offering was upsized from $600 million.

While the new bonds initially moved slightly higher, they never reached the par level and then began to slip back, gradually coming down to their current levels as the week went on.

Wednesday issues trade around

Among the new issues which had come to market during Wednesday’s session, a trader said that TMS International Corp.’s 7¼% notes due 2025 were moving around in a 101 to 101½ bid context on around $8 million of volume.

At another desk, the bonds were seen going home at 101½ bid.

The Glassport, Pa.-based provider of mill services to steelmakers had priced its $250 million regularly scheduled forward calendar offering at par.

A trader said that David Weekley Homes, LLC’s 6 5/8% notes due 2025 continued to languish around the 97½ bid mark, with only around $2 million traded.

The Houston-based homebuilder had priced its $250 million forward calendar offering at 97.731 to yield 7%.

Clear Channel International BV’s add-on to its existing 8¾% notes due December 2020 were seen at 104¾ bid, down ¼ point on the day, on volume of around $10 million.

The San Antonio, Texas-based outdoor advertising company had priced a quickly shopped $150 million tack-on issue on Wednesday at 104 to yield 6.86%.

The new bonds had initially firmed, trying to head back to the levels the existing paper had held before the new deal was announced, but then fall back in Thursday’s dealings.

PetSmart falls on CEO exit

Phoenix-based pet products retailer PetSmart announced on Thursday that its chief executive officer was leaving the company after two years on the job.

The market didn’t react well to the news and a trader said the company’s 7 1/8% notes due 2023 declined 2 points to 85 1/8.

“They were maybe even lower intraday,” the trader added.

More than $37 million of those notes traded during the session.

Michael Massey joined PetSmart after the company went private in 2015. Since then, it has expanded, purchasing online pet retailer Chewy.com earlier this year.

PetSmart said it was searching for a replacement. In the meantime, Raymond Svider, a managing partner at private equity owner BC Partners, will serve as executive chairman, overseeing the senior leadership team.

Indicators stay lower

Statistical market performance measures were lower across the board for a third consecutive session on Thursday and their fifth lower session in the last six trading days. They retreated on Tuesday – and then stayed down after that – after being mixed on Monday, which in turn had followed two earlier sessions on the downside.

The KDP High Yield Daily Index saw its third big loss in a row and sixth straight downturn overall on Thursday, plummeting by 15 basis points to end at 72.13. The index had also nosedived on Wednesday by 14 bps, on top of Tuesday’s 11 bps swoon.

For a second straight session, its yield rose by 5 bps Thursday to finish at 5.20%, matching Wednesday’s widening out; it was the fourth successive rise for the yield, which had also been up by 3 bps on Tuesday and by 1 bp on Monday.

The Markit CDX Series 28 High Yield Index ended dropped by more than ½ point Thursday to go out at 106½ bid, 106 17/32 offered, its sixth loss in a row. On Wednesday, it had retreated by more than ¼ point.

And the Merrill Lynch North American High Yield Index also continued to struggle on Thursday, backtracking by 0.289%, its third successive downturn. It had lost 0.361% Wednesday on top of Tuesday’s 0.067% fall.

The latest loss cut the index’s year-to-date return to 5.412% from Wednesday’s close at 5.718%.

It was down as well from last Wednesday’s close at 6.233%, its 2017 year-to-date peak level.

-Stephanie N. Rotondo contributed to this review

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