New Home, Fortress price to cap $17.54 billion week, biggest of all time, recent deals busy

By Paul Deckelman and Paul A. Harris

New York, March 10 – The high-yield primary market topped off an amazing week on a relatively quiet note on Friday, pricing a pair of $250 million regularly scheduled forward calendar offerings – from builder New Home Co. and from Fortress Transportation and Infrastructure LLC, which acquires aviation, energy, intermodal transport and rail equipment and infrastructure. Both issues priced at a discount.

A session in which just two transactions priced, generating a total of less than $500 million of proceeds, was somewhat anticlimactic after Thursday’s frenetic session which saw $6.64 billion of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers price in eight tranches brought by six issuers – Junkbondland’s biggest new-issuance session since last June.

The day’s two deals capped off a week in which $17.54 billion of new junk bonds came to market in 26 tranches – the heaviest ever week for junk bond new issuance.

Traders meantime saw considerable aftermarket activity in some of the many large issues which had priced earlier in the week, including credits such as Valeant Pharmaceuticals International, Inc., Charter Communications, Inc. and American Axle & Manufacturing Inc.

Most of the new issues traded around their par issue price but Valeant and New Enterprise Stone & Lime Co. Inc. were notable exceptions, both firming smartly after pricing at par.

Statistical market performance measures turned mixed on Friday after being lower across the board for four consecutive sessions before that. They had turned southward on Monday and continued to move lower on Tuesday, Wednesday and again on Thursday after being been mixed last Thursday and again last Friday.

The indicators were lower all around versus where they had finished last Friday, their first lower week after three higher weeks.

New Home at a discount

The Friday primary market session generated a respectable news volume.

However by the standards set in the four torrid sessions which preceded it, Friday was an idyll.

Two issuers priced notes at discounts to par, raising a combined total of $490 million.

They brought the week’s total to $17.53 billion, a new record for weekly issuance in the high-yield market.

Friday’s pair of relatively modest deals included New Home Co., which priced a $250 million issue of 7¼% five-year senior notes (B3/B-) at 98.961 to yield 7½%.

The yield printed on top of yield talk that had been announced in the 7½% area.

Credit Suisse, Citigroup, J.P. Morgan and US Bancorp were the joint bookrunners for the debt refinancing.

Fortress at a discount

Fortress Transportation and Infrastructure priced a $250 million issue of 6¾% five-year senior notes (B1/B+) at 97 to yield 7.48%.

The coupon, reoffer price and yield came on top of talk.

In a structural change, call protection was increased to three years from 2.5 years.

There were also covenant changes.

Morgan Stanley was the sole bookrunner for the debt refinancing.

First Quantum fixes roadshow

First Quantum Minerals Ltd. plans to start an international roadshow on Monday for a $1.6 billion two-part offering of senior notes (B-/expected B).

The debt refinancing deal is expected to price on Wednesday.

It features six-year notes and eight-year notes with tranche sizes to be determined.

Barclays, BNP Paribas and JP Morgan are the global coordinators. JP Morgan will bill and deliver.

The First Quantum deal climbs aboard a modest calendar.

Also scheduled are Foresight Energy LLC with $500 million of seven-year secured notes, Gartner, Inc., with $600 million of eight-year notes and Rain Carbon Inc., with $1.05 billion of eight-year notes.

The latter deal is a holdover from the past week. Its roadshow was scheduled to wrap up on Thursday.

In addition to those, Scotland’s KCA Deutag is expected to show up in the dollar-denominated market with a $525 million offering of five-year secured notes.

The primary market will be open next week, a trader said on Friday.

But it is unlikely to be as cheap for issuers as it was when the record-setting week of March 6 got under way, the source remarked.

SPIE to begin roadshow

Turning to the European high-yield primary, France-based engineering group SPIE plans to market a €600 million offering of seven-year notes by means of an investor roadshow during the week ahead.

HSBC, SG CIB and Natixis are leading the offer.

The Cergy-Pontoise, France-based group plans to use the proceeds to finance the acquisition of German-based energy services provider SAG Group, as well as to refinance SAG debt and for general corporate purposes.

And Merlin Entertainments plc plans to meet with investors on Monday in London in an attempt to place a €200 million add-on to its 2¾% non-callable senior notes due 2022, via BNP Paribas and HSBC.

Look for three to four more deals to surface in the euro-denominated market during the March 13 week, a London-based debt capital markets banker advised on Friday.

None will be gigantic.

All are expected to range in size between €300 million and €500 million, the source said.

Biggest week ever

The two dollar-denominated junk bond offerings which priced on Friday swelled to $17.54 billion the amount of new dollar-denominated and fully junk-rated paper from domestic and industrialized-country borrowers which had priced in 26 tranches during the week, according to data compiled by Prospect News.

The week’s total was more than double the $8.03 billion which had priced in 13 tranches last week, ended March 1 and over four times the $4.15 billion which had priced in eight tranches the week before that, ended Feb. 24.

And it was almost double the $8.94 billion which had priced in 19 tranches during the week ended Feb. 10, which had previously been the heaviest new-issuance week so far this year.

In fact, it was the biggest weekly total volume ever seen in the junk market, nosing out the $17.03 billion which had priced during the week ended Sept. 22, 2013.

This week’s primary activity brought year-to-date issuance for 2017 to $65.64 billion in 113 tranches – almost four times the $17.79 billion which had gotten done in 30 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Full-year issuance in 2016 finished at $226.78 billion in 359 tranches –which ran 12.9% behind the $260.02 billion which had gotten done in 408 tranches in 2015.

New Home deal firms

In the secondary market, a trader said that the New Home 7¼% notes due 2022 were in a 99½ to par range, though he saw only relatively thin volume of a couple of million bonds traded.

That was up from the 98.961 level at which the Aliso Viejo, Calif.-based homebuilder’s regularly scheduled $250 million issue had priced.

Valeant issues busy

Traders saw some activity in some of the recently priced deals, notably both halves of the Valeant issue. Each of the Canadian pharmaceutical firm’s new tranches was trading well above 101½ bid, with over $158 million of the 7% notes due 2024 and over $80 million of the 6½% notes due 2022 changing hands.

Indicators turn mixed

Statistical market performance measures turned mixed on Friday after being lower across the board for four consecutive sessions. They had turned southward on Monday and continued to move lower on Tuesday, Wednesday and again on Thursday after being mixed the previous week on Thursday and again Friday.

The indicators were lower all around versus where they had finished last Friday, their first lower week after three higher weeks.

The KDP High Yield Daily Index eased by 2 basis points on Friday to end at 71.65, its sixth straight loss. On Thursday, it had plunged by 49 bps, on top of Wednesday’s 28 bps swoon.

Its yield crept by 1 bp to 5.28%, its sixth consecutive widening. It had ballooned out by 16 bps on Thursday after moving up by 10 bps on Wednesday. The stretch of wider yields marks a change from nearly a month of session in which the yield came in or was unchanged, a run dating back to Feb. 8.

Friday’s levels compared unfavorably with last Friday’s 72.70 index reading and 4.92% yield.

The Markit CDX Series 27 High Yield Index was down by over 3/32 point on Friday, closing at 106 27/32 bid, 106 29/32 offered, its fifth straight loss.

It was down from last Friday’s close at 108 1/16 bid. 108 1/8 offered.

But the Merrill Lynch High Yield Index broke out of its recent rut, moving up by 0.05% on Friday, after retreating during the previous six sessions, a run of gains that followed eight consecutive sessions moving upward. The index dropped by 0.458% on Thursday on top of Wednesday’s 0.343% pullback.

Friday’s small gain upped its year-to-date return to 1.739% from 1.688% on Thursday – still well down from its 2017 peak level of 3.19% hit on March 1.

For the week, it was down 1.224% – its first weekly loss after six gains.

© 2015 Prospect News.
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