Euro deals price, but dollar market quiet to close $3.65 billion week; Dole, secured BWAY firm

By Paul Deckelman and Paul A. Harris

New York, March 24 – The dollar-denominated segment of the high-yield market turned quiet on Friday, with syndicate sources reporting no pricings of new junk issues in that space.

However, there was action in the European part of the market, as Adler Pelzer Group, a German maker of automotive acoustic systems and trim parts priced €350 million of seven-year secured notes.

Spanish innkeeper NH Hotel Group, SA did a €115 million add-on to its existing 2023 secured notes.

The lack of any pricings in the dollar market kept the week’s total of new dollar-denominated junk-rated paper from domestic or industrialized-country borrowers right where it was on Thursday, at $3.65 billion in six tranches, according to data compiled by Prospect News – about half of what last week’s volume was and only a small fraction of the deluge of new bonds which priced the week before that, ended March 10 – the busiest new-issue week on record.

Traders said that both of the deals which came to market on Thursday, from fruit and vegetable products producer Dole Food Co. and from American Tire Distributors, Inc., moved up modestly from their respective par pricing levels in Friday’s dealings.

They also saw the secured portion of Wednesday’s big two-part transaction from container manufacturer BWAY Holding Co. a little above its issue price, although the unsecured portion of that megadeal was slightly easier.

Away from the new deals, the news from Washington that the Republican leadership had pulled its healthcare bill before a scheduled vote seemed to act as a tonic for hospital operators such as Community Health Systems, Inc., Tenet Healthcare Corp. and HCA Inc., all of whose bonds firmed on the news.

Traders saw considerable activity – though almost all of it in smallish odd-lot trades – in Sears Holding Corp. paper, as the troubled retailer’s bonds rebounded from the lows they had hit earlier in the week after the company had included a “going concern” warning in its latest financial filing.

Statistical market performance measures turned higher across the board on Friday after having been mixed on Thursday and lower all around for three sessions before that.

However, those indicators were all lower than where they had finished last Friday, when they had been up all around on a week-over week basis. It was the second down week in the last three.

Adler Pelzer prices tight

Friday primary market activity took place in Europe, where two deals were priced at the conclusions of roadshows.

Germany-based Adler Pelzer Group priced a €350 million issue of seven-year senior secured notes (B1/B+) at par to yield 4 1/8%.

The yield printed at the tight end of yield talk in the 4¼% area.

JPMorgan was the lead bookrunner.

The Bad Durrenberg, Germany-based producer of automotive acoustic systems and trim parts plans to use the proceeds to refinance debt.

NH Hotel prices 3¾% notes

NH Hotel Group priced a €115 million add-on to its 3¾% senior secured notes due Oct. 1, 2023 at 103.375, rendering a 2.942% yield to worst and a 3.171% yield to maturity.

Deutsche Bank managed the sale.

The Madrid-based hotel chain plans to use the proceeds, plus cash on hand, to refinance €150 million of its 6 7/8% senior secured notes due 2019.

Volatility mutes primary

The final week of March gets underway with a relatively thin calendar.

Ascent Resources Utica Holdings, LLC is the market with a $1.5 billion two-part offering of senior notes expected to price on Monday.

Initial guidance has the shorter maturity five-year notes coming to yield 7½% to 7¾%, and the longer maturity eight-year notes coming at 8% to 8¼%, a market source said on Friday.

Aston Martin Capital Ltd. is set to wrap up a roadshow in London on Monday, then kick off a U.S. roadshow expected to last until late in the week for its £530 million equivalent two-part offering of senior secured notes due 2022 (expected ratings B3/B-) coming in dollars and pounds.

The market expects $400 million minimum of dollar-denominated notes and initial guidance is 7%. The pound sterling-denominated notes are expected to come 50 to 75 bps inside the dollar-denominated notes. Final tranche sizes remain to be determined.

Meanwhile Anglo American Capital plc began a high-grade style series of meetings with investors early in the past week, measuring the market ahead of a planned benchmark offering to come in dollar- and/or euro-denominated notes, sources said.

There was some expectation that a deal would materialize during the past week and clear the market before Friday’s close.

It’s possible that available rates are not in line with the company’s initial expectations, a sellside source said on Friday.

Mixed Thursday flows

Ultimately the week ahead is something of a question mark, sources said on Friday.

Renewed volatility in the stock market, a sub-$50 crude oil barrel price and lingering indigestion resulting from a tsunami of new issuance in the first half of the month – including the record-setting $17.53 billion March 6 week – have taken some of the luster off what had truly been an issuer-friendly primary market, sources say.

Those factors are also making it more difficult to pick up trends in the cash flows of dedicated high-yield bond funds, a trader said on Friday.

The most recent data on daily flows, covering Thursday, was mixed, the source said.

High-yield ETFs saw $138 million of inflows on Thursday.

Actively managed funds sustained $75 million of outflows on the day.

New issuance continues to slip

For a second straight week, high-yield primary issuance was proceeding at a more relaxed pace than that seen the week before.

With no new dollar-denominated and fully junk-rated deals having come to market on Friday, the week’s tally of such paper from domestic or industrialized-country borrowers stayed right where it had been at the close of Thursday’s session, a total of $3.65 billion in six tranches, according to the data compiled by Prospect News.

That was less than half of the $7.8 billion in 16 tranches that priced the week before, ended March 17, and was way down from the whopping $17.53 billion which got done in an eye-popping 26 tranches the week before that, ended March 10.

That earlier week turned out to be the single busiest new-issuance week ever in Junkbondland, the data indicated, nosing out the $17.03 billion which had priced during the week ended Sept. 22, 2013.

This week’s primary activity, restrained as it was, brought year-to-date issuance for 2017 so far up to $77.07 billion in 135 tranches – nearly triple the $27.29 billion which had priced in 46 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.

Thursday deals seen firm

Traders generally called Friday a pretty lackluster session, with some market participants making an early exit.

They did see the two deals which had priced on Thursday holding at somewhat firmer levels.

A trader said that the new Dole Food 7¼% junior priority secured notes due June 2025 were trading around a 100¼ to 100½ bid context around midday.

A second trader saw the bonds moving around between 100 1/8 and 100 5/8 bid

Dole, a Westlake Village, Calif.-based importer and producer of fresh and processed fruit and vegetable products, had priced its $300 million of those notes at par on Thursday, after the regularly scheduled forward calendar offering was downsized from an originally announced $375 million.

The day’s other offering – American Tire Distributors’ fungible add-on to its existing 10¼% senior subordinated notes due March 1, 2022 – was seen by a trader to have moved up a little to 101 bid, 101½ offered.

The quickly shopped $120 million addition to the Huntersville, N.C.-based independent tire distributor’s existing $805 million of those bonds had priced at par on Thursday after being upsized from an originally planned $100 million.

BWAY secureds stay above par

The traders saw both halves of Wednesday’s big deal from Atlanta-based metal and plastic containers manufacturer BWAY Holding Co. a little easier from the aftermarket levels they had reached when they began trading around on Thursday.

But they said that the secured portion of that $2.68 billion transaction was “doing a little better than the unsecured piece,” as one put it, holding at levels above the bonds’ par issue price.

He saw those 5½% senior secured notes due 2024 trading between 100¼ and 100 5/8 bid, calling that off by ¼ point.

Another trader said that the secured notes held between 100 3/8 and 100 5/8 bid.

BWAY had priced $1.48 billion of those notes at par late in the day on Wednesday after upsizing that tranche from $1.38 billion.

The secured debt had been seen as good as 100½ in very heavy trading on Thursday.

The traders said that Friday’s volume was off from Thursday’s levels.

They also saw the other half of that big deal – the 7¼% senior unsecured notes due 2025 – having “sold off,” in the words of one trader, and ending below its par issue price.

He saw the bonds around a 99 1/8 to 99 5/8 bid context.

At another desk, those unsecured notes were seen ending somewhere between 99¾ and par bid.

BWAY had priced the unsecured price at par after downsizing it to $1.2 billion from $1.25 billion originally.

When those new notes hit the aftermarket, they had firmed to closing levels slightly above par.

The regularly scheduled forward calendar deal priced after its overall size was increased from an originally announced $2.63 billion.

Hospital issues healthier

Away from the new deals, traders saw some upside movement in healthcare names, with sector investors apparently heartened by the failure of House Republicans to vote on a much-awaited bill that would repeal and replace some portions of the current Obamacare healthcare law enacted during the previous presidential administration; the hospitals were seen benefitting from the maintenance of the status quo rather than uncertainties about what the complicated new legislation might mean for their top and/or bottom lines.

Franklin, Tenn.-based hospital operator Community Health Systems’ 7 1/8% notes due 2020 were seen by a trader climbing to 93¾ bid, a gain of 3½ points on the session.

Its 5 1/8% notes due 2021 rose by a more modest ¼ point to 89¾ bid.

Tenet Healthcare’s 6% notes due 2020 firmed by ¾ point, ending at 105½ bid.

The Dallas-based hospital operator’s 6¾% notes due 2023 did even better than that, a market source said, seeing the notes as high as 98 bid, which he said was a nearly 3 point gain on the day.

Nashville-based sector peer HCA’s 5¼% notes due 2026 firmed by 1½ points on the day to end at 104 bid,

Maintenance of the healthcare status quo – at least for now – was also seen as beneficial to Canadian drug manufacturer Valeant Pharmaceuticals International Inc.’s paper.

A trader saw the Laval, Que.-based company’s 7½% notes due 2021 finishing up ¾ point on the session at 86¼ bid.

Sears paper rebounds

Elsewhere, a trader quoted Sears Holding s 6 5/8% notes due 2018 just under 94 bid, off slightly on the session from Thursday’s close above 94, but still up considerably from lows around 86 to which those bonds had tumbled on Wednesday.

The bonds had nosedived after the struggling Hoffman Estates Ill.-based retailer, which operates the iconic Sears and Kmart department store chains, included a warning in a financial filing that its ability to continue operations as a going concern might be in jeopardy.

The company later clarified that it included the ominous language in the filing to satisfy standard securities laws.

The trader said that most of Friday’s activity in the name was in smallish odd-lot trades.

Indicators turn higher

Statistical market performance measures turned higher across the board on Friday after being mixed on Thursday and lower all around for three straight sessions before that. It was the second firmer session in the last seven trading days.

However, those indicators were all lower than where they had finished last Friday, when they had been up all around on a week-over week basis. It was the second weaker week in the last three.

The KDP High Yield Daily Index gained 1 point on Friday to close at 71.36, its first rise after four straight losses before that, including Thursday s 3 bps retreat.

Its yield came in by 1 bp to 5.45%, its first narrowing after three sessions of having widened out, including Thursday’s 2 bps rise.

But those levels compared unfavorably with last Friday’s 71.72 index reading and 5.36% yield.

The Markit CDX Series 27 High Yield Index saw its second straight gain on Friday, firming by 11/32 point to 107 5/32 bid, 107 7/32 offered. On Thursday, it had gained more than 1/8 point, its first upturn after three losses in a row.

But Friday’s close was still below last Friday s 107 5/16 bid, 107 3/8 offered close.

The Merrill Lynch High Yield Index also was up for a second straight day after having snapped a losing streak, improving by 0.174% on Friday after Thursday’s 0.16% upturn, its first after four consecutive losses.

The rebound raised its year-to-date return to 1.757% on Friday from Thursday’s 1.58%, although those levels remain well down from the index’s 2017 peak level of 3.19%, which was established on March 1.

For the week, though, the index lost 0.207%, after having risen by 0.225% last week.

© 2015 Prospect News.
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