Netflix megadeal, Global Ship Lease price; FXI, Consol offerings slate; new GSL firms; recent issues active

By Paul Deckelman and Paul A. Harris

New York, Oct 23 – After two consecutive sessions of relative inactivity in which no new U.S. dollar-denominated and fully junk-rated paper was heard to have priced, the high-yield primary sphere came back to life in a big way on Monday, as a pair of such deals got done, generating $1.96 billion of new paper.

Most of that was attributable to internet media content company Netflix, Inc.’s quickly shopped $1.6 billion offering of 10.5-year notes, the biggest junk market offering in nearly three weeks.

Traders quoted the Netflix paper right around its issue price in initial aftermarket dealings.

The day’s other pricing was a $360 million regularly scheduled forward calendar offering of five-year secured notes from containership charter company Global Ship Lease Inc. Those bonds were heard to have firmed in active trading when they hit the secondary market.

High-yield syndicate sources meantime reported that several prospective new issues had joined the forward calendar, including deals from specialty chemical manufacturer FXI Holdings, Inc. and from coal company Consol Mining Corp.

Besides the aftermarket trading in the new Global Ship Lease and Netflix issues, market sources for the first time in several days saw a fair amount of activity in some recently priced credits, including Targa Resources Partners LP, West Corp., Crown Rock, LP, and, going back a little further, Tesla, Inc.

Away from the new deals, traders saw activity in healthcare names such as pharmaceuticals maker Endo International plc, which firmed smartly, and hospital operator Tenet Healthcare Corp., whose bonds were mixed.

Statistical market performance measures were mixed for a second consecutive session in Monday; those indicators had turned mixed on Friday, after having been higher across the board for three consecutive sessions before that.

Netflix drives by

In Monday's new issue market, Netflix, Inc. priced a $1.6 billion issue of 10.5-year senior bullet notes (B1/B+) at par to yield 4 7/8%.

The yield came in the middle of the 4¾% to 5% yield talk. Initial guidance was in the 4¾% to 5% area.

Morgan Stanley, Goldman Sachs, JP Morgan, Deutsche Bank and Wells Fargo were the joint bookrunners for the drive-by deal.

Global Ship Lease first priority

Global Ship Lease Inc. launched and priced a $360 million issue of 9 7/8% five-year first priority secured notes (B3/B) at 99.00 to yield 10.128%.

The yield printed slightly wide of yield talk in the 10% area. The reoffer price came on top of price talk.

Citigroup was the left bookrunner. Clarksons Platou was the joint bookrunner.

It took the London-based containership charter company two passes at the primary market in order to bring home the cash.

Last July the Global Ship halted a $400 million offering of five-year secured notes, with proceeds from the pulled deal also earmarked to take out the 10% notes, the same use of proceeds as the deal that priced on Monday.

FXI roadshow

FXI Holdings, Inc. started a roadshow on Monday for a $500 million offering of seven-year senior secured notes.

The buyout deal is set to price late in the Oct. 23 week.

Jefferies is the left bookrunner. Deutsche Bank and BofA Merrill Lynch are the joint bookrunners.

Consol Mining second lien deal

Consol Mining Corp. is in the market with a $350 million of senior secured second-lien notes due 2025.

Pricing is expected before the end of the Oct. 23 week.

JP Morgan is leading the offer, which is in the market in relation to the spinoff of the Pittsburgh-based coal mine operator from parent Consol Energy Inc.

Proceeds, together with term loan and its revolver debt, will be used make a payment to Consol Energy in relation to the spinoff, as well as to refinance existing debt of CNX Coal Resources LP under its revolving credit facility, to fund working capital needs and for general corporate purposes.

Tight talk from Wind

In the euro-denominated market news surfaced Monday on the megadeal that has been winding its way through the market over the past week.

Wind Tre SpA set price talk in its €7.3 billion equivalent offering senior secured notes (B1/BB-/BB), coming in five benchmark-sized tranches.

Official talk for all five tranches comes tight to, or inside of, initial guidance.

• Euro-denominated fixed-rate notes due January 2023 are talked to yield in the 2¾% area; initial guidance was in the 3% area. The five-year notes come with two years of call protection;

• Euro-denominated fixed-notes notes due January 2025 are talked to yield in the 3¼% area; initial guidance was in the 3½% area. The seven-year notes come with three years of call protection;

• Euro-denominated floating-rate notes due January 2024 are talked at talked at par with a 275 basis points to 300 bps spread to Euribor. Initial guidance was 300 bps to 325 bps at par. The six-year floating-rate notes come with one year of call protection;

• Dollar-denominated fixed-rate notes due January 2026 are talked to yield in the 5¼% area. Initial talk was in the low-to-mid 5% area. The eight-year notes come with three years of call protection;

• Dollar-denominated floating-rate notes due January 2023 are talked at 99.5 to par with a 300 bps spread to Libor. Initial talk was Libor plus 300 bps to 325 bps at 99.5. The five-year floating-rate notes come with one year of call protection.

Tranche sizes remain to be determined.

The deal is expected to price on Tuesday.

Joint global coordinator Deutsche Bank will bill and deliver for the euro-denominated notes.

Joint global coordinator BofA Merrill Lynch will bill and deliver for the dollar-denominated notes.

Vallourec taps 6 5/8% notes

France-based Vallourec SA priced a €150 million add-on to its 6 5/8% senior fixed-rate notes due Oct. 15, 2022, at 102.5 to yield 5.979% on Monday.

Morgan Stanley was the sole global coordinator for the debt refinancing deal. BNP Paribas, Credit Agricole, Natixis, Santander and SG CIB were the joint bookrunners.

Global Ship Lease firms

In the secondary arena, traders said that the new Global Ship Lease 9 7/8% first-priority senior secured notes due 2022 moved up after pricing at par fairly early in the session, “on active volume,” one of them noted.

One trader saw the bonds get as good as 101 bid.

At another desk, the trader was a little more conservative in his estimation, seeing the bonds going home at 100 5/8 bid.

It was the day’s busiest credit in Junkbondland, with over $25 million having changed hands by the close.

Netflix in tight range

Traders did not see quite as much price movement, or overall activity, in the new Netflix, Inc. 4 7/8% notes due in April 2028, which priced later in the session.

Two separate market sources each quoted the bonds in a tight 99 7/8-to-100 1/8 bid range, versus their par issue price.

Another saw them trading between par and 100 1/8, while yet another pegged the bonds at 100 1/8 offered.

A trader noted that the $1.6 billion new issue from the Scotts Valley, Calif.-based provider of on-demand internet streaming media was the first megadeal the junk market had seen since Oct. 11, when Beacon Roofing Supply Inc., a Herndon, Va.-based producer of roofing products from the residential and commercial construction market, had priced a $1.3 billion regularly scheduled eight-year deal.

And it was the biggest such billion-dollar-plus transaction seen in the junk precincts since Oct. 3, when Dallas-based energy midstream oil and natural gas company Energy Transfer Equity, LP, drove by with a $1.75 billion issue of 5.5-year notes.

Recent issues trade around

Traders also saw some dealings in some of the recently priced issues, which had lately been fairly quiet in the aftermarket.

For instance, Targa Resources’ 5% notes due in January of 2028 were quoted at 101 bid, up 11/32 point on the day, with over $13 million of the Houston-based midstream energy company’s issue 10.25-year issue seen having traded.

Targa had priced that quick-to-market $750 million offering at par on Oct. 10.

A trader saw West Corp.’s 8½% notes due 2025 ending at 99¼ bid, down 9/16 point on the day, on volume of over $12 million.

The Omaha, Neb.-based provider of communications and network infrastructure services priced its $1.15 billion forward calendar deal – downsized from $1.3 billion originally – at 98.579 on Oct. 3, yielding 8¾%.

Crown Rock’s 5 5/8% notes due 2025 firmed by 5/8 point, to 101¼ bid, also on turnover of more than $12 million.

The Midland, Texas-based energy exploration and production operator priced its $1 billion drive-by transaction at par on Oct. 2.

Going back a little further, a trader said that Tesla, Inc.’s 5.3% notes due 2025 “have been kind of trading every day,” seeing them up 3/8 point at 97 7/8 bid.

Another source located those bonds up 9/32 point on the day, ending at 97 13/16 bid, with over $13 million having changed hands.

The Palo Alto, Calif.-based manufacturer of electric cars and energy storage systems had priced its $1.8 billion behemoth of a regularly scheduled bond deal at par back on Aug. 11, after upsizing that issue from an originally announced $1.5 billion.

Healthcare names mixed

Away from the new deals, traders saw healthcare-related names mixed on the session.

One of the busiest was Dublin-based pharmaceutical company Endo International plc’s 6% notes due 2023, which saw more than $10 million traded. They jumped by 1 7/8 points to end at 83 5/8 bid.

A second trader saw the company’s 6% notes due 2025 likewise up by 2½ points on the day to close at 82. However, he saw no fresh news out on the company that might explain that jump.

Endo’s Nasdaq-traded shares lost 24 cents on the day, or 3.11%, ending at $7.48. Volume of 3.2 million shares was about half the norm.

A trader said that Dallas-based hospital operator Tenet healthcare Corp.’s 6¾% notes due 2023 lost 1/8 point on the day to end at 96 1/8 bid, although its 8 1/8% notes due 2022 gained 3/16 point to close at 101 5/8 bid, both on about $10 million of volume.

Franklin, Tenn.-based hospital company Community Health Systems Inc. lost 3/8 point to close at 76 bid.

Indicators stay mixed

Statistical market performance measures were mixed for a second consecutive session in Monday; those indicators had turned mixed on Friday, after having been higher across the board for three consecutive sessions before that.

The KDP High Yield Daily Index gained 3 basis points on Monday to close at 72.49, after having eased by 1 bp on Friday, a loss which snapped a string of three straight gains, including Thursday’s 1 bp firming.

For a second consecutive session, its yield was unchanged at 5.15%, matching Friday’s close, after having come in by 1 bp on Thursday. The yield had also been unchanged on Wednesday, after having narrowed by 3 bps on Tuesday – the first tightening after six straight sessions of having widened out.

But the Markit CDX Series 29 High Yield Index posted its first loss after six successive gains, easing by 1/16 point on Monday to finish at 108 15/32 bid, 108½ offered. On Friday, it had finished up 7/32 point, after having edged up by around 1/16 point on both Wednesday and then again on Thursday.

However, the Merrill Lynch North American High Yield Index improved by 0.107% on Monday, its sixth advance in a row. The index had also firmed by 0.038% on Friday.

The latest gain lifted its year-to-date return to 7.632% from 7.517% on Friday, establishing a fifth straight new 2017 year-to-date peak level.

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