TitleMax, Graham, Atotech, Tervita price; Talen rises; PHI eyed; funds add $261 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 24 – The domestic high-yield primary market was active on Thursday with $1.4 billion pricing over four deals.

TMX Finance LLC, formerly known as TitleMax, priced a $450 million issue of five-year senior secured notes (Caa2/B-) at par to yield 11 1/8%.

Graham Holdings Co. priced $400 million of eight-year senior notes (Ba1/BB+) at par to yield 5¾%.

Atotech BV sold a $300 million issue of five-year senior PIK toggle notes (Caa1/CCC+) at 99.01 to yield 9%.

Tervita Corp. priced a $250 million add-on to its 7 5/8% senior secured notes due Dec. 1, 2021 (B2/B) at 100.5 to yield 7.46%.

While TitleMax and Graham Holdings were the most active of the new deals in the secondary space, all of Thursday’s deals were seen trading above their issue prices.

While secondary attention turned to Thursday’s new paper, Mattel, Inc.’s 6¾% senior notes due 2025 (B1/BB-/BB) remained active although largely unchanged after the pricing of a $500 million add-on Wednesday.

Interest in Carriage Services, Inc.’s new 6 5/8% senior notes due 2026 (B2/B) waned on Thursday after they were among the top volume movers on Wednesday.

PHI, Inc.’s 5¼% senior notes due 2019 have seen high volume trading the past two days on speculation the company may attempt to refinance the bond, a market source said.

Talen Energy Corp.’s junk bonds have been making gains with the 9½% senior notes due 2022 (B1/B+) now trading above par for the first time since mid-March.

High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – gained $261 million of cash in the week to May 23, an inflow that followed two larger losses, according to fund-flow statistics generated by AMG Data Services Inc.

TitleMax prints at 11 1/8%

TMX Finance, formerly known as TitleMax, priced a $450 million issue of five-year senior secured notes (Caa2/B-) at par to yield 11 1/8%.

The yield printed at the wide end of yield talk in the 11% area.

People liked it at 11 1/8%, according to a trader.

Jefferies was the bookrunner for the refinancing deal.

The 11 1/8% notes were seen at 100 ¾ bid, 101 offered shortly after terms circulated the market, a trader said.

The 11 1/8% notes continued to climb throughout the session and traded as high as 102, a market source said.

Most prints were between 101 3/8 to 101 ½ with about $20 million of the bonds traded by late afternoon.

As new paper from TMX Finance hit the market, TMX’s existing 8½% senior notes due 2018 were also active with the notes seen trading up to par ¼.

Graham brings eight-year deal

Graham Holdings priced a $400 million issue of eight-year senior notes (Ba1/BB+) at par to yield 5¾%, according to market sources.

The yield came in the middle of yield talk in the 5¾% area and slightly tight to initial price talk in the high 5% to 6% area.

J.P. Morgan, Wells Fargo, BofA Merrill Lynch, HSBC and PNC were the joint bookrunners for the debt refinancing deal.

The new 5¾% notes dominated the secondary market after breaking for trade.

They were seen trading between par ½ and par 5/8 with more than $68 million of the bonds traded by late afternoon.

Atotech’s PIK toggle deal

Germany-based Atotech priced a $300 million issue of five-year senior PIK toggle notes (Caa1/CCC+) at 99.01 to yield 9%.

The notes pay a cash coupon of 8¾% which rises by 75 basis points to 9½% for PIK interest payments.

The coupon came at the wide end of the 8½% to 8¾% coupon talk. The reoffer price came in line with price talk of 99.

The yield printed at the wide end of the 8¾% to 9% yield talk.

PIK toggle deals brought to market to raise cash that will fund shareholder dividends, as was the case with the Atotech trade, are always conspicuous, sources say.

And Atotech’s Thursday deal was especially conspicuous because it was the first PIK toggle dividend deal to price since January, a trader remarked.

JP Morgan and Barclays were the joint bookrunners for the Atotech offering.

The notes were seen trading between 99¾ and par in the secondary market with about $8 million of the bonds traded by late afternoon, a market source said.

Tervita at the rich end

Tervita priced a $250 million add-on to its 7 5/8% senior secured notes due Dec. 1, 2021 (B2/B) at 100.5 to yield 7.46%.

The reoffer price came at the rich end of the 100 to 100.5 price talk and rich to early guidance in the par area.

Deutsche Bank and TD Securities were the joint bookrunners.

The Calgary, Alta.-based environmental management company for the oil and gas industry plans to use the proceeds to fund the refinancing of Newalta’s existing debt in connection with the acquisition of Newalta and the merger of Tervita and Newalta into an entity to be called Amalco.

Like most small add-ons, the new notes were not expected to see much activity in the secondary market.

However, the new notes were seen up almost 1 point above their issue price with trades seen between 101¼ and 101½, a market source said.

Source Energy upsizes

In the Canadian dollar-denominated market, Source Energy Services Canada LP and Source Energy Services Canada Holding priced an upsized C$50 million add-on to their 10½% senior secured first-lien notes due Dec. 15, 2021 (B+//DBRS: B (high)) at 105.75 to yield 7.953%.

The amount was increased from C$40 million.

The reoffer price came on top of price talk.

BMO and Scotia were the joint bookrunners.

The Calgary, Alta.-based company plans to use the proceeds to repay drawn amounts under its ABL facility, which may be redrawn for general corporate purposes, as well as to fund working capital and capital expenditures.

Dometic to start marketing

In the European market, Sweden-based Dometic Group AB plans to start a roadshow on Friday in Stockholm for a benchmark offering of euro-denominated five-year senior notes (Ba3/BB).

The roadshow is set to continue through the May 28 week.

Deutsche Bank is leading the debt refinancing deal.

The forward calendar

With the dollar-denominated calendar cleared heading into the extended Memorial Day holiday weekend in the United States, the deal calendar for the June-July crossover week is thin indeed.

At Thursday’s close that calendar was an all-Europe show.

Italy-based shipbuilder Fincantieri SpA announced earlier in the month that it mandated Banca IMI, BNP Paribas, Deutsche Bank, Goldman Sachs, HSBC and UniCredit to arrange meetings with fixed-income investors ahead of a contemplated €300 million minimum offer of fixed-rate senior notes with a five-year to seven-year maturity.

Those meetings were slated to begin last Monday.

There has been no word since, sources say.

A pair of prospective issuers, both of them Norwegian, announced deals in the Nordic bond market.

Marine Harvest mandated DNB Markets and Nordea as coordinators ahead of a possible euro-denominated five-year unsecured deal, with investor meetings to commence Monday.

And Bulk Industrier AS mandated Arctic Securities to arrange meetings for a contemplated offering of krone-denominated four-year secured bonds. Those meetings are set to begin Friday.

Mattel active

In the secondary, Mattel’s 6¾% senior notes due 2025 saw another day of active trading on Thursday after the company priced a $500 million add-on Thursday. The 6¾% notes were seen largely unchanged in the high-volume trading at 96¾, a market source said.

More than $25 million of the bonds had traded by late afternoon.

Mattel priced the $500 million add-on at 96.25 to yield 7.403% on Wednesday.

The add-on announcement put pressure on the outstanding 6¾% notes, which lost 2½ points in the run up to pricing.

The add-on is trading on top of the outstanding issuance with the trading level for the notes 96¾.

Carriage slips away

Carriage Services newly priced 6 5/8% senior notes due 2026 drifted out of focus on Thursday although they were seen slightly improved.

The notes traded at par ¾ in limited trading activity.

“They didn’t get a lot of interest today,” a market source said.

The 6 5/8% notes were one of the major volume movers of Wednesday’s session after they broke for trade.

Carriage Services priced a $325 million issue of the 6 5/8% notes at par on Wednesday. More than $37 million of the bonds traded during Wednesday’s session.

PHI eyed

PHI’s 5¼% senior notes due 2019 have been in focus amid speculation the company would try to refinance them, a market source said.

The notes dropped about 7/8 point to trade at 96 on Thursday after rising ½ point on Wednesday to trade just south of 97.

The notes have seen high-volume trading over the past two days with more than $30 million of the bonds traded on Thursday and more than $37 million of the bonds traded on Wednesday.

The prospects for refinancing do not look good, a market source said, because of the company’s high leverage.

The leverage may be less at year end, “but that does not look good,” the source said. The 5¼% notes have also always traded tight.

Given the price moves over the last couple of days, either people disagree about the company’s ability to refinance or the bond is being eyed by short-sellers, the market source said.

Talen Energy gains

Talen Energy’s junk bonds have been making gains over the past two days, a market source said. The structure, as a whole, is up but the company’s 9½% notes due 2022 have risen the most.

The 9½% notes were up another 1.5 point to trade at 101¾ on Thursday. The gains come on top of a 3 point gain on Wednesday, the source said.

About $17 million of the bonds traded by late afternoon.

The 9½% notes, which priced at 97 in April 2017, broke above par on Wednesday for the first time since mid-March.

Talen Energy’s 4.6% notes were also making gains in active trading on Thursday.

The notes were seen up 1 point to trade at 89 with $17 million of the bonds also trading.

The U.S. Environmental Protection Agency recently denied Connecticut’s petition to force the Brunner Island power plant, owned by Talen Energy, to cut down on smog emission, LancasterOnline reported.

The coal power plant has been a focal point of criticism.

In a settlement reached with the Sierra Club in February, Talen Energy agreed to stop using coal at the plant by 2028.

Indexes mixed

Three benchmarks for the high-yield secondary market were again mixed on Thursday.

The KDP High Yield index was down 7 basis points on Thursday to 70.43 with the yield now 5.9%. The index was also lost 4 bps on Wednesday.

The Merrill Lynch High Yield index made gains on Thursday.

The index was up 4.8 bps with the year-to-date return now negative 0.23%. The index was down 9.4 bps on Wednesday erasing its gains from earlier in the week.

The index has been in negative territory since May 15.

The CDX High Yield 30 index was down 6 bps on Thursday to close the day at 106.89 after a 0.5 bps rise on Wednesday.

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