Quality Tech drives by; new Wind Tre, Netflix off in busy trading; Staples slides, Bombardier battered

By Paul Deckelman and Paul A. Harris

New York, Oct 25 – For a second consecutive session, the high-yield primary sphere was heard to have pushed out a single new U.S. dollar-denominated and fully junk-rated deal on Wednesday, as data-centers company Quality Tech, LP, brought an upsized $400 million of eight-year notes to market.

Traders did not immediately report any initial aftermarket dealings in the late-breaking issue.

Traders meantime said that Tuesday’s big new deal from Italian telecommunications company Wind Tre SpA was the busiest credit of the day in Junkbondland, seeing those 8.25-year secured notes in retreat.

Monday’s megadeal-sized offering from entertainment company Netflix, Inc. was likewise seen on the downside on sizable volume.

Away from the new issues, retailer Staples Inc.’s bonds fell sharply on busy volume, pushed down by the news that online retailing giant Amazon.com will offer two-day shipping on office supply products.

And aircraft maker Bombardier Inc.’s notes lost altitude across the board as the company said it is reviewing delivery plans for its new C-Series aircraft in light of problems with the separately manufactured engines.

Statistical market performance measures turned lower on Wednesday for the first time in nearly two weeks, after having been mixed for a third consecutive session on Tuesday and higher across the board for three straight sessions before that.

QTS upsizes

The news flow of the dollar-denominated primary market remained thin on Wednesday.

QualityTech, LP and QTS Finance Corp. (QTS) priced the session's sole deal, an upsized $400 million issue of eight year senior notes (B1/BB) at par to yield 4¾%.

The issue size was increased from $350 million.

The yield printed in the middle of yield talk in the 4¾% area.

Morgan Stanley, Jefferies, TD, BofA Merrill Lynch, Deutsche Bank, Goldman Sachs, JP Morgan, KeyBanc, MUFG, Regions, Stifel and SunTrust were the joint bookrunners for the debt refinancing deal.

Moving into the latter part of the Oct. 23 week, there are still dollar deals set to clear before Friday's close.

Warrior Met Coal, Inc. is marketing a $350 million offering of seven-year senior secured notes (B3/B-), a dividend-funding deal being led by left bookrunner Goldman Sachs.

Early guidance is in the mid 7% area, according to a market source who recounted that back in March the Brookwood, Ala.-based coal producer withdrew a $350 million seven-year covenant-light first-lien term loan B from the syndicated loan market, because prices and terms were not acceptable to shareholders.

As with the present bond deal, the withdrawn loan was in the market to fund a dividend to shareholders.

As reported, the term loan was talked at Libor plus 550 basis points to 575 bps with a 1% Libor floor, an original issue discount of 99 and 101 soft call protection for one year.

Credit Suisse was the lead on the withdrawn loan.

Also on deck to price before the end of the week is first-time issuer goeasy Ltd. with a $300 million offering of five-year senior notes (Ba3/BB-), via left bookrunner Wells Fargo.

The deal is whispered in the mid-to-high 7% area, according to a market source.

Ineos upsizes

As has been the case through much of the middle part of October, the euro-denominated primary market generated higher news volume than its dollar-denominated counterpart on Wednesday.

Ineos Holdings Ltd. launched and priced an upsized €550 million issue of eight-year senior secured notes (Ba1/BB+/BBB-) at par to yield 2 1/8%.

The investment grade rating from Fitch notwithstanding, the debt refinancing deal was talked and priced at a yield. It was upsized from €500 million, was talked to yield in the 2¼% area.

J.P. Morgan, Barclays and Citigroup were the joint global coordinators.

BMO, Credit Suisse, Deutsche Bank, ING and Lloyds were the co-managers.

CBR Fashion prices €450 million

Germany-based apparel supplier CBR Fashion priced a €450 million issue of five-year senior secured notes (B2/B) at par to yield 5 1/8%.

Credit Suisse and UniCredit Bank managed the sale.

Proceeds will be used to refinance debt.

Shop Direct talks £700 million

Looking to Thursday's session, Shop Direct Funding plc set initial price talk in its £700 million two-part offering of five-year senior secured notes (B2/B+).

Initial talk is in the 7% area for the fixed-rate notes, and Libor plus 675 basis points area for the floating-rate note.

Tranche sizes remain to be determined.

Global coordinator and lead left bookrunner Barclays will bill and deliver.

Quality Tech unseen

In the secondary realm, traders did not immediately report any initial aftermarket dealings in the new 4¾% notes due 2025 from Overland Park, Kan.-based data-centers operator Quality Tech, LP.

One said that the issue came too late in the day for any significant secondary action.

Wind Tre trades off

Among recently priced issues, Tuesday’s giant-sized dollar-denominated piece of Italian telecommunications company Wind Tre SpA was easily the busiest bond of the session, a market source said, with over $69 million having changed hands by the close.

He saw those 5% senior secured notes due in January 2026 down 7/16 point, closing at 100 5/8 bid.

A second trader saw the notes in a 100 5/8-to 100 7/8 offered context, noting that “they didn’t go too far, trading around there most of the day.”

Wind priced $2 billion of those 8.25-year notes at par on Tuesday as part of a four-part €7.325 billion equivalent regularly scheduled forward calendar offering that also included three tranches of euro-denominated notes.

The dollar bonds had traded up by nearly 1 point in active initial Tuesday dealings.

Netflix off, GSL steady

Monday’s quickly shopped offering of 4 7/8% notes due in April 2028 from Netflix, Inc. remained one of the most actively traded issues, with turnover of more than $50 million on Wednesday.

A trader saw those bonds down more than 1 full point, closing at 98 7/8 bid.

Netflix, another trader said, “took a little dive after trading on good volume [Tuesday] around par,” where the Scotts Valley, Calif.-based provider of streaming internet entertainment content had priced its $1.6 billion offering on Monday.

Meanwhile, Monday’s other deal – London-based containership charter company Global Ship Lease Inc.’s regularly scheduled $360 million offering of 9 7/8% first-priority senior secured notes due 2022 – were seen by a trader as having bucked that negative trend and improved by 1/16 point, ending at 101¼ bid.

He said that volume on the issue was around $9 million, about half the handle seen in Tuesday’s market.

Staples gets slammed

Away from the new deals, traders saw Staples Inc.’s 8½% notes due 2025 hammered down by more than 2 points on the session, with one market source seeing the Framingham, Mass.-based office supplies retailer’s paper ending at 89 3/16, calling that a 2½-point loss, with over $43 million having traded.

“Staples was plenty active today,” another trader said, “with Amazon challenging their business.”

He too saw those bonds down more than a deuce on the day at 89 bid.

A third trader was amazed to find that the Staples issue “is now officially in distress,” as its yield ballooned out to the 10½% mark.

He located the notes at 89 1/8 bid.

The traders pointed to news reports that internet retailing giant Amazon.com plans to offer businesses in the United States and Germany the same kind of two-day shipping service for their orders that its Amazon Prime customers enjoy on their orders delivered to their homes.

“Is there anything that Amazon won’t own?” a trader asked rhetorically, noting the inroads that Amazon has already made in areas such as sales of books and electronics, and other products traditionally dominated by brick-and-mortar department stores and big-box retailers.

Bombardier bonds bombed

Elsewhere, traders said that Bombardier Inc.’s bonds were lower across the board, buffeted by news reports that the Montreal-based aircraft market may have to delay deliveries on its new C-Series planes because of delays in getting engines from producer Pratt & Whitney. The latter company has been making modifications on some of its engines due to glitches surfacing earlier in the year.

On top of that, U.S.-based Bombardier rival Boeing Corp. said it will continue to press its unfair trade practices case against the Canadian company, which caused the U.S. Commerce Department to threaten to slap Bombardier’s Canada-built planes with as much as a 300% tariff.

Boeing shrugged off the recent announcement that European aircraft giant Airbus will take control of the C-Series project and do final assembly work on the planes in Mobile, Ala.

Bombardier’s 8 % notes due 2021 were seen down more than 1 point at 111 7.8 bid, with over 417 million traded.

Its 7½% notes due 2025 dropped 1¼ points, to 104¾ bid, on volume of more than $12 million.

Indicators turn south

Statistical market performance measures turned lower on Wednesday for the first time in nearly two weeks, after having been mixed for a third consecutive session on Tuesday and higher across the board for three straight sessions before that.

It was the first session since Oct. 12 in which the indicators were down all around.

The KDP High Yield Daily Index dropped by 7 basis points to end at 72.42, after having been unchanged on Tuesday and having gained 3 bps on Monday.

Its yield widened out by 3 bps to 5.17%, after having come in by 1 bp on Tuesday after two straight sessions of having been unchanged on Friday and again on Monday.

The Markit CDX Series 29 High Yield Index retreated for a third day in a row, giving up 7/32 point to close at 108 7/32 bid, 108 9/32 offered. On Tuesday, it had edged off marginally, after easing by 1/16 point on Monday, its first loss after six successive gains.

And even the recently robust Merrill Lynch North American High Yield Index finished on the downside on Wednesday, its first setback after seven straight advances.

It fell by 0.183%, in contrast to Tuesday’s 0.003% gain, and Monday’s 0.107% upturn.

Wednesday’s loss dropped its year-to-date return to 7.439% ion Tuesday, which had established a sixth straight new 2017 year-to-date peak level.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.