Tronox prices wide; Boyne trades up; Coty downsizes; GCP, Petrobras active

By Paul A. Harris and Abigail W. Adams

Portland, March 27 – Two new deals totaling $1.15 billion priced in Junkbondland on Tuesday.

Tronox Inc. priced a $615 million issue of eight-year senior notes (B3/B-) at par to yield 6½% in a quick-to-market trade.

In a heavily oversubscribed deal, Boyne USA, Inc. priced a $400 million issue of seven-year senior secured second-lien notes (B2/B) at par to yield 7¼% at the conclusion of a roadshow.

The new notes were immediately seen “trading well, as expected,” a market source said.

Coty Inc. downsized its offering of senior notes (B2/BB) to $1.5 billion from $2 billion and also revised its dual currency, multi-tranche deal.

There is still $4.9 billion in prospective deals on the pre-Easter calendar awaiting price talk and timing.

As new paper flows into Junkbondland, recent deals have had mixed results.

Cequel Communications Holdings I, LLC 7½% senior notes due April 2028 (Caa1/B) continued to make gains in active trading in the secondary market.

KCA Deutag UK Finance plc 9 5/8% secured notes due April 2023 (B3/B-) also continued to trade up although the new notes have seen light trading volume.

While GCP Applied Technologies Inc.’s newly priced 5½% senior notes due April 2026 (B1/BB-) saw heavy trading volume on Tuesday, the new notes lost ground, closing Tuesday just above par.

Petroleo Brasileiro SA’s junk bonds, however, saw gains as Brazil’s scandal ridden state-owned oil producer moves closer to offloading its assets in Nigeria.

Tronox drives by

Tronox Inc. priced a $615 million issue of eight-year senior notes (B3/B-) at par to yield 6½% in a quick-to-market trade.

The yield printed at the wide end of yield talk in the 6 3/8% area, which was also the initial guidance.

Citigroup was the left bookrunner for the debt refinancing deal. BofA Merrill Lynch, Barclays, Credit Suisse, Goldman Sachs, RBC and Wells Fargo were the joint bookrunners.

Oversubscribed Boyne trades up

Boyne USA priced a $400 million issue of seven-year senior secured second-lien notes (B2/B) at par to yield 7¼%, at the conclusion of a roadshow.

The yield printed at the tight end of the 7¼% to 7½% yield talk and inside of the 7½% to 7¾% initial guidance.

The order book was four-times the deal size, according to a trader who was receiving a lot of inquiries on the name early Tuesday.

The new notes immediately traded up. They were seen at 101½ bid, 102 offered shortly after pricing.

Wells Fargo was the sole bookrunner.

The Boyne Falls, Mich.-based ski resort owner and operator plans to use the proceeds to purchase seven resort properties and personal property currently owned by Och-Ziff Real Estate but operated by Boyne and to repay debt.

Coty downsizes

Coty downsized its offering of senior notes (B2/BB) to $1.5 billion from $2 billion.

The New York-based beauty company also revised its dual currency, multi-tranche deal and set formal price talk.

The revised offer features three tranches of notes instead of the four that the company launched into the market last week.

The revised deal includes euro-denominated five-year notes talked to yield in the 4% area.

It also includes euro-denominated eight-year notes talked to yield in the 4½% area.

The sole remaining dollar-denominated portion of the deal is also coming as a tranche of eight-year notes talked to yield 6% to 6¼% on top of initial guidance.

Tranche sizes remain to be determined.

A proposed tranche of dollar-denominated 10-year notes has been withdrawn.

Books close at 10 a.m. ET Wednesday and the deal is set to price thereafter.

Joint bookrunner Morgan Stanley will bill and deliver for the dollar-denominated notes.

Joint bookrunner BNP Paribas will bill and deliver for the euro-denominated notes.

Proceeds, together with new credit facilities, will be used to repay in full and refinance the existing credit facilities. The $500 million amount by which the bond offer is reduced will be made up by means of a draw on the revolving credit facility.

Pre-Easter calendar

Meanwhile, the market awaits official price talk and timing on six tranches from five prospective issuers, totaling $4.9 billion, which are expected to price before the extended Easter/Passover holiday weekend.

The pre-holiday offerings include McDermott International Inc., which conducting a roadshow for $1.5 billion of senior notes (B2/B-) in two tranches: $950 million of six-year notes, with initial price talk 8 3/8% to 8½%, and $550 million of eight-year notes, with initial price talk 3/8% behind the six-year notes.

The deal is coming in connection with the merger of McDermott and CB&I.

Wyndham Hotels & Resorts, Inc. was slated to start a roadshow on Monday for a $500 million offering of eight-year senior notes (Ba2/BB-).

Proceeds will be used to help fund the acquisition of La Quinta Holdings Inc.’s hotel franchise and hotel management businesses for $1.95 billion in cash and for general corporate purposes.

Charles River Laboratories, Inc. plans to price $500 million of eight-year senior notes (expected ratings B1/BB+) on Wednesday.

Initial guidance has the deal coming to yield 5½% to 5¾%, a trader said.

JP Morgan is the lead.

The Wilmington, Mass-based company plans to use the proceeds to help fund its acquisition of MPI Research.

W/S Packaging Holdings is heard to be in the market with $250 million of notes (expected ratings B3/B).

The deal comes with early guidance of 8¾% to 9%.

BofA Merrill Lynch is the lead.

All of the above is anticipated Wednesday business, market sources say.

One deal is expected to remain in the market into the abbreviated Thursday session.

Ply Gem Holdings Inc. started a roadshow last Friday for a $645 million offering of eight-year senior notes (expected ratings Caa1/CCC+).

Initial price talk is 7% to 7¼%.

Flows

With two days remaining in the current reporting period, the dedicated high-yield funds were tracking $601 million outflows from Thursday's open to Monday's close, according to an analyst working with numbers reported by Lipper US Fund Flows.

Those outflows follow the $1.174 billion of net outflows in the week to the Wednesday, March 21 close.

Year to date, dedicated high yield funds are deeply in the red, with $15.48 billion of net outflows since the beginning of 2018, the source said.

Year to date outflows now top the $14.91 billion of aggregate outflows seen during the entire year of 2017, the source added.

That's $30.39 billion of net outflows the funds sustained from the beginning of 2017 until Monday's close.

Retail cash, as opposed to institutional cash, is thought to be represented in the weekly fund flow numbers that Lipper reports, sources say.

Still the numbers continue to be closely watched in the market as an indication of sentiment, regarding the high-yield bond asset class, they add.

‘Yield-y’ issues trade well

Issues that came late last week amid turbulence in the global capital markets paid a concession to the rugged market conditions, sources say.

As a result of the relatively higher yields, those recent deals tend to be trading somewhat better than their tight-pricing counterparts that came in late February and early March, a trader said.

Cequel Communications’ 7½% senior notes due April 2028 (Caa1/B) continued to turn in a strong performance in the secondary market, a trader said.

The paper was seen at 102¼ bid, 102 ¾ offered early in the session, a trader said, noting that it had just traded at 102½.

The 7½% notes continued to improve throughout the day and were seen trading at 102 3/8 late in the afternoon, a trader said.

Cequel’s 10-year paper, which came at par in a $1.05 billion issue that priced late last week, was wrapped around 102 on Monday.

The notes continued to see good trading volume on Tuesday with $27 million bonds in play during the session, a market source said.

KCA Deutag’s recently priced 9 5/8% secured notes due April 2023 (B3/B-) continued to trade up.

The new five-year secured paper was 101 3/8 bid, 101½ offered on Tuesday.

The $400 million issue also priced at par on Friday. While KCA Deutag’s notes were up, they did not see much trading action, a market source said.

The Aberdeen, U.K-based international oil and gas service company's operations in the Third World kept some U.S. high-yield investors on the sidelines for the KCA Deutag deal, sources say.

KCA Deutag has operations in 20 countries worldwide including Iraq, Nigeria, northern Africa, and Russia.

GCP loses steam

GCP Applied Technologies’ newly priced 5½% senior notes due April 2026 (B1/BB-) were among Tuesday’s top volume movers.

The 5½% notes were seen at par 1/8 bid at mid-morning, having faded from earlier highs of par 3/8 bid, par ½ offered.

The notes continued to lose steam and were seen trading at par to par ¼ late in the afternoon.

The $350 million deal came at par in a Monday drive-by. While the new paper did not reach the heights of last week’s deals, “they’ve been pretty active volume-wise,” a market source said.

About $36 million of the bonds were seen trading on Tuesday.

Trade wars

Meanwhile, Fortescue Metals Group Ltd. cut its guidance amid expectations that prices could slip due to slower construction activity in China and trade war tensions, which pushed the Australia-based iron ore producer's recently minted bonds lower.

The FMG Resources (August 2006) Pty Ltd. 5 1/8% senior notes due 2023 (Ba2/BB/BB+) were at 99½ bid early Tuesday, a trader said.

They were seen later in the afternoon at 99 bid, 99½ offered.

The 5 1/8% notes, which came at par in a $500 million issue on March 1, traded as high as par ¼ bid, par 3/8 offered, the source said.

Petrobras makes gains

While FMG Resources’ was down, Petroleo Brasileiro SA’s junk bonds were active and making gains during Tuesday’s session.

Petrobras’ 5.999% senior notes due 2028 (Ba3/B) were up a little more than ½-point on Tuesday. They were seen trading up to 98.

Petrobras’ 7 3/8% notes due 2027 (Ba3/B) were up 1 point to trade at 107½. Petrobras’ 5¾% notes due 2029 (Ba3/B) rose 1¼ point to trade at 97½.

Petrobras’ 5.299% notes due 2025 (Ba3/B) were up almost 1 point to trade at 98.9.

Petrobras’ 7¼% notes due 2044 (Ba3/B) were up almost 1½ point to trade at 1005/8.

Petrobras’ 6¾% notes due 2041 (Ba3/B) were up a little more than 1¼ to trade at 95.93.

Oil traders Vitol and Glencore are in talks to back Nigerian companies’ bid to buy Petrobras’ oil fields in Nigeria, valued at $2 billion, Reuters reported.

Petrobras is in the process of selling its operations in Africa as part of a plan to offload $21 billion in assets in 2018.

Indexes

The KDP High Yield Daily index was up to 70.21 on Tuesday with the yield dropping 1 bps to 5.90%.

The Merrill Lynch High Yield index gained 10.8 bps on Tuesday shaving its negative year-to-date return down to 0.891%.

The CDX high yield 29 index was down 6.1 bps on Tuesday after seeing a 36.2 bps gain on Monday.

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