Stericycle on tap; U.S. Renal expected; GCI gains continue; Neiman Marcus tanks; Ferroglobe jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 4 – The majority of news from the domestic high-yield primary market came from cross-over trades on Tuesday.

Stericycle, Inc. started a roadshow on Tuesday for a $550 million split-rated offering of five-year senior notes (S&P: BBB-/Fitch: BB+), which is being run on the high-yield desk.

In another crossover trade, Vistra Energy Corp. priced $1 billion of split-rated senior secured notes (expected ratings Ba1/BBB-) in two tranches.

However, the deal was run off the investment-grade desk.

In a deal run from emerging markets desks, Navios Logistics South American unit Corporacion Navios SA is marketing an offering of senior secured notes in the 7% area.

While no new deals priced on Tuesday, there is an active forward calendar, which U.S. Renal Care Inc. is expected to soon join with a $505 million LBO deal.

Meanwhile, the secondary space was strong on Tuesday with the market off to the races as the Federal Reserve signaled it would be open to a rate cut.

While the overall market was up, Neiman Marcus Group’s recently priced 14% senior notes due 2024 were putting in a dismal performance in the secondary space.

The notes were trading up from their lows on Tuesday, but were still 8 points below their discounted issue price.

However, GCI, LLC’s recently priced 6 5/8% senior notes due 2024 continued to make gains in the secondary space after a strong start out of the gate.

Ferroglobe plc’s 9 3/8% senior notes due 2022 jumped on Tuesday despite an earnings miss with the London-based supplier of metals reducing its leverage following an asset sale.

Stericycle starts roadshow

Stericycle started a roadshow on Tuesday for a $550 million split-rated offering of five-year senior notes (S&P: BBB-/Fitch: BB+), which is being run on the high-yield desk.

Initial talk has the deal coming with a yield in the low 5% area, a trader said.

The roadshow wraps up on Friday.

BofA is the left bookrunner.

The Lake Forest, Ill.-based provider of specialized disposal services plans to use the proceeds, along with proceeds from its amended term loan, to repay or redeem all of its outstanding private placement notes, with any remaining proceeds to be used for general corporate purposes.

In another crossover trade, this one coming off of the investment -grade desk, Vistra Energy brought $1 billion of split-rated senior secured notes (expected ratings Ba1/BBB-) in two tranches.

Meanwhile, Navios Logistics South American unit Corporacion Navios SA is on the road with an offering of senior secured notes, which are being discussed in the 7% area.

The debt refinancing deal is being run on the emerging-markets desk but is heard to have sparked a modicum of interest among investors in other asset classes, including high yield.

Morgan Stanley is the lead.

U.S. Renal Care $505 million expected

U.S. Renal Care plans to make a $505 million offering of unsecured high-yield notes as part of the financing for the leveraged buyout of the company, according to an investor.

Barclays will be the left bookrunner.

The LBO financing also features a $1.62 billion term loan and a $150 million revolver.

Although details on the bonds, including deal timing, remain to be announced, loan commitments are due on June 13.

Elsewhere, Tuesday dealers fleshed out details on the Multi-Color acquisition deal.

LABL Escrow Issuer, LLC, which is to be merged with and into W/S Packaging Holdings, Inc., plans to start a roadshow on Thursday for a $1.39 billion two-part offering of senior secured notes backing the acquisition of Multi-Color by Platinum Equity and the merger of Multi-Color with W/S Packaging.

The deal includes $650 million of seven-year notes (expected ratings B2/B) with initial guidance in the low 7% area and $740 million of eight-year notes (expected ratings Caa2/B-) with initial guidance in the low 9% area.

The roadshow wraps up on Thursday, June 13.

BofA is the left bookrunner. Deutsche Bank, Barclays, BMO, Credit Suisse, Houlihan Lokey and Morgan Stanley are the joint bookrunners.

The calendar

The above-mentioned business boards a calendar that includes Grubhub Inc., with a $400 million offering of eight-year senior notes (Ba3/BB).

The deal is in the market with initial guidance of 6% to 6¼% and is expected to price on Friday.

Also, Petroleum Geo-Services, issuing as PGS ASA, plans to start a global roadshow for a $150 million offering of senior secured notes due January 2025 (Caa2/CCC+/CCC+) on Thursday.

Initial talk is in the 12% area.

Following a notable selloff in junk on Monday, the market regained its footing on Tuesday, with some attributing the improvement to perceptions that the Federal Reserve Bank, which flashed talons early in 2018's fourth quarter, is lately of a more accommodative persuasion.

Expectations are that there are rate cuts in the offing, sources said.

Regardless of how Tuesday's improvement came about it could mean fairer weather for the new issue market, a debt capital markets banker said.

Opportunistic issuers, which lately elected to hold their water rather than face an unfriendly junk primary market, could return sooner than later, the banker said.

Neiman Marcus tanks

Neiman Marcus’ recently priced 14% second lien senior notes due 2024 continued to put in a dismal performance in the secondary space.

While the notes were trading up from their lows after breaking for trade on Monday, they were still well below their issue price.

The notes were seen at 89 bid, 90 offered early in the session and traded up to 91 in the afternoon, sources said.

They were down 10 points to trade on an 87 handle after breaking for trade on Monday.

While down substantially, the notes have seen light trading volume in the secondary space with only about $4 million in reported volume on Tuesday.

There have been plenty of notes for sale; however, there have been few buyers, a source said.

Neiman Marcus Group priced a $550 million issue of the 14% notes at 97 to yield 15% on Monday. The coupon was a blended 8% cash and 6% PIK coupon.

The deal was marketed via a roadshow in mid-March and was pushed back several times before pricing on Monday.

The deal was heard to be backstopped by what may have been a single bidder who was now looking to get out of the name, sources said.

GCI gains

While new paper from Neiman Marcus’ tanked in the secondary space, GCI’s recently priced 6 5/8% senior notes due 2024 continued to post gains on Tuesday.

The notes were trading at 101 bid, 101¼ offered in the late afternoon and stood poised to close the day at par 3/8, a market source said.

With more than $38 million on the tape by the late afternoon, the notes were among the most actively traded of Tuesday’s session.

They closed Monday at par ½ bid, 101 offered.

Their performance in the secondary space was largely due to pent up demand for new paper, a market source said.

General Communications priced an upsized $325 million issue of the 6 5/8% notes at par in a Monday drive-by.

The initial size of the deal was $300 million.

The yield printed at the tight end of talk in the 6¾% area.

Ferroglobe jumps

While volume was light, Ferroglobe’s 9 3/8% senior notes due 2022 jumped 5 points, despite an earnings miss.

The 9 3/8% notes traded up to 85¼ late Tuesday afternoon after closing out Monday at 80¼, a market source said.

However, the 9 3/8% notes saw only $6.5 million on the tape shortly before the market close.

Ferroglobe was making gains despite a large first-quarter earnings miss.

Ferroglobe reported revenue of $456.8 million versus analyst expectations for revenue of $481.3 million.

EBITDA was $11.8 million versus analyst expectations for EBITDA of $16.1 million, according to a market source.

While the London-based supplier of silicon metal, silicon-based specialty alloys and ferroalloys missed earnings, it announced the sale of its hydro facility in Spain for €170 million.

The company’s leverage was 2.4x at the end of the first-quarter.

Proceeds from the sale of the hydro facility will be used to further reduce its debt with a target of debt below $200 million, Prospect News reported.

Massive Monday outflows

The daily cash flows of the dedicated high-yield bond funds were extremely negative on Monday, especially the ETFs, according to market sources.

Junk ETFs sustained a whopping $1.35 billion of outflows on the day.

In particular, iShares iBoxx $ High Yield Corp Bond HYG saw $905 million of outflows, amounting to approximately 6½% of assets under management, a source said.

Actively managed high-yield funds saw $325 million of outflows on Monday.

In the first three sessions of the present week, Thursday, Friday and Monday, the combined funds are tracking $3.06 billion of net outflows, the source noted.

Indexes gain

Indexes regained their footing on Tuesday with all posting gains after opening the week with losses.

The KDP High Yield Daily index gained 18 basis points to close Tuesday at 69.52 with the yield now 5.99%. The index slid 6 bps on Monday after a cumulative loss of 50 bps on the week.

The ICE BofAML US High Yield index gained 43.7 bps with the year-to-date return now 7.909%. The index slid 4.7 bps on Monday after a cumulative loss of 60.5 bps on the week last week.

The index dropped below the 8% threshold on May 29 after largely posting returns of 8% plus since early April.

The CDX High Yield 30 index gained 92 bps to close Tuesday at 105.29. The index dropped 17 bps on Monday after a cumulative loss of 123 bps on the week.

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