Global new issue calendar reaches $5 billion; Targa in demand; Freedom Mortgage, Compass trade down

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 9 – European issuers dominated primary market news on Monday. The global calendar for new issuances spiked to $5 billion with several dual euro/dollar offerings in the works.

TopBuild Corp. joined the calendar of purely dollar-denominated issuances with its offering of $375 million eight-year senior notes (S&P: expected BB-), which is expected to price on Thursday.

Lycra Co. and OCI NV both launched full roadshows in Europe and the United States. Lycra is offering an $810 million two-part offering of senior secured notes; OCI is offering a $1 billion equivalent offering of five-year senior secured notes.

Both deals will have dollar-denominated and euro-denominated tranches.

Novafives SAS, Vallourec SA and Piaggio & Co. SpA are launching roadshows for euro-denominated junk bond offerings and Aurum Holdings Ltd. is launching a roadshow for an offering in pounds.

As the primary market prepares new paper, last week’s deals remained the focus of an overall quiet trading session in Junkbondland with most issues remaining largely flat.

“The market never really got going today,” a market source said. “It was pretty much just treading water and looking for direction.”

However, paper from last week remained active in the secondary space. Targa Resources Partners LP’s new 5 7/8% senior notes due 2026 (Ba3/BB-) were one of the primary volume movers of the secondary space.

Both Targa and McDermott International Inc.’s recently priced 10 5/8% senior notes due May 2024 (B2/B-) continued to trade up on Monday.

However, Freedom Mortgage Corp.’s new 8¼% senior notes due 2025 (B2/B-) and Compass Diversified Holdings LLC’s new 8% senior notes due 2026 were seen down on Monday.

Charter Communications, Inc.’s recently priced 5.75% senior secured notes due April 2048 (Ba1/BBB-/BBB-) were again active in the high-yield market with junk bond buyers chasing the telecommunications company’s split rated issue.

TopBuild kicks off

TopBuild plans to price a $375 million offering of eight-year senior notes (S&P: expected BB-) on Thursday.

Initial price talk has the acquisition deal coming with a yield in the talk mid-to-high 5% area.

BofA Merrill Lynch is leading the offer.

Novafives €600 million fixed/FRN

Novafives SAS started a roadshow for a €600 million offering of seven-year senior secured notes (expected ratings B3/B+) in two tranches.

The debt refinancing deal is coming in tranches of fixed-rate notes with initial price talk in the 5% area and floating-rate notes with initial price talk in the Euribor plus 450 basis points area.

Tranche sizes remain to be determined.

The roadshow wraps up on Thursday and notes are set to price thereafter.

Joint global coordinator JP Morgan will bill and deliver. BNP Paribas is also a joint global coordinator.

Credit Agricole CIB, Deutsche Bank, Natixis and SG CIB are the joint bookrunners.

Vallourec starts roadshow

Vallourec started a roadshow on Monday for a €300 million offering of 5.5-year senior notes (S&P: B), to be issued in tranches of dollar-denominated and euro-denominated notes.

The roadshow wraps up on Thursday, and the debt refinancing deal is set to price thereafter.

Joint global coordinator BNP Paribas will bill and deliver. JP Morgan and SG CIB are also joint global coordinators. Natixis is the joint bookrunner.

Piaggio starts Tuesday

Piaggio & Co. plans to start a roadshow on Tuesday for €250 million of seven-year senior notes (expected ratings B1/BB-), including notes to be issued as part of its concurrent exchange offer.

The roadshow wraps up on Friday.

Physical bookrunner Banca IMI will bill and deliver for the debt refinancing deal. BNP Paribas and BofA Merrill Lynch are also physical bookrunners. Banca Akros, HSBC, ING, Mediobanca and UniCredit are joint bookrunners.

Aurum roadshowing £265 million

Aurum Holdings plans to start a roadshow on Tuesday for a £265 million offering of five-year senior secured notes (mid-single B ratings expected).

The roadshow wraps up on Friday.

Joint bookrunner Goldman Sachs will bill and deliver. Barclays, Jefferies and Wells Fargo are also joint bookrunners.

The United Kingdom-based watchmaker plans to use the proceeds to repay a shareholder loan and other debt.

OCI $1 billion equivalent

News also surfaced on deals from Europe-based issuers planning to roadshow dual-currency dollar/euro offers into the April 16 week.

OCI NV will run a full roadshow in Europe and the United States for a $1 billion equivalent offering of five-year senior secured notes, which will be sold in tranches of dollar-denominated and euro-denominated notes.

Initial price talk has the dollar-denominated notes coming with a yield in the low 7% area and the euro-denominated notes yielding in the mid-to-high 5% area.

Tranche sizes remain to be determined.

Joint global coordinator and sole physical bookrunner JP Morgan will bill and deliver. Barclays and HSBC are also joint global coordinators.

BofA Merrill Lynch, BNP Paribas, Citigroup, Credit Agricole, Goldman Sachs, Rabobank and SG CIB are the passive bookrunners.

The Amsterdam-based producer and distributor of natural gas-based fertilizers and industrial chemicals plans to use the proceeds to refinance OCI Nitrogen existing term debt, OCI NV bank debt, an OCI NV shareholder loan and to finance the recent buyback of OCI NV convertible notes.

Lycra dual-currency offer

Lycra Co. announced on Monday that it will run a full roadshow in Europe and the United States for an $810 million two-part offering of senior secured notes.

The acquisition financing deal includes $500 million of seven-year notes, which come with initial price talk in the 8% area, and €250 million of five-year notes with initial price talk in the 6% area.

Joint global coordinator and sole physical bookrunner JP Morgan will bill and deliver. Barclays is also a joint global coordinator.

Elsewhere Italy-based Banca IFIS SpA (Fitch: BB+) mandated BNP Paribas, Nomura and UniCredit for meetings with investors in Europe, set to get underway on Wednesday.

The Venice, Italy-based banking company is expected to issue five-year unsecured notes, pending market conditions.

Targa in demand

Targa’s new 5 7/8% senior notes remained one of the major volume movers of the secondary space with almost $50 million bonds traded. The notes were seen quoted at par 3/8 bid on Monday, about ¼-point lower than Friday, according to a market source.

However, the notes traded in a range of par ½ to par 7/8, about a ¼-point increase from Friday’s close, a market source said.

The new notes were the major volume mover on Friday with more than a $150 million traded. While trading activity tapered on Monday, they remained a top volume mover of the space. “It’s a new issue, they tend to be busier,” a market source said.

Targa priced an upsized $1 billion issue of eight-year senior notes at par in a drive-by on April 5.

The issue from the Houston-based natural gas provider was a straight-forward energy deal, a market source previously said.

McDermott up

McDermott’s recently priced 10 5/8% notes continued to trade well above their issue price of 94.75.

While weakening on Friday, the notes were again on the rise on Monday.

The notes were seen trading in a range of 96¼ to 97¼ on Monday, with the closing trade about a ¼-point increase from Friday, a market source said.

McDermott remained active in the secondary space with about $17.5 million bonds traded on Monday.

The Houston-based engineering, procurement, construction and installation company priced the $1.3 billion issue at 94.75 to yield 11.865% on April 4.

The deal struggled during the subscription process with the offering downsized, widened and revised before pricing but has been in demand since entering the secondary market.

Freedom Mortgage loses steam

Freedom Mortgage’s recently priced 8¼% notes due 2025 were down on Monday after trading as high as 101½ after breaking for trade shortly after pricing on April 4.

The notes were seen trading in a range of 99¾ to par ¼ during Monday’s session, a market source said. In an upsized deal, Freedom Mortgage priced a $700 million issue of the 8¼% notes at par on April 4.

The deal “was pretty well spoken for,” a market source said.

Underwriters were driving the trading activity that pushed the notes north of 101, the source said.

However, after high volume trading late last week, trading of the notes has been light with the notes losing ground.

“It’s just fatigue,” a market source said.

Compass down

Compass Diversified’s new 8% senior notes due 2026 (B3/B-) also continued to trade down on Monday.

The notes were seen at 99¾ bid, 100¼ offer on Monday. They were down about 1/8 to ¼ point in trading activity, a market source said.

Compass priced the $400 million issue at par on April 5.

Moody’s Investor Service and S&P recently lowered their corporate credit rating of the Westport, Conn.-based holding company specializing in acquisitions and buy-outs of middle market companies.

The downgrade was due to the high leverage threshold. The company will also have a high cash consumption rate, due to dividends on preferred stock, Moody’s said in a press release.

Compass sold $100 million in 7.875% series B fixed-to-floating rate preferred stock on March 6.

Charter eyed

Charter’s recently priced 5 3/8% notes due 2038 and 5¾% notes due 2048 (Ba1/BBB-/BBB-) are continuing to appeal to junk bond buyers with the notes active in the space, a market source said.

The 5¾% notes were among the most active in the secondary market on Monday with more than $26 million bonds traded.

They were seen trading at 101½, well above their issue price of 99.706.

While not as active as the 5¾% notes, the 5 3/8% notes were seen trading just under par on Monday but still 1 point above their issue price of 98.846.

With the high yield, the split rate notes are attractive to junk bond buyers, a market source said.

Charter subsidiaries Communications Operating, LLC and Charter Communications Operating Capital Corp. sold $2.5 billion of the senior notes in two tranches on April 3.

Charter priced $800 million in 5 3/8% notes at 98.846 to yield 5.471%. Charter priced $1.7 billion of the 5¾% notes at 99.706 to yield 5.771%.

Indexes

The KDP High Yield index saw another day of gains on Monday. The index was up 7 basis points to 70.45, shaving the yield down to 5.81%.

The index has been on the rise since late last week gaining a total of 22 basis points on Thursday and Friday.

The Merrill Lynch High Yield index also saw large gains on Monday. The index was up 11.4 bps shaving the negative year-to-date return to 0.488%. The negative year-to-date return was 0.602% on Friday.

The CDX high yield 30 index “traded better,” on Monday, a market source said. The index was up 35.5 bps after dropping 49 bps on Friday.

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