CGG, Aurum price; Poindexter, recent deals trade up; McDermott lower; inflows positive

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 13 – The high-yield primary market rounded out the week with the pricing of a $650 million equivalent dual currency offering and a £265 million offering.

CGG Holding (US) Inc. priced $650 million equivalent of five-year senior secured notes (B2/B) in two tranches on Friday. The dollar-denominated notes were active in the secondary market and traded up 3 points, market sources said.

Aurum Holdings Ltd. priced a £265 million issue of five-year senior secured notes (B2/B-) at par to yield 8½% on Friday.

Two additional dual-currency deals are on tap for the April 16 week with continued activity expected in the European market.

As new paper from CGG entered the secondary market, the deals that priced over the past week continued to trade strongly.

J.B. Poindexter & Co., Inc.’s newly priced 7 1/8% senior notes due 2026 (expected B2/confirmed BB-) were seen well above their issue price in active trading.

New paper from Drax Group Co. and TopBuild Corp. also continued to trade up, although trading volume was lighter than on Thursday, sources said.

Hilton Worldwide Holdings, Inc.’s newly priced 5 1/8% senior notes due 2026 (Ba2/BB+) remained active in the secondary space and also continued to trade higher on Friday.

McDermott International Inc.’s recently priced 10 5/8% senior notes due May 2024 (B2/B-) were down in active trading on Friday after reaching new heights and breaking par during Thursday’s session, despite pricing with a deep discount.

The strength of the new paper in the secondary market was largely seen as a result of the shortage of new issuance, sources said.

“The market is grinding tighter every day,” a market source said. “Liquidity has been light and new issuances have been slow. Everyone in the secondary is trying to find offerings of decent paper but it’s hard to come by because no one’s giving it up.”

Meanwhile fund flows have been better in recent sessions and Thursday saw a notable surge into exchange-traded funds.

Aurum atop talk

Aurum Holdings priced a £265 million issue of five-year senior secured notes (B2/B-) via its Jewel UK Bondco plc subsidiary at par to yield 8½%.

The yield printed in the middle of yield talk that was set in the 8½% area.

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

The Leicester, U.K.-based watchmaker plans to use the proceeds to repay a shareholder loan and other debt.

Oversubscribed CGG prices

CGG Holding priced $650 million equivalent of five-year senior secured notes (B2/B) in two tranches on Friday.

The dollar-denominated tranche featured $300 million of notes that priced at par to yield 9%. The yield printed 12.5 bps inside of yield talk announced in the 9¼% area. Initial guidance was in the high 9% area.

The euro-denominated tranche featured €280 million of notes that priced at par to yield 7 7/8%. The yield printed 25 bps inside of talk for a yield in the 8¼% area. Initial guidance was in the high 8% area to 9%.

Near the time that order books were scheduled to close on Friday, demand was heard to be $2 billion and €2 billion, respectively, a trader said.

Global coordinator Credit Suisse will bill and deliver for the dollar-denominated notes. Global coordinator JPMorgan will bill and deliver for the euro-denominated notes.

Proceeds will be used to refinance the company’s existing first-lien senior secured notes.

The 9% dollar senior notes were up in high volume after breaking for trade, a market source said.

The notes from the geophysical services company for the oil and gas industry were seen changing hand s between 102 and 103¾ on Friday with the last prints at 103½, a market source said.

Nearly $62 million bonds traded during Friday’s session. With a 9% coupon and the energy sector currently strong, buyers were seeking out the bonds, sources said.

“Oil is going up and now everyone wants in,” a market source said.

The primary week ahead

The pace of the junk bond market is expected to pick up in the April 16 week, according to U.S. and European-based sources.

In the wake of CGG, there are still two dual-currency deals remaining in the market.

Netherlands-based OCI NV is roadshowing $1 billion equivalent of five-year senior secured notes in dollar- and euro-denominated tranches.

Initial price talk is in the low 7% area for the dollar-denominated notes and in the mid-to-high 5% area for the euro-denominated notes.

Also, Lycra Co. is marketing $810 million equivalent of senior secured notes (S&P: B) in two tranches: $500 million seven-year notes with initial price talk in the 8% area and €250 million five-year notes with initial price talk in the 6% area.

The European high-yield market, which generated much of the past week’s primary news, figures to be even busier in the week ahead, including at least one €1 billion-plus deal.

There may also be a handful of dollar-denominated deals in the $300 million to $500 million range in the April 16 week, a syndicate source said.

Week sees $2.9 billion

With Friday’s deals, dollar-denominated issuance for the week totaled $2.92 billion in five tranches, down sharply from the $4.90 billion seen the previous week.

The year-to-date new deal total is now $70.76 billion in 128 tranches, still lagging the 2017 pace by a substantial margin. By this point in the calendar last year, the U.S. junk market had seen $95.09 billion of issuance, meaning that 2018 is behind by 26%.

J.B. Poindexter up

In the secondary, J.B. Poindexter newly priced 7 1/8% senior notes due 2026 (expected B2/confirmed BB-) were going strong after pricing late Thursday afternoon.

The 7 1/8% notes were seen trading in a range of 102 to 102¾ on Friday. By the close, they were up about ¾ point on the day, finishing at 102½ after closing Thursday at 101¾, a market source said.

About $32.5 million bonds traded during Friday’s session.

J.B. Poindexter priced an upsized $350 million issue of eight-year senior notes at par to yield 7 1/8% late Thursday afternoon.

The amount was increased from $300 million.

The yield printed at the tight end of yield talk that was set in the 7¼% area and in line with initial talk in the low 7% area.

With a B2/BB- credit rating and a high coupon, the notes are attractive, a market source said. “But there’s got to be some kind of a rub to have that coupon attached to it,” the source added.

The Houston-based diversified manufacturing company plans to use proceeds from the offering to redeem its $175 million of 9% senior notes due 2022 at 103 plus accrued interest.

The refinancing of the 9% notes was delayed due to conditions that had not be met or waived by the company as of Wednesday, Prospect News reported.

J.B. Poindexter has delayed the redemption until the business day immediately following the satisfaction or waiver of the refinancing conditions.

Drax, TopBuild, Hilton up

New notes from Drax Group and TopBuild continued to perform well on Friday although trading of these new issues lightened.

Drax Group’s 6 5/8% notes due 2025 (BB+/BB+) “didn’t see a ton of activity,” a market source said. The notes were up about ½ point to 101 7/8, the source said.

Drax Group priced a $300 million issue of 7.5-year senior secured notes (BB+/BB+) at par to yield 6 5/8% on Thursday.

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

TopBuild’s 5 5/8% senior notes due 2026 (B1/BB-) were also seen up on moderate trading volume, a market source said.

The notes were seen better by about 3/8 point to trade around 102. TopBuild priced an upsized $400 million issue of the eight-year senior notes at par on Wednesday.

Hilton’s recently priced 5 1/8% senior notes due 2026 (Ba2/BB+) remained active in the secondary market on Friday and continued to improve. The notes were seen up another 3/8 point to 101 3/8, a market source said.

The notes have steady climbed since pricing on Tuesday. The notes closed Thursday at par ½ bid, 101 offered after closing Wednesday at par 5/8, sources said.

Hilton priced a massively upsized $1.5 billion issue of the eight-year senior notes at par on Tuesday.

The offering was increased from $500 million.

McDermott gives up some gains

McDermott’s recently priced 10 5/8% senior notes due 2024 (Caa1/CCC+) remained active in the secondary space on Friday although the notes traded down after breaking par on Thursday.

McDermott priced a downsized $1.3 billion issue of 10 5/8% six-year senior notes at 94.75 to yield 11.865% on April 4. Since breaking for trade, the notes have moved well above their discounted issue price.

On Thursday, the notes were seen trading at par. The notes dropped 1 3/8 points in active trading on Friday to trade at 98 5/8.

While struggling during the subscription process, the 10 5/8% notes have been strong in the secondary market with buyers chasing the high yield, a market source said.

Fund flows

Daily cash flows for dedicated high-yield bond funds were positive on Thursday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw notable inflows of $568 million on the day.

Actively managed high-yield funds saw $70 million of inflows on Thursday.

News of those daily flows followed a Thursday afternoon report from Lipper US Fund Flows. Dedicated high yield bond funds saw $989 million of inflows in the week ending Wednesday, April 11. It was only the second positive weekly flow in the past 13 weeks.

During that 13-week stretch aggregate net flows were negative $17.9 billion, the trader said.

Of the $989 million that came into high-yield funds in the most recent week, $772 million went into ETFs, the source added.

Meanwhile ETFs represented a smaller portion of the $443 million of inflows to the dedicated bank loan funds seen in the week to Wednesday’s close. Of that $443 million $192 million went into the bank loan ETFs.

On Thursday, dedicated loan funds saw $63 million of inflows, $5 million of which went into ETFs, the trader said.

Indexes

The KDP High Yield index rounded out the week with gains marking seven consecutive trading days of upward momentum. The index was up 13 bps to 70.92 on Friday shaving the yield down to 5.67%.

The index has been on an upward trend since April 4.

The Merrill Lynch High Yield index remained in the green on Friday after a long stretch of negative year-to-date returns.

The index was up 18.5 bps on Thursday with the year-to-date return now 0.221%. The index entered positive territory on Thursday after making large gains all week.

The CDX high yield 30 index was also up on Friday gaining 16 bps. The index gained 32 bps on Thursday after dropping 8 bps on Wednesday.

© 2015 Prospect News.
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