Shutterfly coming Wednesday with better pricing; new notes higher; Sprint, WeWork decline

By Paul A. Harris and James McCandless

Portland, Ore., Sept. 24 – On the heels of a busy Monday session that saw a trio of deals price and trade to smart premiums, the Tuesday session barely rippled the waters of the high-yield primary market.

Shutterfly Inc. is planning for Wednesday a $785 million offering with extra pricing and lender protection, in line with recent investor pushback on new deals.

The high-yield secondary market saw the lion’s share of activity in Monday issuance.

New notes from Inmarsat plc and BidFair/Sotheby's along with CSC Holdings LLC’s new add-on were all on a positive track.

Elsewhere, Sprint Corp.’s issues declined after news broke of an FCC investigation and talk of a temporary suspension of its merger with T-Mobile.

Coworking name WeWork Cos. Inc.’s paper also trailed after announcing that its chief executive officer had resigned from the position.

Shutterfly sweetens talk

Shutterfly Inc. became the latest issuer to offer extra pricing and lender protection as it endeavors to get its deal across the finish line.

Shutterfly sweetened price talk on its upsized $785 million offering of seven-year senior secured notes (B1/B). The revision sets coupon talk at 8½%, with discount talk that has the deal coming at 95 to 96.

Earlier talk had the deal coming to yield 8¼% to 8½%.

Initial guidance was in the low-to-mid 7% area, a bond trader said.

The offer, which was upsized from $500 million, is set to price Wednesday.

On Monday Shutterfly announced covenant changes tightening restrictions on payments, investments, debt incurrence and liens, an informed source said.

The dollar-denominated new issue market is presently playing to investors who have sufficient leverage to push dynamics such as pricing and lender protection, a syndicate official said on Tuesday.

Pushback and pulls

Numerous deals are facing investor pushback, sources say.

Some are being pulled.

Stelco Holdings Inc. cited current bond market conditions as it withdrew its $300 million offering of five-year senior secured notes (B3/B-).

Elsewhere the Howden deal has been heard to be struggling, market sources say.

The latest on that offer, the Granite Holdings US Acquisition Co. $300 million eight-year senior notes (Caa1), has them coming this week, with guidance widened to 10¾% to 11% from the 10% area, amid covenant changes.

Meanwhile the Calumet Specialty Products $550 million offering of 5.5-year senior notes (Caa1/B-/B-), expected to price ahead of the coming weekend, has sparked some selling among holders of Calumet's existing bonds which are not being addressed in the current deal.

The Calumet Specialty Products Partners, LP/Calumet Finance Corp. 7 5/8% senior notes due January 2022 traded as low as 96½ on Tuesday, a trader said, noting those bonds were 98 3/8 bid last week.

The specialty chemical company is using the proceeds from the current deal to redeem its 6½% senior notes due April 2021.

So, upon completion of the new offer the 2022 paper will be the next maturity, the trader observed.

Early talk has Calumet's new deal coming with double-digit juice, according to a trader: high 10% to 11% area.

ELIS prices €850 million

France-based supplier of sanitation products and services ELIS SA launched and priced €850 million of senior notes (BB+/BB) in two fixed-rate bullet tranches on Tuesday.

The deal included €500 million of notes due April 3, 2025 (long five-year paper) at par to yield 1%, tight to final yield talk in the 1 1/8% area. Initial talk was in the 1 3/8% area.

In addition, ELIS priced €350 million of notes due April 3, 2028 (long eight-year paper) at par to yield 1 5/8%, tight to the 1 5/8% to 1¾% final yield talk. Initial talk was in the 2% area.

New notes above par

In the secondary, Monday issuances were moving higher, traders said.

London-based satellite name Inmarsat’s new 6¾% senior secured notes due 2026 rose ½ point to close at 101¾ bid.

The notes saw about $105 million on the tape by the end of the afternoon.

The deal was priced at an upsized $2,075,000,000 on Monday after being pegged at $1,825,000,000 and $1,125,000,000.

The notes were sold via Connect Finco Sarl and Connect Finco LLC.

Meanwhile, New York City-based auctioneer Bidfair/Sotheby’s new 7 3/8% senior secured notes due 2027 moved up ¾ point to close at 101¾ bid.

About $53 million traded by the end of the day.

The deal, brought to market at $600 million, was priced concurrently with a term loan to fund Bidfair’s acquisition of Sotheby’s.

Bethpage N.Y.-based CSC Holdings’ new $1.25 billion add-on to its 5¾% senior notes due 2030 spurred a ¼ rise, closing at 104¾ bid.

The company is a subsidiary of telecom name Altice USA, Inc.

Sprint declines

Telecom giant Sprint’s notes were declining, market sources said.

The 7 7/8% senior notes due 2023 dropped 1 point to close at 110½ bid. The 8¾% senior notes due 2032 fell 2 points to close at 123 bid.

The two tranches combined to see about $48 million on the tape.

On Tuesday, news broke that the Federal Communications Commission is investigating the Overland Park, Kan.-based mobile phone network provider over alleged misuse of low-income subsidies.

The government claimed that the company took millions in government subsidies based on hundreds of thousands of customers who were not using a low-income service.

In reaction to the news, FCC commissioner Geoffrey Starks called for the body to pause its review of a proposed merger between Sprint and T-Mobile until the matter is settled.

WeWork negative

Elsewhere, WeWork’s issues moved on a negative track, traders said.

The 7 7/8% senior notes due 2025 shaved off ½ point to close at 94¼ bid.

About $21 million was traded by the end of the session.

The New York City-based coworking name announced on Tuesday that chief executive officer Adam Neumann would be resigning from that position.

“The bankers and investors had to save face quickly,” a trader said.

Neumann will remain as non-executive chairman of the board.

The pressure for Neumann’s removal had been increasing in recent days after the company decided to delay an initial public offering after questions were raised about the company’s valuation.

Monday inflows

The dedicated high-yield bond funds saw positive cash flows on Monday, according to a market source.

High-yield ETFs saw $250 million of inflows on the day.

Actively managed high-yield funds saw $55 million of inflows on Monday.

The combined high-yield funds are tracking $542 million of inflows for the week that will conclude with Wednesday's close, the source said.

Indexes negative

Three high-yield indexes trended on the negative side on Tuesday.

The KDP High Yield Daily index went unchanged, closing the day at 71.80 with the yield at 5.36.

The index added 1 basis point on Monday, gained 9 bps on Friday and dipped 17 bps on Thursday.

The ICE BofAML US High Yield index fell 1.2 bps on Tuesday with the year-to-date return now at 11.913%.

The index garnered 1.6 bps on Monday, inched up 0.2 bp on Friday and gained 6 bps on Thursday.

The CDX High Yield 30 index declined by 32.86 bps to 107.1002.

The index increased by 32.39 bps on Monday, lost 32.60 bps on Friday and dropped 32.37 bps on Thursday.

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