Focus turns to September; Digicel up on exchange; First Quantum loses more; Diebold gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 31 – The primary and secondary space were both quiet in the run up to the Labor Day weekend with all eyes turning towards the steady pipeline of deals expected in September.

Refinitiv’s $5.5 billion equivalent of secured and unsecured notes in dollars and euros is expected to come to market early in the month.

AkzoNobel Specialty Chemicals’ €1.5 billion equivalent of notes, including possible dollar-denominated notes, is also expected in early September.

Trading volume in the secondary space remained light with many calling an early start to the long weekend.

Digicel Group Ltd.’s junk bonds were on the rise after a steep drop earlier in the week after the company announced an exchange offer.

Diebold, Inc.’s 8½% senior notes due 2024 were again on the rise after the company announced it had successfully amended the terms of its credit agreement.

First Quantum Minerals Ltd.’s junk bonds continued to lose ground in active trading on Friday as copper prices fell further.

The week ahead

The primary market was quiet on Friday ahead of the extended Labor Day holiday weekend in the United States.

There was no hard news on the calendar for the post-Labor Day week.

However, there is an expectation that Refinitiv, with $5.5 billion equivalent of secured and unsecured notes in dollars and euros to help fund the acquisition of a 55% stake in Thomson Reuters Financial & Risk by Blackstone and Canada Pension Plan Investment Board, will be early – and perhaps first – out of the gates, an investor said on Friday.

There is a sense that, particularly owing to the amount of bonds in question, dealers are keen to get the deal out of the way, the source added.

In the meantime, Refinitiv is scheduled to launch its $8 billion equivalent of term loan debt at bank meetings on Tuesday in London and on Wednesday in New York.

Another expected early-September bond offer should see AkzoNobel Specialty Chemicals bring approximately €1.5 billion equivalent of notes, including possible dollar-denominated notes.

As with Refinitiv, the deal, to help fund the acquisition of AkzoNobel’s specialty chemicals business by the Carlyle Group, has a bank loan component already scheduled to kick off in the week ahead.

The Amsterdam-based company is scheduled to hold a U.S. bank meeting on Thursday and a European bank meeting on Monday, Sept. 10 to launch €5,115,000,000 equivalent of term loan debt.

Meanwhile, the Nordic bond market has maintained a modicum of activity during the late summer period, despite the seasonal dormancy that saw the major currency primary markets shuttered.

At least one Nordic deal is on the active calendar, possibly headed for execution in the week ahead.

Norway-based Odfjell Group announced Thursday that it plans to hold a number of fixed-income investor meetings in the coming days ahead of a possible NOK-denominated senior bond.

Digicel’s rebound

After a large drop on Wednesday, Digicel’s junk bonds continued their rebound on Friday with the notes advancing on an exchange offer.

Digicel’s 8¼% senior notes due September 2020 were up 2 points on Friday. They were seen at 73 bid, 76 offered early in the session but closed the day at 72, sources said.

Digicel’s 7 1/8% notes due 2022 were up about 1 point. They were seen at 59½ bid, 60½ offered and closed the day at 59.

Both notes rose a little more than 4 points on Thursday after both dropped 3½ to 4 points on Wednesday.

The Jamaica-based mobile phone network provider announced an exchange offer to extend the maturity of the notes on Friday.

The company is offering to exchange the 8¼% notes for up to $2 billion of new 8¼% notes due 2022.

The company is offering to exchange its 7 1/8% notes due 2022 for up to $1 billion of new 8¼% senior cash pay/payment-in-kind notes due 2024.

Cash interest on the new 2024 notes will accrue at a rate of 7 1/8% and PIK interest will accrue at a rate of 1 1/8%.

The exchange would move the 8¼% notes ahead of the 7 1/8% notes in the corporate structure, a market source said.

Bondholders will probably be cool to the exchange deal and the 90% participation threshold required in the new exchange offer may be challenging to clear, the source said.

The rebound in the two notes comes after a significant drop across the structure on Wednesday.

Digicel’s junk bonds were under pressure Wednesday after the company’s chief financial officer resigned after one year on the job.

Digicel also announced disappointing earnings on Wednesday with the company’s leverage increasing slightly despite its goal to deleverage.

Diebold gains

Sources predicted a little pop in Deibold’s 8½% senior notes due 2024 if it was able to secure an amendment to its credit agreement and they were right.

The 8½% senior notes were up 1½ points on Friday to close at 72½, according to a market source.

Diebold announced on Thursday that it had obtained the needed amendment to its credit agreement to enable a new $650 million term loan.

The notes have risen about 7½ points on the week after the company announced on Monday it had secured a $650 million commitment from two institutional investors for the new term loan.

While the notes made significant gains on the week, they are still well below their pre-sell-off levels.

The company’s second-quarter earnings report in early August sent the notes into freefall.

Prior to Diebold’s announcement of its second-quarter earnings, the notes were trading around 92.

Diebold has hired Credit Suisse and Evercore as financial advisers to help the company explore a sale.

First Quantum losses

First Quantum’s junk bonds continued to slide on Friday after losing ground over the past few trading sessions.

The Vancouver, B.C.-based mining company’s 6 7/8% senior notes due 2026 were down another ½ point to close the day at 93¼, according to a market source.

The notes were down about 3¼ points on the week.

First Quantum’s 7½% senior notes due 2025 were down another ¾ point to close the day at 96¼, according to a market source. Those notes have dropped about 3 points on the week.

The drop in Frist Quantum’s notes is correlated to the declining price of copper, a market source said. Copper closed Friday at $2.649 a pound, a decrease of 1.54%.

Indexes end week with losses

Benchmarks for the high-yield secondary market posted losses on Friday after a mixed week.

The KDP High Yield Daily index dropped 1 basis point to close Friday at 70.46 with the yield remaining flat at 5.80%.

The index was down 7 bps on Thursday, was flat on both Wednesday and Tuesday and was up 6 bps on Monday. The index dropped 2 bps on the week after a 9 bps gain the week before.

The CDX High Yield 30 index was again down on Friday after a significant drop on Thursday.

The index was down 10 bps to close Friday at 106.86. The index was down 29 bps on Thursday, 7 bps on Wednesday and 2 bps on Tuesday after rising 18 bps on Monday.

The index was down 11 bps on the week after a 27 bps gain the week before.

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