CNX prices; Bombardier, Carter’s skyrocket; CHS lags; Summit trades up; Neiman volatile

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 1 – After a slow start, the domestic high-yield primary market ended the week with one deal pricing on Friday after a flurry of activity on Thursday.

CNX Resources Corp. priced a $500 million issue of 7¼% eight-year senior notes (B3/BB-) at 97.06 to yield 7¾%.

The coming week also promises to be an active one. Johnson Controls is expected to surface with $10 billion in euro- and dollar-denominated secured and unsecured bonds.

Digicel may also be on tap with a $550 million offering, in addition to Frontier Communications Corp.

Meanwhile, the new paper was in focus in the secondary space, although with mixed performances.

Bombardier Inc.’s 7 7/8% senior notes due 2027 (Caa1/B-) were the most actively traded issue during Friday’s session with the notes well above their issue price.

While Bombardier’s new paper was in focus, its outstanding issues continued to trade up with the prospects of the company improving.

Carter's, Inc.’s 5 5/8% senior notes due 2027 (Ba2/BB+) have skyrocketed since hitting the secondary space with the notes in high demand.

Summit Materials, Inc.’s 6½% senior notes due 2027 (B3/BB) were trading at a slight premium to their offer price.

However, Community Health Systems, Inc.’s 8% senior notes due 2026 (Caa1/B-/B) were lagging their issue price in the secondary market.

Outside of the new paper. Neiman Marcus Group, Inc.’s notes were volatile in active trading on news the retailer reached a tentative agreement with creditors after an ongoing battle.

CNX Resources prices

CNX Resources priced a $500 million issue of 7¼% eight-year senior notes (B3/BB-) on Friday.

The deal was poised to clear the market discounted to 97.06 to yield 7 ¾%, market sources said.

The yield printed at the wide end of the 7½% to 7¾% yield talk.

The deal, which had been planned as a Thursday drive-by, was initially guided in the mid-to-high 6% area, sources say.

MUFG was the lead.

However, Credit Suisse Securities (USA) LLC initially shopped the deal with investors, and was subsequently outbid by MUFG, sources say.

The Pittsburgh, Penn.-based natural gas exploration, development and production company plans to use the proceeds to fund a tender for up to $400 million of its 5 7/8% senior notes due 2022, with the remainder to be used to repay debt under the revolving credit facility.

CNX Resources shelved a $500 million offering of eight-year senior notes in March 2018.

That deal had been in the market with yield talk in the 6½% area with Credit Suisse on the left.

The week ahead

The week ahead is expected to be an active one in the new issue market, sources say.

Johnson Controls International is expected to show up in the debt capital markets with approximately $10 billion of debt: $8.2 billion of secured debt in the form of dollar-denominated and euro-denominated bonds and loans, to be led by J.P. Morgan Securities LLC, and $2.05 billion of unsecured bonds, according to a fixed income investor.

The unsecured bonds, which will be led by Credit Suisse, have initial price indications in the low 9% area.

The loan portion of the debt is set to kick off with a lender call on Monday.

Also, Jamaica-based telecom Digicel is expected to show up with a deal, as it seeks to address a bank loan maturity by issuing new secured bonds, perhaps $550 million or more, depending upon demand.

Citigroup is expected to lead that deal, a source said.

Additionally, Frontier Communications is expected to show up with secured notes during the March 4 week, an investor said.

Beyond the March 4 week, there is uncertainty with respect to the primary market, said the investor who attended the J.P. Morgan Global High Yield & Leveraged Finance Conference which took place in Miami during the first half of the past week.

Real money deals, those which generate new bonds – as opposed to deals which take investors out of existing bonds and replace them with new ones – are expected to be scarce in the near and intermediate term, the investor said.

Merger and acquisition activity is the most familiar generator of real money deals.

And the equity sponsors, which venture into such deals, are not finding great values as they size up the present market, the source remarked.

Bombardier strong

Bombardier’s newly priced 7 7/8% notes due 2027 were well above their issue price in high-volume activity in the secondary space.

The notes were quoted at 99¾ bid, par ½ offered early in the session.

They made large gains as the session progressed and were changing hands at 101½ in the late afternoon.

More than $158 million of the bonds were on the tape during Friday’s session.

The new paper had a nice coupon and yield, a market source.

Bombardier priced an upsized $2 billion issue of the 7 7/8% notes at 99.246 to yield 8% in a Thursday drive-by.

The deal doubled from its initial $1 billion size.

The yield printed at the tight end of yield talk in the 8% area. Initial talk was 8% to 8¼%.

The deal played to an order book in the high $3 billion range, a source said.

While the new paper was in focus, Bombardier’s outstanding issues continued to improve.

The Montreal-based aerospace and transportation services company’s 7½% senior notes due 2025 were also making gains in high-volume activity.

The notes rose 1 1/8 points to 102 3/8. More than $22 million of the bonds were on the tape by the late afternoon.

While the company has struggled, its prospects are improving, sources said.

Proceeds from the new paper are being used to address the financial risk of its upcoming maturity, the source said.

The company’s leverage is also projected to decrease from its current 4.6x EBITDA to 3.4x EBITDA in 2019, a source said.

Bombardier announced on Friday a tender offer of up to $975 million for its €780 million of 6 1/8% senior notes due 2021 and $1.4 billion of 8¾% senior notes due 2021, Prospect News reported. (See related article in this issue.)

The 8¾% senior notes traded up to their tender offer price during Friday’s session after trading just shy of it in high-volume activity on Thursday.

The 8¾% notes closed Friday at 110 7/8.

Bombardier is offering $1,105 for each $1,000 of the 8¾% notes tendered by the early deadline of 5 p.m. ET on March 13, in addition to accrued interest.

The company is also offering to tender its $850 million of 7¾% senior notes due 2020.

Carter’s skyrockets

Carter’s newly priced 5 5/8% senior notes due 2027 have skyrocketed since freeing for trade with the demand for the notes seen during bookbuilding following it into the secondary market.

The 5 5/8% notes were quoted at 101 7/8 bid, 102¼ offered early in the session.

They were seen changing hands at 102 1/8 with more than $45 million of the bonds on the tape by the late afternoon.

The coupon was decent for a company with a double B rating.

There is also not much paper from apparel companies in the high-yield space, a market source said.

Carter's priced a $500 million issue of the 5 5/8% notes at par in a Thursday drive-by.

The yield printed tight to price talk in the 5¾% area.

The deal was heard to play to $1.2 billion of orders.

Summit trades up

Summit Materials’ 6½% senior notes due 2027 were trading at a premium to their issue price in the secondary space.

The notes were quoted at par bid, par ½ offered and were seen changing hands around par ½ in the late afternoon.

More than $30.5 million of the bonds were on the tape during Friday’s session.

Summit priced a $300 million issue of the 6½% notes at par in a Thursday drive-by.

The yield printed in the middle of yield talk in the 6½% area and tighter than initial guidance in the 6¾% area.

The deal was heard to be playing to $800 million in orders.

CHS lags

While the majority of deals to price during Thursday’s session were putting in strong performances in the secondary space, Community Health Systems’ 8% senior notes due 2026 were lagging their issue price.

The notes were quoted at 98 1/8 bid, 98½ offered.

They were seen changing hands around 98¼ with more than $88 million of the bonds on the tape by the late afternoon.

Community Health priced a $1.58 billion issue of the 8% notes at 98.683 to yield 8¼% in a Thursday drive-by.

The yield printed at the wide end of the 8% to 8¼% revised yield talk. Earlier talk was 7 7/8% to 8%.

Neiman Marcus volatile

While the new paper was in focus during Friday’s session, Neiman Marcus’ junk bonds were active with the notes volatile after the company reached a tentative agreement with creditors.

The retailer’s 8% senior notes due 2021 and 8¾% senior notes due 2021 initially jumped up 7 points on the news.

However, both notes sank in late afternoon trading, a market source said.

After trading as high as 59, Neiman’s 8% senior notes due 2021 came in to trade as low as 50.

They were seen changing hands at 51 in the late afternoon.

More than $32.5 million of the bonds changed hands during Friday’s session.

Neiman’s 8¾% senior notes due 2021 also traded as high as 59 but came in to trade as low as 52.

They were seen changing hands at 55¼ in the late afternoon. More than $18 million of the bonds were on the tape during Friday’s session.

After a long-running dispute with creditors, Neiman announced on Friday it had reached a tentative refinancing agreement with holders of its term loans and unsecured notes.

The agreement includes a three-year maturity extension, a market source said.

The agreement also addresses the long-running dispute over Neiman’s transfer of its e-commerce site MyTheresa outside the reach of creditors.

The agreement would allow bondholders to exchange $250 million of the notes for an equivalent amount of MyTheresa preferred shares, a market source said.

The remaining balance of the unsecured notes could be swapped for new third-lien notes which would have first-lien on 50% of MyTheresa’s common equity.

However, there is a question as to whether the proposal will garner enough support to go into effect.

Some noteholders continue to demand the return of the MyTheresa assets to the company, according to a market source.

Indexes mixed

Indexes closed the week mixed after a mixed week.

The KDP High Yield Daily index dipped 3 basis points to 69.91 with the yield now 5.99%.

The index was flat on Thursday, rose 4 bps on Wednesday and 3 bps on Tuesday, and dropped 3 bps on Monday.

The index saw a cumulative gain of 1 bp on the week.

The ICE BofAML US High Yield index rose 4.8 bps with the year-to-date return now 6.407%.

The index rose 6.8 bps on Thursday, 11.9 bps on Wednesday, 9.5 bps on Tuesday and 18.3 bps on Monday for a cumulative gain of 51.3 bps on the week.

The index shot past 6% returns on Monday after passing 5% returns on Feb. 12.

The index initially crossed the 5% threshold on Feb. 5 but sunk below it on Feb. 7.

The index surpassed 4% year-to-date returns on Jan. 30.

The CDX High Yield 30 index rose 20 bps to close Friday at 106.43.

The index dropped 17 bps on Thursday, rose 2 bps on Wednesday, dipped 1 bp on Tuesday, and rose 11 bps on Monday.

The index saw a cumulative gain of 14 bps on the week.

© 2015 Prospect News.
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