Netflix prices, trades up; Teekay starts roadshow; Entercom jumps; PG&E, Anadarko gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 24 – One name dominated attention in the domestic high-yield primary and secondary market on Wednesday – Netflix, Inc.

Netflix priced an upsized $2.24 billion equivalent amount of 10.5-year senior bullet notes (Ba3/BB-) in two tranches on Wednesday.

While Netflix’s new notes dominated activity after breaking for trade, the company’s outstanding issues continued to gain.

Thursday also promises to be an active session for the primary market with offerings for Adient US LLC, Brookfield Property REIT Inc., Moss Creek Resources Holdings, Inc. and Truck Hero, Inc. on deck as possible business.

In other primary market news, Teekay Corp. joined the active forward calendar and began marketing a $300 million offering of five-year senior secured notes.

Meanwhile, new paper remained in focus in the secondary space.

Entercom Media Corp.’s newly priced 6½% senior notes due 2027 were making large gains in active trading on Wednesday.

Outside of the new paper, Pacific Gas & Electric’s senior notes continued to see high-volume activity with the notes again on the rise after filing for a rate increase.

Anadarko Petroleum Corp.’s split-rated 6.6% senior notes due 2046 (Ba1/BBB) also continued to rise after receiving a competing bid from Occidental Petroleum that trumped Chevron’s previous buyout offer.

Netflix upsized and tight

Netflix priced an upsized $2.24 billion equivalent amount of 10.5-year senior bullet notes (Ba3/BB-) in two tranches on Wednesday.

The deal, which was upsized from $2 billion equivalent, included $900 million of the notes, which priced at par to yield 5 3/8%.

The yield printed at the tight end of yield talk in the 5½% area and inside of the 5 5/8% early guidance.

Netflix also priced €1.2 billion of the notes at par to yield 3 7/8%, at the tight end of yield talk in the 4% area and inside of the 4% to 4 1/8% early guidance.

The deal was heard to be playing to $6 billion equivalent of orders across both the dollar-denominated and euro-denominated tranches on Wednesday morning.

Morgan Stanley, Goldman Sachs, J.P. Morgan, Deutsche Bank and Wells Fargo were the joint bookrunners.

Proceeds will be used for general corporate purposes.

Netflix, a market fixture

Los Gatos, Calif.-based media services provider, Netflix is becoming a fixture in the high-yield new issue market, a trader said early Wednesday.

Last October, in a transaction quite similar to Wednesday's deal, the company priced approximately $2.06 billion of 10.5-year senior notes, which came in dollars and euros.

That deal followed a $1.9 billion placement of non-callable unsecured paper that priced almost exactly a year ago (April 23, 2018).

Hence, in the past year Netflix printed $6.2 billion of what, in the junk bond market, is long-term maturity, non-callable paper.

In a letter to shareholders earlier in 2019 Netflix stated, “As long as we judge our marginal after-tax cost of debt to be lower than our marginal cost of equity, we’ll continue to finance our working capital needs through the high-yield market.”

Netflix could easily return to the junk primary market before the end of 2019, as it continues to endeavor to acquire content for its media entertainment enterprise, the trader said.

Adient talks 7 1/8% area

Looking to Thursday's session, Adient is expected to price its $750 million offering of seven-year senior secured notes (Ba2/BB-).

Talk in the 7 1/8% area surfaced on Wednesday.

Official talk comes tight to initial guidance in the low-to-mid 7% area.

BofA is the left bookrunner.

Other possible Thursday trades include Brookfield Property REIT ($335 million, initial talk 5 5/8% to 5 7/8%), Moss Creek Resources Holdings ($500 million, initial talk 10%) and Truck Hero ($335 million, initial talk 8% to 8 3/8%).

See the High Yield Calendar in this edition of the Prospect News High Yield Daily.

Teekay markets $300 million

Teekay Corp. commenced marketing a $300 million offering of five-year senior secured notes.

The notes, which come as funding for a concurrent tender offer, are expected to price next Tuesday.

Meanwhile, an active session is expected Thursday in the European high-yield primary.

Among the deals on deck, FNAC Darty SA circulated initial price guidance on €650 million of senior notes (expected ratings Ba2/BB+), which are coming in two tranches.

The short maturity paper is coming as a €300 million tranche of five-year notes with two years of call protection and with initial guidance in the low-to-mid 2% area.

The long-dated tranche, €350 million of seven-year notes with three years of call protection, are initially guided in the 3% area.

Global coordinator Credit Agricole will bill and deliver.

Netflix in focus

Netflix’s 5 3/8% senior notes due 2029 were in focus in the secondary space with the notes making large gains out of the gate after freeing for trade.

The 5 3/8% notes rose 1 point soon after hitting the market. The bonds were seen changing hands around 101 with about $70 million on the tape, according to a market source.

While Netflix’s new paper was in focus, the online streaming company’s outstanding issues continued to post gains.

Netflix’s 4 3/8% notes due 2026 rose ½ point to 99 1/8 with more than $11 million on the tape by the late afternoon, according to a market source.

The 5 7/8% senior notes due 2028 gained almost ¾ point and stood poised to close the day at 105 3/8, a source said.

Entercom jumps

Entercom’s newly priced 6½% senior notes due 2027 were putting in a strong secondary market performance.

The 6½% notes traded up to 102 by Wednesday afternoon, after closing out Tuesday at 101 1/8, according to a market source.

More than $50 million of the bonds were on the tape.

Like many of the new deals that have shot up in secondary trading, the notes heights were attributed to pent up demand for new paper, sources said.

Entercom priced an upsized $325 million issue of the 6½% notes at par on Tuesday.

The issue size increased from $300 million.

The yield printed at the tight end of the 6½% to 6¾% yield talk and inside of initial guidance of 6 7/8% to 7 1/8%.

PG&E gains continue

Pacific Gas & Electric’s senior notes saw another round of active trading on Wednesday with the notes again posting gains following a proposed rate increase.

The 6.05% senior notes due 2034 were again among the most actively traded issues in the secondary space.

The notes gained 1 5/8 point to change hands at 104¼, according to a market source.

More than $37 million of the bonds were on the tape by the late afternoon.

While less active, Pacific Gas & Electric’s 3.95% senior notes due 2047 rose 1¾ point to 86¼, and the 5.8% senior notes due 2037 rose 1½ points to 101½.

The struggling utility company’s notes were again posting large gains following news it had filed for a rate increase.

Pacific Gas & Electric notes have been on the rise throughout April with the governor of California calling on the legislature to change laws surrounding utility company’s liabilities for wildfires.

Pacific Gas & Electric filed for bankruptcy in January soon after losing its investment-grade status due to liability from the California wildfires.

Anadarko’s buy-out

Anadarko’s split-rated 6.6% senior notes due 2046 were on the rise in high-volume activity on Wednesday after Occidental Petroleum submitted a competing bid for the petroleum company.

The 6.6% notes rose 5/8 points to 138 with more than $21 million of the bonds on the tape, according to a market source.

The notes returned to focus after Occidental Petroleum submitted an unsolicited bid to buy the company for $38 billion.

The offer tops Chevron’s previous proposal to buy Anadarko for $33 billion.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $118 million of inflows on the day.

However, actively managed high-yield funds sustained $90 million of outflows on Tuesday, the source added.

Indexes mixed

Indexes were mixed on Wednesday with some posting gains and others losses.

The KDP High Yield Daily index rose 4 basis points to 70.64 with the yield now 5.69%. The index was flat on Tuesday and slid 2 bps on Monday after a cumulative gain of 8 bps on the week last week.

The ICE BofAML US High Yield index gained 10.6 bps with the year-to-date return now 8.785%. The index was up 13.2 bps on Tuesday after slipping 0.6 bps on Monday.

The index shot past 8% year-to-date returns on April 8 after only recently surpassing the 7% threshold on March 26 and passing 6% year-to-date returns on March 11.

The CDX High Yield 30 index dropped 25 bps to close Wednesday at 170.45. The index gained 18 bps on Tuesday after dropping 12 bps on Monday.

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