Venator, Valvoline price; United scraps offering; PBF, Lamb Weston, Azek up 3 to 4 points

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 8 – The domestic high-yield primary market rounded out an active week with one new deal and one add-on pricing.

Venator Materials plc priced a $225 million issue of five-year senior secured notes (B1) at a discount.

And Valvoline Inc. priced an upsized $400 million add-on to its 4 3/8% senior notes due Aug. 15, 2025 (existing ratings Ba3/BB).

However, United Airlines scrapped its offering of $2.25 billion secured senior notes (Ba2/BB-/BB+) which had encountered pushback.

The May 11 week also promises to be an active one with PowerTeam Services, LLC’s $587 million offering of senior secured notes due December 2025 (B3/B-) on deck.

BMC Software plans to commence marketing a $1.25 billion equivalent of senior secured notes in three tranches on Monday.

Meanwhile, the secondary space closed the week on firm footing with equities climbing higher and crude oil futures logging another gain.

New paper continued to dominate trading activity with the deals to price during Thursday’s session skyrocketing in the secondary space.

Lamb Weston Holdings, Inc.’s 4 7/8% senior notes due 2028 (Ba2/BB+), Azek Building Products, Inc.’s 9½% senior notes due 2025 (Caa2/CCC+) and PBF Holding Co LLC and PBF Finance Corp.’s 9¼% senior notes due 2025 (Ba2/BBB-/BB-) were all trading 3 to 4 points above their issue prices, sources said.

Friday primary

Valvoline priced an upsized $400 million add-on to its 4 3/8% senior notes due Aug. 15, 2025 at 99.5 to yield 4.481% in a Friday drive-by.

The issue size increased from $300 million.

The issue price came at the rich end of the 99 to 99.5 price talk.

Also Venator Materials, priced a $225 million issue of 9½% five-year senior secured notes at 98, in a deal that flew somewhat below the radar, according to a New York-based bond trader.

United scraps offering

Meanwhile, United Airlines scrapped its $2.25 billion offering of secured senior notes that had been expected to price on Thursday.

The deal was struggling, sources said.

The company came looking to price tranches of three-year notes and five-year notes at a blended rate in the low 9% area.

Talk subsequently pushed out to the 10% to 10½% range and then to 11%, according to sources.

The initial collateral package included 360 aircraft amounting to roughly 46% of United's mainline fleet, but representing some of the “older vintages” of the airline's portfolio of aircraft, according to a report by Fitch Ratings.

As negotiations went on that collateral package was enhanced to include gates and routes, sources said.

The week ahead

The May 11 week figures to be a busy one, according to a trader who added that the market is looking for as much as $14 billion of new issuance to clear in the week ahead.

The past week, which just cleared the $6 billion mark, was supposed to be that big, the trader added, noting that the Neiman Marcus Group Inc. bankruptcy and the travails of the above-mentioned United Airlines deal – the first post-Fed deal to actually struggle – served to erode market sentiment.

In any case, the week ahead will get underway with an active calendar in place.

BMC Software plans to commence marketing a $1.25 billion equivalent of senior secured notes in three tranches on a global investor call on Monday, as the Houston-based enterprise software supplier seeks to fund its acquisition of Compuware.

And PowerTeam Services is expected to set price talk on its $587 million offering of senior secured notes due December 2025 (B3/B-) on Monday morning, and price the deal later in the day.

Lamb Weston trades up

Lamb Weston’s 4 7/8% senior notes due 2028 continued to gain in active trading on Friday after a strong break.

The notes traded as high as 103¼ during Friday’s session, a source said. They were changing hands between 102¾ to 103 1/8 heading into the late afternoon.

The notes saw a strong break, trading up to a 102-handle shortly after freeing for trade on Thursday, according to a market source.

While the notes priced tight, the Idaho-based food processing company is a high-quality credit and the market has been starved for new issuance, a source said.

Lamb Weston priced a $500 million issue of the 4 7/8% notes in a Thursday drive-by.

The issue size increased from $400 million.

The yield printed on top of final yield talk and tight to earlier talk in the 5% area.

Initial price talk was for a yield in the mid-5% area.

PBF in focus

PBF Holding’s 9¼% senior notes due 2025 dominated activity in the secondary space on Friday with the notes skyrocketing at a high volume.

The 9¼% notes traded as high as 104¼ in intraday activity but came in slightly as the session progressed.

They were changing hands in the 103½ to 103¾ context heading into the market close.

While the secured notes were split-rated, the pricing was a reflection of the market’s sentiment about the N.J.-based petroleum refiner.

Fitch Ratings downgraded PBF Holding in April to BB- from BB due to a reduction in oil prices and demand for refined products such as gasoline.

PBF Holding priced a $1 billion issue of the 9¼% notes at par on Thursday.

Pricing came at the tight end of talk for a coupon of 9¼% to 9½% and tighter than initial guidance for a yield in the 9½% to 10% area.

Azek Building gains

While volume was relatively light, Azek Building’s 9½% senior notes due 2025 outperformed in the aftermarket with the notes trading up to 5 points above their issue price.

The 9½% notes traded up to 104½, a market source said.

Azek Building priced an upsized $350 million issue of 9½% notes at 99 to yield 9¾%.

The issue size increased from $320 million.

The yield printed tight to the 9¾% to 10% yield talk. The notes had discount talk of 1 to 2 points.

$374 million Thursday inflows

The dedicated high-yield bond funds had $374 million of net inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $304 million of inflows on the day.

Actively managed high-yield funds had $70 million of inflows on Thursday, the source said.

News of Thursday flows follows a Thursday report that the combined high-yield funds had $3.53 billion of net inflows for the week to the Wednesday, May 6 close.

The latest weekly inflows extended the number of consecutive positive flows to six, during which the combined funds had $23.1 billion of net inflows, more than erasing the record $19.2 billion of net outflows sustained during the five-week stretch that preceded the present run of inflows, according to the market source.

The combined high-yield funds have had $3 billion of net inflows for 2020 to Thursday's close. By contrast, loan funds have undergone a staggering $19.6 billion of outflows over the same period, the source said.

Indexes mixed

Indexes were mixed on Friday. However, all closed the week with cumulative gains.

The KDP High Yield Daily index shaved off 1 basis point to close Friday at 62.83 with the yield now 7.49%.

The index gained 11 bps on Thursday, 4 bps on Wednesday and 20 bps on Tuesday after sinking 13 bps on Monday.

The index saw a cumulative gain of 21 bps on the week.

The ICE BofAML US High Yield index gained 16.6 bps with the year-to-date return now negative 9.198%.

The index was up 20.6 bps on Thursday, 10.6 bps on Wednesday and 53.6 bps on Tuesday after sliding 13.9 bps on Monday.

The index saw a cumulative gain of 87.5 bps on the week.

The CDX High Yield 30 index gained 41 bps to close Friday at 94.5.

The index was up 129 bps on Thursday, sank 87 bps on Wednesday, was up 22 bps on Tuesday and dropped 35 bps on Monday.

The index saw a cumulative gain of 70 bps on the week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.