Enviva, Garda add-on; Occidental notes in focus, improve; Spectrum at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 29 – The domestic high-yield primary market saw a slow start to the week with two small add-on deals clearing the market on Monday.

The final days of June promise to be quiet after a record $50 billion plus in issuance – the largest amount in the history of the junk bond market.

Enviva Partners, LP and Enviva Partners Finance Corp. priced a $150 million add-on to their 6½% senior notes due Jan. 15, 2026 (existing unsecured ratings B1/B+/BB-).

And Garda World Security Corp. priced a $120 million add-on to its 4 5/8% senior secured notes due Feb. 15, 2027 (B1/B).

With the domestic high-yield primary market expected to be subdued during the truncated holiday week, the European primary market was in focus.

Germany-based thyssenkrupp Elevator is on deck with a €4.05 billion equivalent five-part offering and Austrian sensor manufacturer ams AG plans to price its €1 billion equivalent two-part offering on Tuesday.

Rebecca BidCo GmbH and Titan Cement International SA are also in the market with euro-denominated offerings.

Meanwhile, it was a quiet Monday in the secondary space with the market again soft despite a rally in equities, a source said.

Illiquidity continued to contribute to the weak tone with the week expected to remain quiet.

Occidental Petroleum Corp.’s three tranches of senior notes (Ba2/BB+/BB) were in focus on Monday.

While the notes improved after a weak break on Friday, they were still flat to lagging their issue price.

Spectrum Brands Inc.’s newly priced 5½% senior notes due 2030 (Ba2/B/BB) were holding onto their premium in the secondary space.

American Airlines, Inc.’s 11¾% senior secured notes due 2025 (Ba3/B+/BB-) remained active although the notes were largely unchanged.

Quiet Monday

The dollar-denominated primary market passed a relatively quiet Monday, as the historic month of June 2020 – the first month in the history of the market to top $50 billion of issuance – heads for the record book.

A couple of add-on deals came past the drive-through window.

Enviva Partners priced a $150 million add-on to their 6½% senior notes due Jan. 15, 2026 (existing unsecured ratings B1/B+/BB-) at 103.75, with a 5.261% yield to worst.

The issue price came in the middle of the 103.5 to 104 price talk.

And Garda World Security priced a $120 million add-on to its 4 5/8% senior secured notes due Feb. 15, 2027 (B1/B) at 98 to yield 4.982%.

The issue price came at the cheap end of the 98 to 98.5 price talk.

Big European calendar

With the coming Independence Day holiday weekend creating an abbreviated week – an early close Thursday and a holiday on Friday – the European market has the primary market spotlight.

While all the names on the wrappers are European, there are expected be dollar-denominated bonds for sale in a pair of euro megadeals set to price Tuesday.

Germany-based elevator technology company thyssenkrupp Elevator revised the tranches of its €4.05 billion equivalent five-part offering of high-yield notes in tranches of dollar-denominated and euro-denominated notes.

Tranche size revisions and price talk surfaced Monday.

And Austrian sensor manufacturer ams AG downsized its two-part offering of five-year senior notes (Ba3/BB-/BB-) to €1 billion equivalent from €1.3 billion equivalent, set price talk and made a structural change.

The deal is expected to feature euros and dollars, with tranche sizes remaining to be determined.

Books for both thyssenkrupp and ams are scheduled to close Tuesday.

Meanwhile the euro-denominated calendar grew on Monday.

A telephone roadshow began Monday for Rebecca BidCo GmbH's €300 million offering of five-year senior secured notes (B1/B), a deal backing Triton's buyout of RENK AG from Volkswagen.

And Greece's Titan Cement International SA, began a telephone roadshow for a €250 million offering of seven-year senior bullet notes (S&P: BB).

Both deals are expected to clear the market before the end of the week (see related stories in this issue).

Occidental in focus

Occidental’s newly priced three tranches of senior notes were in focus on Monday. While the tranches improved after a weak break, they were still flat to lagging their issue price.

Occidental’s 8 7/8% senior notes due 2030 was the most actively traded issue in the secondary space on Monday.

The notes were largely wrapped around par in the high-volume activity, according to a market source.

The bonds saw more than $68 million in reported volume heading into the market close.

Occidental’s 8% senior notes due 2025 were also trading around par and were changing hands at 99 7/8 heading into the market close.

The bonds saw more than $37 million in reported volume during Monday’s session.

Occidental’s 8 &frac32;% senior notes due 2027 were trading at 99 5/8 heading into the market close with about $33 million in reported volume.

All three tranches saw a weak break on Friday, which was also a soft day for the market, and were trading in the 98¼ to 99¼ context.

Occidental priced $2 billion in three tranches on Friday, its first capital raise since becoming a fallen angel in March.

Occidental priced a $500 million tranche of the 8% notes due 2025, a $500 million tranche of the 8½% notes due 2027 and a $1 billion tranche of the 8 7/8% notes due 2030 at par.

The 8% notes priced at the wide end of the 7¾% to 8% yield talk.

The 8½% notes priced at the wide end of the 8¼% to 8½% yield talk.

And the 8 7/8% notes priced at the wide end of the 8¾% to 8 7/8% yield talk.

Spectrum at a premium

Spectrum Brands 5½% senior notes due 2030 held onto its premium in active trading in the secondary space.

The notes were changing hands in the par ¼ to par ½ context during Monday’s session.

There was more than $14 million on the tape heading into the market close.

Spectrum Brands priced a $300 million issue of the 5½% notes at par on Friday.

Pricing came in the middle of yield talk in the 5½% area.

American Airlines active

American Airlines’ 11¾% notes due 2025 remained active on Monday.

However, their downward spiral came to an end with the notes finding their level.

The 11¾% notes continued to trade on a 95-handle on Monday. There was more than $18 million on the tape heading into the market close.

American priced a $2.5 billion issue of the 11¾% notes at 99 to yield 12.013% on June 24.

$460 million Friday outflows

The dedicated high-yield bond funds saw $465 million of net outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained a hefty $465 million of outflows on the day.

Actively managed high-yield funds were flat to slightly positive, posting $5 million of inflows on Friday, the source said.

With only one day of June remaining, and in the face of a global pandemic and its catastrophic economic fallout, the high-yield asset class has seen two of its three biggest monthly inflows since records have been kept.

The biggest was the $20.5 billion inflow seen in May. The second-biggest was the $17.1 billion inflow seen in April. The month of June, which has seen $9.7 billion of inflows to Friday's close, narrowly misses topping the previous record-holding month, October 2011, which saw $9.9 billion of inflows, according to the market source.

Indexes down

Indexes opened the week with losses after closing out the previous week with losses.

The KDP High Yield Daily index dropped 34 points to close Monday at 64.78 with the yield now 6.63%.

The index posted a cumulative loss of 97 points on the week last week.

The ICE BofAML US High Yield index dropped 39.1 bps with the year-to-date return now negative 4.822%.

The index posted a cumulative loss of 121.5 bps on the week last week.

The CDX High Yield 30 index dropped 39 bps to close Monday at 98.5.

The index posted a cumulative loss of 136 bps on the week last week.

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