New junk quiet but full calendar; CA Magnum in demand; PBF Energy, Ford gain post-earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 28 – With over $8 billion of new deals on the junk bond calendar, none of it moved into the new issue space on Thursday.

Meanwhile, the secondary space was firm on Thursday although volume was light amid a slowdown in new issuance.

CA Magnum Holdings’ 5 3/8% senior secured notes due 2026 (B1//BB-) were in focus with the notes continuing to edge higher after a strong break.

While activity in recent deals slowed on Thursday, earnings-related news also sparked movement in some outstanding issues.

PBF Holding Co. LLC’s capital structure rose 1.5 to 2 points in active trading on a better-than-expected earnings report.

Ford Motor Co.’s senior notes were also on the rise after the company reported a large earnings beat.

Thursday and upcoming

The dollar-denominated primary market put up a goose egg on Thursday.

A meager news flow featured one deal announcement.

Chicago-based Railworks Holdings, which is being acquired by Bernhard Capital Partners Management from Wind Point Partners, started a roadshow for a $325 million offering of seven-year senior secured second-lien notes (B) to support the acquisition.

The deal is expected to price in the later part of the week ahead.

Meanwhile price talk of 8¼% to 8½% surfaced on the Armor Holdco, Inc. $350 million offering of eight-year senior notes (Caa1/CCC+) backing the combination of Equiniti Group and AST by sponsor Siris Capital.

Official talk comes wide to early guidance which had the deal coming to yield in the high 7% area to 8%.

It's on deck to price Friday.

Books are heard to be modestly over deal size, a trader said.

There are other offerings in the market on timelines suggesting they could clear ahead of the coming weekend.

However, market watchers were professing some doubt on Thursday.

Most conspicuous is the Lifescan Global Corp. $800 million two-part secured deal (B3/B), with fixed-rate notes (initial guidance high 6% to 7%) and floating-rate notes (initial guidance Libor plus 625 bps at 99 to 99.5).

The roadshow was scheduled to run through Thursday.

CA Magnum gains

CA Magnum’s 5 3/8% senior secured notes due 2026 continued to notch higher after a strong break the previous session.

The 5 3/8% notes were up about ½ point to 102½ bid, 103 offered on Thursday, a source said.

They traded up to 102 soon after breaking for trade on Wednesday.

In the latest leveraged buyout financing deal, CA Magnum priced a $1.01 billion issue of the 5 3/8% senior notes at par on Wednesday.

The yield printed tighter than the 5½% to 5¾% yield talk.

The deal was backing the buyout of Hexaware Technologies by the Carlyle Group.

The high-yield market has seen a string of large LBO deals over the past month.

The deals tend to price cheaper and be more favorable to investors than other types of deals, such as refinancings, a source said.

PBF Energy’s earnings

PBF Energy’s better-than-expected earnings report helped lift its capital structure by 1.5 to 2 points, a source said.

The petroleum refiner’s 7¼% senior notes due 2025 gained 1.5 points to close the day at 78.5.

The 6% senior notes due 2028 also rose 1.5 points and closed the day at 73.5.

The 9¼% senior secured notes due 2025 gained 1.75 points to close the day at 98.75.

The issues were in focus with each seeing more than $20 million in reported volume.

PBF Energy reported a surprise third-quarter profit of 12 cents per share. Analysts were expecting a loss of 25 cents per share.

Revenue of $7.18 billion also bested expectations.

In addition, the company issued strong guidance due to improved demand and reduced its debt by $300 million.

The company repurchased $229 million of the principal amount of its 6% senior notes and 7¼% senior notes for $146.8 million in the second-half of the year, according to a company news release.

Ford gains

Ford’s senior notes were also posting gains following a blowout earnings report.

Ford’s 4¾% senior notes due 2043 rose 1 5/8 points to close the day at 109 1/8, a source said. There was about $10 million in reported volume.

While less active, Ford’s 5.291% senior notes due 2046 gained almost 2 points to close the day at 115.

It was the highest level for the notes since they priced at par in 2016.

Ford reported earnings per share of 51 cents versus analyst expectations for earnings of 27 cents per share.

Revenue was $33.21 billion versus analyst expectations of $32.54 billion.

In addition, Ford reinstated its quarterly dividend and raised its full-year guidance.

The company now expects EBIT of $10.5 billion to $11.5 billion versus previous expectations for EBIT of $9 billion to $10 billion.

Indexes

The KDP High Yield Daily index rose 4 points to close Thursday at 69.66 with the yield now 3.9%.

The index rose 2 points on Wednesday after shaving off 1 point on Tuesday and 5 points on Monday.

The CDX High Yield 30 index gained 12 bps to close Thursday at 109.16.

The index dropped 17 bps on Wednesday after rising 14 bps on Tuesday and 2 bps on Monday.

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