NXP add-on drives by, split-rated Eagle prices; recent bonds busy; funds lose $175 million

By Paul Deckelman

New York, July 28 – The high-yield market saw one fully junk-rated dollar-denominated new deal price on Thursday and one quasi-junk split-rated offering.

Both of those new issues were later seen actively traded in the aftermarket, along with several of the new deals which priced earlier in the week.

Dutch semiconductor manufacturer NXP Semiconductors NV priced a quickly shopped $500 million add-on to its existing 2021 notes through a pair of financing subsidiaries.

Those existing notes had been trading well above the level at which the add-on priced – and once that was out of the way, they traded most of the way back up, though they did end below their Wednesday levels.

Building products maker Eagle Materials Inc. came to market with an upsized $350 million issue of split-rated (Ba/BBB) 10-year notes. That deal was originally considered to be Friday’s business but was moved up in response to strong reported investor demand.

Those new bonds were the most actively traded credits on Thursday, well up from their par issue price.

Other recently priced issues were also actively trading, among them dairy producer FAGE International SA, although it was seen off from the high it had initially hit in aftermarket dealings.

Financial services concern Navient Corp.’s new five-year notes were also busy and they too were off their recently more robust levels, in line with a generally easier market.

Away from the new or recently priced issues, Whiting Petroleum Corp.’s notes were lower in active trading after the oil and natural gas company reported a wider second-quarter loss.

Statistical market performance measures were lower across the board Thursday, after having turned mixed on Wednesday. It was the second lower session in the last three trading days.

Another statistical indicator – the flow of investor cash into or out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – saw its first net outflow in four weeks this week, following three straight weekly inflows before that. Some $175.43 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, in contrast to the $322 million inflow seen last week.

NXP add-on prices

Subsidiaries of NXP Semiconductors priced a $500 million add-on to the company’s existing 4 1/8% senior notes due 2021 (Ba2/BB+) on Thursday, high-yield primary market sources said.

The add-on priced at 101.875 to yield 3.697%.

Price talk had been in the 101.75 area.

The notes’ official issuers are subsidiaries NXP BV and NXP Funding LLC.

The quickly shopped transaction came to market via sole underwriter Barclays Capital Inc. just hours after the prospective deal was announced.

The notes are being issued under Rule 144A and Regulation S for life.

They are immediately fungible with the existing 4 1/8% notes.

NXP, a semiconductor manufacturer based in Eindhoven, Netherlands, plans to use the proceeds from the add-on issue to repay the $200 million of 3½% senior notes scheduled to come due on Sept. 15 that remain outstanding from the $500 million of those notes issued in September 2013. The company redeemed another $100 million of those 2016 notes earlier this year, using surplus cash on hand.

It plans to use the left-over proceeds from Thursday’s add-on deal for general corporate purposes.

Split-rated Eagle prices

Also pricing on Thursday was Eagle Materials $350 million of split-rated (Ba1/BBB) senior notes due 2026, which came to market at par to yield 4½%, high-yield syndicate sources said.

The regularly scheduled forward calendar issue was upsized from the $300 million offering that the company announced on Monday.

It was originally expected to price on Friday but timing was moved up after the deal played to a considerably oversubscribed order book, with more than $2 billion of orders having been generated by Wednesday, according to a market source.

The notes priced inside of initial guidance estimating a yield of 4 7/8% to 5 1/8%.

The SEC-registered public offering was brought to market via joint bookrunners J.P. Morgan Securities LLC, Bank of America Merrill Lynch, Wells Fargo Securities, LLC and BB&T Capital Markets.

Eagle Materials, a Dallas-based manufacturer and distributor of cement, gypsum wallboard, recycled paperboard, concrete and aggregates, as well as oil and gas proppants, said it plans to use the proceeds to repay $295 million of borrowings under its revolving credit facility and to pay fees relating to the repayment.

The incremental net proceeds from the increase in the offering size will be used to repay outstanding borrowings under the company’s credit facility.

Diamond marketing shaping up

Elsewhere on the new-deal scene, more details emerged on Thursday about Diamond Resorts International, Inc.’s marketing effort for its planned $600 million offering of eight-year senior notes (Caa1/CCC+).

News of the deal first surfaced in the junk bond market on Wednesday.

The company will be presenting its deal to prospective investors via a four-day roadshow starting on Monday in the New York and New Jersey area, according to a syndicate source.

The two-day marketing effort there will include a group luncheon on Tuesday afternoon in Manhattan, concurrently with a conference call, another source said.

The roadshow then continues in Boston on Wednesday and then moves on to the West Coast of the United States on Thursday.

Syndicate sources said the deal’s pricing is expected to take place during the Aug. 1 week.

Proceeds will be used to help fund the acquisition of Diamond Resorts – a Las Vegas-based hospitality and vacation ownership company – by New York-based private equity company Apollo Global Management LLC for $30.25 per share, or $2.2 billion.

The bond offering will be brought to market via RBC Capital Markets Corp. the left bookrunner, with Barclays Capital Inc. and Jefferies LLC as joint bookrunners.\

NXP above issue price

In the secondary market, a trader said that NXP’s 4 1/8% notes due 2021 were going home around the 103 bid level.

That was well up from the 101.875 level at which the add-on issue priced on Thursday.

However, another trader noted that the company’s existing 4 1/8% notes had been trading as high as a 103¾ to 104 bid context on Wednesday before the new deal was announced.

After the add-on had priced, a market source said, the bonds approached the levels they had been trading at before that transaction – but could not quite make it all the way back.

He saw the 4 1/8s going home at 103 bid, calling that down ¾ point on the day, with over $15 million having changed hands.

Eagle Materials trades up

There was no such ambiguity attached to the Eagle Materials 4½% notes due 2026, a stand-alone issue, unlike the NXP add-on.

A trader pegged the new notes at 101¾ bid, 102 offered, well up from their par issue price.

Several other traders saw them up a deuce on the day at 102 bid.

Some $46 million of those notes traded – although one of those market sources noted that given the issue’s split-rating, much of the interest in the new notes was probably due to high-grade accounts reaching down into the buffer zone between purely junk and purely investment grade in order to pick up some yield.

FAGE is volume leader

Back among the purely junk-rated issue, dairy products producer FAGE International’s 5 5/8% notes due 2026 was the busiest such credit, with over $36 million changing hands.

One of the traders saw those bonds at 102¼ bid, which he called a 3/8 point gain.

A second quoted the bonds at 102 bid, 102¼ offered, about unchanged on the day.

But yet another trader saw the notes dip as low as 101 bid during the day, which he said was off by ¾ point on the day.

Athens, Greece-based FAGE and its Johnstown, N.Y.-based affiliate, FAGE USA Dairy Industry Inc., priced $420 million of the notes at par on Wednesday in a regularly scheduled calendar offering.

The new bonds then jumped up to around the 102 bid mark in Wednesday’s aftermarket and remained there on Thursday.

Navient not as strong

A trader saw Navient’s 6 5/8% notes due 2021 down ½ point on the day at 101 1/5 bid.

He said that over $17 million changed hands.

The Newark, Del.-based financial services company priced $750 million of those notes at par on Tuesday, after upsizing the drive-by offering from an original $500 million.

The bonds initially moved above the 101 bid level in brisk trading on Tuesday and then pushed above the 102 mark on Wednesday.

Whiting weaker post-earnings

Away from recently priced deals, a trader said there was “a fair amount of activity” in Whiting Petroleum’s 5¾% notes due 2021 after the Denver-based oil and gas producer reported a much wider loss for the second quarter.

He saw the bonds sliding over ½ point to 84½, with more than $27 million traded.

For the quarter, Whiting reported a net loss of $301 million, or $1.33 per share. That compared to a loss of $149.3 million, or 73 cents per share, the year before.

On an adjusted basis, the Denver-based company posted a loss of 70 cents per share. Analysts polled by Thomson Reuters had predicted a loss of 46 cents per share.

Production declined 22% during the quarter to 12.2 million barrels of oil equivalent.

Indicators turn lower

Statistical market performance measures were lower across the board Thursday, after having turned mixed on Wednesday. It was the second lower session in the last three trading days.

The KDP High Yield Index lost 5 basis points on Thursday to close at 69.12, on top of Wednesday’s 3 bps retreat. It was the index’s fourth straight loss.

Its yield meantime rose by 3 bps to 5.57% after being unchanged at 5.54% on Wednesday. It was the third widening in the last four trading days.

The Markit Series 26 CDX Index saw its third loss in the last four sessions, as it fell by 9/32 point to end at 104 1/32 bid, 104 1/16 offered, versus its 5/32 point rise on Wednesday.

The Merrill Lynch High Yield Index suffered its third consecutive loss after six straight advances. It was down by 0.104% after falling 0.045% on Wednesday.

That loss lowered the index’s year-to-date return to 12.157% from Wednesday’s close at 12.274%, which itself was down from Monday’s close at 12.546%, the index’s fifth consecutive new peak year-to-date return.

-Stephanie N. Rotondo contributed to this review

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