Schweitzer-Mauduit, Carvana, Enova, Fortress on tap; Pacific Drilling trades up; funds lose $862 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 13 – While no deals priced in the domestic primary market on Thursday, the stage is set for a busy end to the week.

Schweitzer-Mauduit International, Inc., Carvana Co., Enova International, Inc. and Fortress Transportation and Infrastructure Investors are all expected to price on Friday.

While the market awaits price talk on the deals from Enova and Fortress, price talk circulated for Schweitzer-Mauduit’s $350 million offering of eight-year senior notes and Carvana’s $300 million offering of five-year senior notes.

The European primary market remained active on Thursday with Gamenet Group SpA pricing a €225 million issue and Arqiva Broadcast Finance plc setting price talk for its £625 million offering with pricing expected on Friday.

Meanwhile, the secondary space was for the most part quiet with one exception.

Pacific Drilling SA’s 8 3/8% senior secured first-lien notes due 2023 (Caa1/B) dominated trading activity in the secondary space with the notes seen well above their issue price.

The 12% PIK toggle notes were also seen well above their issue price although trading of the notes was light.

Popular, Inc.’s recently priced 6 1/8% senior notes due 2023 (B2/BB-/BB-) were improved on Thursday although the notes continued to see light trading volume.

As expected, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw outflows this past week.

Funds saw outflows of $862 million in the week ended Sept. 12, according to fund-flow statistics generated by AMG Data Services Inc.

The outflow is the second consecutive week of cash leaving the space after a streak of five consecutive inflows.

Combined with the $639 million in cash that left the space in the week ended Sept. 5, outflows over the past two weeks have more than wiped out the gains seen in August.

Busy Friday

The stage is set for a big finish to the Sept. 10 week.

On Thursday, Schweitzer-Mauduit International talked its $350 million offering of eight-year senior notes (B2/B+) to yield in the 7% area and set pricing for Friday.

Official talk comes wide of the 6½% to 6¾% initial talk, a trader said, adding the market heard the order book was around two-thirds done at 12:30 p.m. ET Thursday.

J.P. Morgan is the lead.

Carvana talked its $300 million offering of five-year senior notes (Caa2/CCC+) to yield in the 9% area.

Official talk comes tight to initial price talk in the low 9% area.

Wells Fargo is the left bookrunner.

Meanwhile, the market awaits official talk on two other dollar-denominated deals set to clear ahead of the coming weekend.

Enova International has having a roadshow for $375 million of seven-year senior notes (S&P: B-).

Initial price talk is in the low to mid 8% area. The deal is expected to price Friday.

And Fortress Transportation and Infrastructure Investors is marketing $300 million seven-year senior notes (B1/B+) initially guided in the 6½% area. The deal is also set to price Friday.

Gamenet prices tight

In Thursday's new issue market, Gamenet Group priced a €225 million issue of Euribor plus 512.5 basis points senior secured floating-rate notes due April 2023 (B1/B+) at par.

The spread came tight to the 525 bps spread talk.

UniCredit, Nomura, Credit Suisse and Intermonte SIM managed the sale.

The Rome-based online gaming company plans to use the proceeds to finance part of its acquisition of GoldBet Srl for €265 million.

Arqiva talk 7% area

Friday action is also expected in the European new issue market.

On Thursday, Arqiva Broadcast Finance talked its £625 million offering of five-year senior notes (expected B2//confirmed B-) in the 7% area.

The deal is set to price on Friday.

Meanwhile, late Thursday in London price talk was still pending on the eDream Odigeo €425 million offering of five-year senior secured notes, a sellside source based there said. Both official talk and final terms are expected on Friday.

Grinding away

The secondary space was again quiet on Thursday as it has been for much of the week, a market source said.

While the market was grinding higher, trading volume remained light. “I think it’s the lack of any real significant supply. We’re really not seeing institutional buying,” a market source said.

With only two deals pricing thus far, the secondary space has been largely dead for much of the week, the source said.

However, all eyes are on Refinitiv’s $5.5 billion equivalent four-tranche offering of high-yield notes. Market players were hopeful timing of the deal would accelerate and that it would price on Friday.

The dollar-denominated tranches were said to be well oversubscribed. However, there was still work to be done placing the euro-denominated tranches, sources said.

The deal is expected to price early in the Sept. 17 week.

Pacific Drilling trades up

Pacific Drilling’s 8 3/8% senior secured first-lien notes due 2023 dominated trading activity in the secondary space with the notes seen more than 2 points above their issue price.

The notes were trading at 102½ bid, 102¾ offered early in the session but came in slightly as the day progressed. They were seen at 102 1/8 bid, 102 3/8 offered later in the afternoon.

“There was pretty good buying,” a market source said.

Pacific Drilling’s 12% second-lien PIK toggle notes due 2024 were also well above their issue price although there was not much of a market for them, a market source said.

The 12% PIK notes were seen at 102¾ bid, 103 offered on Thursday. While there were some prints for the notes early in the session, they were quiet into the afternoon.

Pacific Drilling priced an upsized $1 billion two-tranche offering of secured notes on Wednesday.

The deal included an upsized $750 million tranche of the 8 3/8% notes which priced at par. The tranche was increased from $700 million.

The yield printed in the middle of the 8¼% to 8½% yield talk.

Pacific Drilling also priced $250 million of second lien PIK toggle notes at par to yield 11%.

The cash coupon is 11% while the PIK coupon steps up by 100 basis points to 12%. The PIK coupon came at the tight end of the 12% to 12½% PIK interest talk.

The PIK tranche was added after Pacific Drilling launched its roadshow.

The deal was in high demand during bookbuilding and was said to have played to $4 billion in orders.

The demand followed the notes into the secondary space, a market source said.

Popular improves

Popular’s recently priced 6 1/8% senior notes due 2023 improved on Thursday although trading of the notes remained light.

The 6 1/8% notes were seen up about ½ point. They were trading at par ½ bid, 101 offered on Thursday, according to a market source.

The notes were seen at par bid, par ½ offered on Wednesday.

Popular priced a $300 million offering of the notes at par on Tuesday.

Proceeds from the new deal, in addition to cash, will be used to redeem the company’s $450 million of outstanding 7% senior notes due 2019.

The 7% notes continued to see activity on Thursday with the notes trading between 102 and 102½.

Indexes gain

Three benchmarks for the high-yield secondary market again posted gains on Thursday although some indexes saw larger increases than others.

The KDP High Yield Daily index was up slightly on Thursday.

The index rose 1 basis point to close the day at 70.30 with the yield now 5.87%. The index was up 6 basis points on Wednesday, breaking a five consecutive day losing streak.

The index was down 4 bps on Tuesday and 3 bps on Monday after posting losses for much of last week.

The Merrill Lynch High Yield index saw another large gain on Thursday further solidifying it above the 2% year-to-date return threshold, which it crossed on Wednesday.

The index was up 13.9 bps with the year-to-date return now 2.229%.

The index was up 14.3 bps on Wednesday, 5.3 bps on Tuesday and 10.3 bps on Monday.

The CDX High Yield 30 index was up 21 bps to close Wednesday at 107.32. The index was up 14.3 bps on Wednesday, 5 bps on Tuesday and 17 bps on Monday after seeing a cumulative 2 bps drop last week.

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