Manitowoc, Target Hospitality on tap; Scientific Games gains; Credit Acceptance weakens; Endo drops

By Abigail W. Adams

Portland, Me., March 6 – While no new deals priced during Wednesday’s session, the domestic high-yield forward calendar continued to grow with two deals joining the already $5.25 billion being marketed.

Manitowoc Co. Inc. plans to price $300 million seven-year senior secured second-lien notes (B2/B) on Friday.

Target Hospitality (Arrow Bidco LLC) plans to start a roadshow for a $340 million offering of five-year senior notes, which will run through March 12 with pricing thereafter.

Digicel International Finance Ltd. and Digicel Holdings Ltd. set official price talk for their $550 million offering, which is set to price on Thursday.

While Johnson Controls (Power Solutions) is not expected to price its $4.7 billion equivalent offering until March 15, its secured tranches were heard to already be oversubscribed.

Meanwhile, the paper that priced during Tuesday’s session was in focus in the secondary space although with mixed performances.

Scientific Games International Inc.’s newly priced 8¼% senior notes due 2026 (existing Caa1/B) were performing well.

However, Credit Acceptance Corp.’s 6 5/8% senior notes due 2026 were hovering above their issue price.

Outside of the new paper, Endo International plc’s junk bonds dropped in high-volume activity with news about Purdue Pharma’s pending bankruptcy dragging the notes down.

Manitowoc for Friday

Manitowoc plans to price $300 million of seven-year senior secured second-lien notes (B2/B) on Friday, according to market sources.

Early whispers have the deal coming in the low 8% area.

J.P. Morgan Securities LLC is lead left bookrunner for the Rule 144A and Regulation S deal.

Proceeds, together with proceeds from an extension of credit under the company’s ABL credit facility, will be used to redeem the company’s outstanding 12¾% senior secured second-lien notes due 2021.

Proceeds will also be used to repay the existing $225 million asset-based revolving credit facility and existing $75 million accounts receivable securitization program.

Target Hospitality’s offering

Target Hospitality plans to start a roadshow for a $340 million offering of five-year senior notes, which will run through March 12 with pricing thereafter, according to a market source.

Credit Suisse Securities (USA) LLC is the left lead for the Rule 144A and Regulation S offering. Barclays, Deutsche Bank Securities LLC and BofA Merrill Lynch are joint bookrunners.

Proceeds will be used to fund the merger of Target Logistics Management LLC and RL Signor Holdings LLC to form Target Hospitality, a Woodlands, Texas-based specialty rental and hospitality service provider.

The forward calendar

While the forward calendar continued to build on Wednesday, Digicel’s $550 million offering of five-year first-lien senior secured notes is expected to clear the market on Thursday.

Official price talk has the deal coming in the 9% area. Initial price talk was for a yield of 9% to 9¼%, according to market sources.

Proceeds will be used to refinance Digicel’s short-term secured debt.

While not pricing until next week, anticipation is building around Johnson Controls’ (Power Solutions) $4.7 billion equivalent three tranche offering of euro- and dollar-denominated senior notes.

The offering will consist of a $2 billion senior secured tranche of seven-year senior notes and a $750 million equivalent euro-denominated senior secured tranche of seven-year notes whispered in the 7% area.

The offering will also consist of a $1.95 billion senior unsecured tranche of eight-year notes (B3/B/B-) whispered in the low 9% area.

The deal is not expected to price until March 15 following a roadshow in Europe and the United States.

However, the secured tranches were heard to be playing to $3.5 billion of orders, a market source said.

Scientific Games trades up

Scientific Games’ 8¼% senior notes due 2026 were trading up in the secondary space.

The notes were quoted at par ¾ bid, 101¼ offered. They were seen changing hands around par ¾.

“They’re performing well,” a market source said.

Scientific Games priced $1.1 billion of the 8¼% senior notes in a Tuesday drive-by.

Pricing came wide of initial talk in the high 7% area.

Proceeds from the new offering will be used to call $1 billion of the technology-based gaming company’s 10% senior notes due 2022.

The 10% notes were trading largely flat on the call news. They were changing hands around 105½ in light volume.

Credit Acceptance dips

Credit Acceptance’s 6 5/8% senior notes due 2026 dipped in active trading on Wednesday.

The notes were largely stuck at par, a market source said.

They were trading in a range of par to par 3/8 throughout the session and were seen changing hands in the late afternoon at par 1/8.

More than $26 million of the bonds were on the tape by the late afternoon.

The 6 5/8% notes were coming in from their highs after breaking for trade on Tuesday.

The notes were seen at par ¼ bid, par ¾ offered after breaking for trade and closed the day at par ¼, sources said.

Credit Acceptance priced a $400 million issue of the 6 5/8% notes at par on Tuesday after the conclusion of a brief roadshow.

Price talk was in the 6¾% area.

Timing was accelerated with the deal initially expected to price on Wednesday.

Endo drops

Endo International’s junk bonds were again trading down on Wednesday after weakening towards the market close on Tuesday.

Endo’s 5¾% senior notes due 2022 dropped 1 7/8 points to close Wednesday at 90, according to a market source. More than $35 million of the bonds were on the tape by late afternoon.

The notes traded down 1 3/8 points to 91 7/8 in the late afternoon on Tuesday.

Endo’s 6% senior notes due 2023 dropped 1 point to close Wednesday at 78¾. More than $28 million of the bonds changed hands on Tuesday.

The notes traded down 2½ points toward the market close on Tuesday to 79 7/8.

Endo’s junk bonds were trading down on news Purdue Pharma was preparing to file for Chapter 11 bankruptcy protection, a market source said.

Purdue, the maker of OxyContin, is facing thousands of lawsuits that accuse it of contributing to the opioid crisis.

Endo has also been named in thousands of lawsuits accusing the generics and specialty pharmaceutical company of contributing to the opioid epidemic.

Indexes drop

Indexes continued to decline on Wednesday.

The KDP High Yield Daily index was down 11 basis points to close Wednesday at 69.76 with the yield 6.04%.

The index dipped 4 bps on Tuesday and was flat on Monday.

After a mixed week last week, the index closed the week largely flat as well. The index saw a cumulative gain of 1 bp on the week last week.

The ICE BofAML US High Yield index was also down 11 bps with the year-to-date return now 6.258%.

The index slid 4.1 bps on Tuesday and rose 0.2 bp on Monday after a cumulative gain of 51.3 bps on the week last week.

The index shot past 6% returns on Feb. 25 after passing 5% returns on Feb. 12.

The index surpassed 4% year-to-date returns on Jan. 30.

The CDX High Yield 30 index dropped 36 bps to close Wednesday at 105.69.

The index was down 26 bps on Tuesday and 12 bps on Monday after a cumulative gain of 14 bps on the week last week.

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