New issue activity muted; PHI drops as new deal faces hurdles; Callon reaches new low

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 19 – New issue activity in the domestic and primary market remained muted on Tuesday as the threat of a trade war between China and the United States roiled the global capital markets.

While no new paper entered the space, the forward calendar continued to fill in with several deals slated to price before the week comes to a close.

Enterprise Development Authority began a roadshow for a $440 million offering of five-year senior secured notes.

Three high profile dual-currency dollar/euro deals from Energizer Holdings Inc., TDC A/S and Cirsa Gaming Corp. are also expected to price before the week comes to a close.

While the domestic market saw no new deal action on Tuesday, the European market did see a small add-on price.

Schmolz + Bickenbach AG priced a €150 million add-on to the Schmolz + Bickenbach Luxembourg Finance SA 5 5/8% senior secured notes due July 15, 2022 (S&P: B+) at 101.50.

While fear of a pending trade war may have muted new deal activity on Tuesday, it had little impact on the secondary space which remained firm, market sources said.

“We’re not even down a quarter,” a market source said. “No one wants to sell anything.”

While the overall market remained firm, PHI Inc.’s 5¼% senior notes due 2019 dropped about 2 points as the company’s new debt refinancing deal struggles.

Rent-A-Center’s junk bonds remained a major volume mover in the secondary space although with little change to price as retail investors exit their position in the company.

Callon Petroleum Co.’s recently priced 6 3/8% senior notes due 2026 (B3/B+) dropped about ½ point on Tuesday to reach a new low of about 98 7/8, according to a market source.

The notes have largely traded below par since pricing on May 31.

EDA roadshow

Enterprise Development Authority, the issuing authority of the California-based Estom Yumeka Maidu tribe, began a roadshow for a $440 million offering of five-year senior secured notes.

Initial guidance on the deal is in the high 9% to low 10% area.

Wells Fargo has the books for the project financing deal.

Busy end to the week

The back half of the week figures to be active with seven deals expected to clear the market before Friday's close.

Among them are three high profile dual-currency dollar/euro deals.

Energizer Holdings plans to price a $1.25 billion equivalent two-part offering of eight-year senior notes (B2/BB-): Energizer Gamma Acquisition BV's $750 million equivalent of euro-denominated notes with early guidance of 4¾% to 5%, and Energizer Gamma Acquisition, Inc.'s $500 million of dollar-denominated notes with early guidance of 6½% to 6¾%.

Denmark-based TDC A/S is on the road with €1.4 billion equivalent of five-year senior notes, a buyout deal coming in dollars and euros. The dollar-denominated notes have initial price talk in the low 9% area. The euro-denominated notes have initial talk in the 7% area.

And Spain's Cirsa Gaming plans to sell €1.56 billion equivalent of seven-year senior secured notes (expected ratings B2/B+) in three tranches: Euro-denominated floating-rate notes with initial talk of Euribor plus 525 basis points, euro-denominated fixed-rate notes with initial talk in the 6% area and dollar-denominated fixed-rate notes with initial talk in the 8% area.

Schmolz + Bickenbach tap

In the European market, Schmolz + Bickenbach announced that it priced a €150 million add-on to the Schmolz + Bickenbach Luxembourg Finance SA 5 5/8% senior secured notes due July 15, 2022 (S&P: B+) at 101.50.

Credit Suisse was the left bookrunner for the acquisition financing.

PHI drops

PHI’s 5¼% senior notes due 2019 were again in focus in the secondary space with the notes dropping as the company’s new senior notes offering to refinance the 2019 notes struggles during book building, a market source said.

The notes were seen down 2 points to 95 bid, 95¼ offered on Tuesday. Most trades during Tuesday’s session were on a 95 handle after the notes traded between 97 5/8 and 98¼ on Monday.

The notes continued to see high volume trading with more than $22 million of the bonds on the tape by late afternoon.

PHI’s 5¼% notes have been active and making gains since the Lafayette, La.-based helicopter service company launched a roadshow for a $500 million offering of new senior notes to refinance the 5¼% notes.

The new deal “is not going well,” a market source said. The fact the new deal was struggling was not a surprise to those familiar with the credit.

“It’s hard to make a case,” another source said, especially given the company’s high leverage.

However, with the maturity of the 5¼% notes quickly approaching, PHI may be forced to accept whatever terms are available to them, a source said.

“They’re better off trying to get it done now,” the source said.

Rent-A-Center active

Rent-A-Center’s junk bonds remained active in the secondary space although with no movement in trading prices.

The company’s 4¾% senior notes due 2021 and 6 5/8% senior notes due 2020 continued to trade at par bid, par ½ offered on Tuesday, a market source said.

With the put at 101 “they won’t go that much higher,” a market source said.

However, the notes remained active as retail investors exit their positions in the bonds, the source said.

The 6 5/8% senior notes saw more than $18 million bonds traded during Tuesday’s session.

Rent-A-Center’s junk bonds jumped on Monday after news broke the company had accepted a sweetened bid from Vintage Capital to acquire the company.

The notes have seen large gains throughout June amid widespread speculation about the buy-out.

Callon’s new low

Callon Petroleum’s recently priced 6 3/8% senior notes due 2026 hit a new low on Tuesday.

The notes were quoted at 98 7/8 bid, 99 5/8 offered on Tuesday after previously being quoted on Monday at 99 3/8 bid, 100 1/8 offered, according to a market source.

The notes were seen trading just south of 99.

Callon priced an upsized $400 million offering of the 6 3/8% notes at par on May 31.

While the notes were in demand during bookbuilding, with the deal upsized from $300 million and the yield printing on the tight end of talk, the notes have struggled since hitting the secondary market.

The notes have traded between 99¼ to 99½ for most of June, according to Trace data.

ETFs see big Monday outflows

High-yield ETFs saw a whopping $815 million of daily outflows on Monday, an investor said.

The cash flows of high-yield asset managers were flat to slightly positive on Monday, at plus-$5 million, the source added.

Indexes down

Benchmarks for the high-yield secondary market all posted losses on Tuesday.

The KDP High Yield index was down 6 basis points to close Tuesday at 70.78 with the yield now 5.76%. The index was flat on Monday.

The Merrill Lynch High Yield index saw its first loss in over six consecutive trading days. The index was down 9.4 bps on Tuesday with the year-to-date return now 0.566.

The index was up 0.1 bps on Monday after a full week of gains last week.

The index broke into positive territory on June 5 for the first time since May 15 and has remained there since.

The CDX High Yield 30 index saw the largest losses on Tuesday. The index was down 31 bps to close the day at 106.68 after a 10 bps drop on Monday.

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