DCP Midstream adds on; Energizer roadshow; First Data up on buyout; Adient, WeWork drop

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 16 – The high-yield primary market returned to action on Wednesday with one drive-by add-on pricing and two more deals in the market.

DCP Midstream Operating LP became 2019's second issuer by pricing an upsized $325 million add-on to its 5 3/8% senior bullet notes due July 15, 2025 (Ba2/BB/BB+) in a Wednesday drive-by.

Energizer Holdings, Inc. began a two-day roadshow in New York for a $600 million offering of eight-year senior notes (B2/B+).

Additionally, Acrisure LLC and Acrisure Finance Inc. plan to price a $500 million offering of senior secured notes due 2024 (B3/B) on Friday.

Meanwhile, the secondary space was again making gains on Wednesday although all eyes were on the long-awaited new deals in the pipeline.

First Data Corp.’s junk bonds were trading sharply higher on news the company would be acquired by Fiserv in an all-stock transaction.

Adient plc’s 4 7/8% senior notes due 2026 were trading down after the company released preliminary first quarter earnings.

WeWork Cos. Inc.’s 7 7/8% senior notes due 2025 dropped after news broke the CEO had leased property he owned to the company.

DCP upsized and rich

DCP Midstream became 2019's second issuer when it more than doubled the size of the offering it announced on Wednesday morning and priced it rich to talk.

The Denver-based master limited partnership priced a $325 million add-on to its 5 3/8% senior bullet notes due July 15, 2025 (Ba2/BB/BB+) at 100.75 in a quick-to-market trade.

The issue size was increased from $150 million.

The reoffer price came rich to the 100.25 to 100.75 price talk. Initial talk was in the par area.

Left lead active bookrunner Mizuho will bill and deliver. Barclays and SunTrust were also active bookrunners.

The partnership plans to use the proceeds, including the additional proceeds resulting from the $175 million upsizing of the deal, for general partnership purposes, including capital expenditures, and to repay debt under its revolving credit facility.

The 5 3/8% notes were not active in the secondary space following the pricing of the add-on. However, they were sharply above issue price in light volume.

The 5 3/8% notes were quoted at 101 bid, 101¼ offered and traded around 101¼, sources said.

Energizer starts roadshow

For the first time since November the Wednesday session came to a close with an active forward calendar.

Energizer Holdings began a two-day roadshow in New York for a $600 million offering of eight-year senior notes (B2/B+).

The roadshow moves to Boston on Thursday.

Initial price talk is 8% to 8¼%, a bond investor said.

Citigroup is the lead bookrunner.

The St. Louis-based manufacturer and distributor of consumer products plans to use the proceeds to help fund the acquisition of Spectrum Brands’ global auto care business.

Acrisure senior secured deal

Acrisure LLC and Acrisure Finance Inc. plan to price a $500 million offering of senior secured notes due 2024 (B3/B) on Friday.

JP Morgan, Morgan Stanley, RBC and SunTrust are joint bookrunners.

The Grand Rapids, Mich.-based insurance brokerage plans to use the proceeds to fund bolt-on acquisitions and for general corporate purposes.

First Data jumps

First Data’s junk bonds were trading sharply higher on Wednesday after news broke the fintech company would be acquired by Fiserv in an all-stock transaction.

The 5¾% senior notes due 2024 were among the most actively traded issues of Wednesday’s session.

The notes rose 2¼ points to 103½, according to a market source. More than $50 million of the bonds were on the tape by the late afternoon.

First Data’s 5 3/8% senior notes due 2023 rose 1¼ points to 102 3/8 with about $18 million of the bonds on the tape.

Fiserv intends to refinance First Data’s $17 billion in debt at the close of the deal, a market source said. Fiserv is an investment-grade company.

In the all-stock transaction, First Data shareholders will receive a fixed exchange ratio of 0.303 Fiserv shares for each First Data share for an equity value of $22 billion, according to a company news release.

The deal is expected to close in the second half of 2019 and is subject to shareholder and regulatory approval.

Adient’s earnings

Adient’s 4 7/8% senior notes due 2026 were trading sharply lower after the company released preliminary first quarter earnings which missed analyst expectations.

The 4 7/8% notes were down 2 1/8 points to 75 in active trading during Wednesday’s session. More than $15 million of the bonds were on the tape by the late afternoon.

Adient announced it expected revenue of $4.158 billion for the first quarter of 2019, which slightly missed analyst expectations for revenue of $4.17 billion.

However, Adient’s projected adjusted EBITDA of $175 million fell well short of analyst expectations for adjusted EBITDA of $235 million, according to a market source.

WeWork drops

WeWork’s 7 7/8% senior notes due 2025 were taking a hit on Wednesday after news broke the CEO had been leasing space he owned to the company.

The 7 7/8% notes were again hitting their lowest levels since pricing. The notes dropped 1 5/8 points to close the day at 86¾.

More than $11 million of the bonds were on the tape by the late afternoon.

The Wall Street Journal reported on Wednesday that WeWork CEO Adam Neumann had an ownership stake in some of the properties rented to WeWork.

WeWork disclosed it paid $12 million in rent for offices in buildings owned by officers of WeWork between 2016 and 2017 and would pay upwards of $110 million over the lifetime of those leases, according to an investor’s prospectus, The Wall Street Journal reported.

Investors were referenced as saying they felt the arrangement was a conflict of interest.

The 7 7/8% notes were again approaching the all-time low they reached in early January when SoftBank announced it had scaled back its planned $16 billion investment in the company to $2 billion.

The notes traded down to 86½., their lowest price since hitting the secondary market in April, on Jan. 7 when the SoftBank news broke.

However, the notes rebounded from their lows last week only to again drop close to that level on Wednesday.

Tuesday outflows

The daily cash flows of the dedicated high yield bond funds were negative on Tuesday, the most recent session for which data was available at press time, a trader said.

High yield ETFs sustained $107 million of outflows on the day.

Actively managed high yield funds saw $165 million of outflows on Tuesday, the trader said.

Those daily outflows notwithstanding, with one day remaining in the present reporting period for the weekly flows of the combined funds they are rafting a river of green ink, tracking a whopping $3.3 billion of net inflows for the week that was set to conclude with Wednesday's close.

Indexes gain

Indexes were on the rise on Wednesday.

The KDP High Yield Daily index was up 14 basis points to close Wednesday at 68.74 with the yield at 6.49%.

The index dropped 1 basis point on Tuesday after a 1 bp rise on Monday. The index saw a cumulative gain of 116 bps on the week last week.

The ICE BofAML US High Yield index rose 31.7 bps with the year-to-date return now 3.523%. The index was up 17.5 bps on Tuesday after a 17.1 bps drop on Monday.

The index saw a cumulative gain of 190.8 bps on the week last week.

After closing 2018 with a year-to-date return of negative 2.265%, the index catapulted past 3% returns in the first two weeks of 2019.

The CDX High Yield 30 index rose 7 bps to close Wednesday at 103.93. The index was up 38 bps on Tuesday after a 42 bps drop on Monday.

The index saw a cumulative gain of 110 bps on the week last week.

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