Covanta prices; more deals on tap; Envision in focus; EnPro, Intelsat trade up

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 3 – The domestic high-yield primary market saw one deal price during Wednesday’s session with three more on tap for Thursday.

Covanta Holding Corp. priced a $400 million issue of 8.25-year senior notes (B1/B) at par to yield 6% in a Wednesday drive-by.

Cable & Wireless Communications Ltd.’s $500 million minimum offering of eight-year notes (B2/BB-/BB-) and Intertape Polymer Group Inc.’s $250 million offering of eight-year notes (B2/B+) are on deck for Thursday.

Resideo Funding Inc.’s $400 million offering of eight-year senior notes (B1/BB+) were expected to price during Wednesday’s session but no information was available as of press time.

The European primary market was also active with one deal pricing and two more on the forward calendar.

Warner Music Group Corp. priced an upsized €250 million issue of eight-year senior secured notes (Ba3/B+) at par to yield 3 5/8%.

Bilfinger SE’s (S&P: BB) €300 million offering of five-year senior notes and Playtech plc’s €530 million offering of five-year senior secured notes (Ba2/BB) are on tap.

Meanwhile, Envision Healthcare Corp.’s 8¾% senior notes due 2026 (Caa1/B-) remained in focus in the secondary space with the notes continuing to trade down in high volume activity.

As Envision trended downwards, EnPro Industries, Inc.’s newly priced 5¾% notes due 2026 (B1/BB) traded up in the secondary space.

Intelsat Jackson Holdings SA’s 8½% senior notes due Oct. 15, 2024 (Caa2/CCC+) returned to their previous levels on Wednesday after a $700 million add-on drove the notes lower.

HD Supply Holdings, Inc.’s 5 3/8% senior notes due 2026 (Ba3/BB-) were slightly weaker on Wednesday with the tight pricing on the notes leaving little upside for the secondary market, a source said.

California Resources Corp.’s 8% senior secured second-lien notes due December 2022 were active but little changed on the day as oil futures again shot up to record highs.

Covanta drives by

Covanta Holding priced a $400 million issue of 8.25-year senior notes (B1/B) at par to yield 6% in a Wednesday drive-by.

The yield printed at the tight end of the 6% to 6 1/8% price talk but in the middle of initial talk that was set in the 6% area.

The offer was playing to a book that was heard to be around deal size, a trader said.

J.P. Morgan, BofA Merrill Lynch, Credit Agricole, Citizens, MUFG and SMBC Nikko were joint bookrunners for the debt refinancing deal.

The notes were trading between par 1/8 and par ¼ soon after breaking for trade, sources said.

On deck for Thursday

Dealers set the table for Thursday in the primary market.

Cable & Wireless Communications talked its $500 million minimum offering of eight-year senior notes (B2/BB-/BB-) to yield 7½% to 7 5/8%.

Official talk comes inside initial price talk in the high 7% area, a trader said.

Books close at 9 a.m. ET Thursday and the deal, which was shopped by means of a Wednesday investor call, is set to price and allocate thereafter.

Citigroup is the left lead bookrunner for the deal, which will be issued via C&W Senior Financing DAC.

Elsewhere, Intertape Polymer Group talked its $250 million offering of eight-year senior notes (B2/B+) to yield 6¾% to 7%, according to market sources.

Official talk comes in line with initial price talk that was announced in the high 6% area to 7%.

The deal, which has been on the high yield road, is set to price on Thursday afternoon, New York time.

Another roadshow deal, Resideo Funding’s $400 million offering of eight-year senior notes (B1/BB+) was talked to yield 6 1/8% to 6 3/8%.

The bonds, related to Honeywell International Inc.’s spinoff of its Honeywell Home business, were expected to price Wednesday, sources said.

However, no terms were available at press time.

European high yield active

In the European primary market, terms surfaced Tuesday night on Warner Music Group Corp.’s upsized €250 million issue of eight-year senior secured notes (Ba3/B+), which priced at par to yield 3 5/8%.

The deal was increased from €200 million.

The yield printed at the tight end of yield talk set in the 3¾% area.

Credit Suisse managed the sale, priced via WMG Acquisition Corp.

In its wake, two announced offers are expected to clear ahead of the coming weekend.

Bilfinger (S&P: BB) is seeking to price a €300 million offering of five-year senior notes, possibly as early as Thursday.

Initial talk is 3¼% to 3½%.

The Mannheim, Germany-based civil and industrial construction engineering services provider has completed an investor roadshow, engaging with over 60 accounts, an investor said.

The deal size will not grow.

And Playtech is scheduled to wrap up its roadshow on Thursday for a €530 million offering of five-year senior secured notes (Ba2/BB).

Price talk on Playtech is pending.

Envision dominates

Envision Healthcare’s 8¾% notes dominated trading activity in the secondary space on Wednesday with the notes again moving lower.

The 8¾% notes were at a 97 handle in intra-day trading but popped to trade between 98¼ and 98 3/8 in the afternoon, a market source said.

More than $115 million of the bonds traded during Wednesday’s session.

The notes had closed Tuesday at 98¾.

“They just can’t get out of their own way,” a market source said.

Envision’s 8¾% notes have been trending lower since pricing on Sept. 28 with the notes down to 99¼ bid out of the gate.

The term loan for the closely watched LBO financing deal was in high demand, giving the false impression that the notes were too, sources said.

There were a lot of flippers involved in the deal, which had weak covenants, a market source said.

Envision priced a downsized $1.225 billion offering of the 8¾% notes at par on Sept. 28.

The deal was reduced from $1.625 billion with $400 million of proceeds shifted to the concurrent term loan, increasing its size to $5.45 billion from $5.05 billion.

EnPro trades up

EnPro’s 5¾% senior notes due 2026 were trading up in the secondary space.

The notes were seen changing hands between par 5/8 and par ¾ with about $30 million of the bonds on the tape in the late afternoon.

EnPro priced a $350 million issue of the 5¾% notes at par on Tuesday at the conclusion of a brief roadshow.

Intelsat returns

Intelsat’s 8½% senior notes due 2024 returned to their previous levels in active trading on Wednesday after an add-on dragged the notes down.

The 8½% notes traded north of 102 on Wednesday with trades between 101 7/8 and 102 in the late afternoon, sources said.

More than $47 million of the bonds changed hands during Wednesday’s session.

The notes traded around 101½ on Tuesday, which was well above the reoffer price of Intelsat’s $700 million add-on, but below its previous level of 102.

Intelsat Jackson Holdings priced a $700 million add-on to its 8½% senior notes due Oct. 15, 2024 (Caa2/CCC+) at 100.75 to yield 8.339% in a Tuesday drive-by.

The reoffer price came at the rich end of price talk in the 100.5 area and rich to initial price talk at par.

HD Supply weakens

HD Supply Holdings’ 5 3/8% senior notes due 2026 (Ba3/BB-) were slightly weaker in the secondary space on Wednesday with the notes hovering around par.

The notes were seen trading between par and par 1/8 after closing on Tuesday around par ¼, a market source said.

About $15 million of the bonds traded during Wednesday’s session.

The deal was oversubscribed and the pricing was tight.

“There was no place really for them to go,” a market source said.

The 5 3/8% notes have largely been wrapped around par ¼ since pricing.

HD Supply priced a $750 million issue of the 5 3/8% notes at par in a Monday drive-by.

The yield printed at the tight end of the 5 3/8% to 5½% yield talk.

The deal was playing to $1.25 billion of orders mid-way through the subscription process, a market source said.

California Resources active

California Resources 8% notes were active in the secondary space as the barrel price of West Texas intermediate crude oil again shot to new highs.

While active, the notes were trading largely flat. The notes were seen at 96 7/8 bid, 97 3/8 offered with trades between 96¾ and 97, sources said.

More than $54 million of bonds traded during Wednesday’s session.

While largely flat on Wednesday, the notes were up 1 to 1.5 points on the week.

Crude oil shot up to $76.41, an increase of $1.18 or 1.57% on Wednesday.

Continued inflows to EFTs

For the third consecutive session, high-yield ETFs saw strong positive flows on Tuesday, according to a bond trader.

The ETFs took in $404 million on the day.

That follows the $876 million of inflows to the ETFs on Monday and the $148 million of daily inflows last Friday.

Meanwhile, actively managed high yield funds saw $55 million of inflows on Tuesday, the trader said.

Combined, the funds are tracking $1.7 billion of inflows in the four sessions since last Wednesday's close.

With one session remaining to be tallied in the present week’s count, the $1.7 billion of aggregate week-to-date inflows eclipse the $1.57 billion of outflows that the funds sustained in the week to the Wednesday, Sept. 26 close.

High-yield spreads tightened 26 basis points in September and are now 43 bps tighter year to date in response to rising Treasury yields, the trader said, citing the JP Morgan high yield index.

High yield spreads are hovering at their tightest levels since July 2007, the source added.

Indexes flat to down

While two benchmarks for the high-yield secondary market were flat on Wednesday while one was down after a mixed day on Tuesday and large gains on Monday.

The KDP High Yield Daily index was up 1 basis point to close Wednesday at 70.66 with the yield now 5.72%.

The index was up 4 bps on Tuesday after jumping 17 bps on Monday.

The ICE BofAML US High Yield index slipped 2.7 bps on Wednesday with the year-to-date return now 2.731%.

The index was up 5 bps on Wednesday after a 22.5 bps gain on Monday.

The CDX High Yield 30 index again dropped on Wednesday after a large drop Tuesday. The index was down 11 bps to close Wednesday at 107.27.

The index dropped 22 bps on Tuesday after a 20 bps gain on Monday.

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