Cable & Wireless, Resideo, Intertape price; Covanta weakens; LBO deals drop; funds add $1.389 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 4 – The domestic primary market was active on Thursday with three deals pricing. However, the forward calendar is thin.

Cable & Wireless Communications Ltd. priced a $500 million issue of eight-year senior notes (B2/BB-/BB-) at par to yield 7½%.

Resideo Funding Inc. priced a $400 million issue of eight-year senior notes (B1/BB+) at par to yield 6 1/8%.

Intertape Polymer Group Inc. priced a $250 million issue of eight-year senior notes (B2/B+) at par to yield 7%.

W&T Offshore, Inc. has been roadshowing a $625 million offering of five-year second-lien notes (B3/B) with pricing expected Friday, although there have been no recent updates about the deal.

In the European primary market, Playtech plc set price talk for its €530 million offering of five-year senior secured notes (Ba2/BB) with pricing expected Friday.

However, Bilfinger SE postponed its €300 million offering of five-year senior notes (S&P: BB).

The new paper from Cable & Wireless was in focus in the secondary space with the notes making large gains after breaking for trade.

However, Covanta Holding Corp.’s newly priced 6% senior notes due Jan. 1, 2027 (B1/B) were not faring as well with the notes lagging their issue price in secondary trading.

The bonds from two recent LBO deals were active during Thursday’s session and continuing to lose ground.

Envision Healthcare Corp.’s 8¾% senior notes due 2026 (Caa1/B-) continued to see high-volume activity with the notes again trading lower, as they have for much of the week.

Refinitiv’s 8¼% senior notes due 2026 (Caa2/B-/B+) saw another burst of activity on Thursday with the notes continuing their downward trend.

Mallinckrodt plc’s junk bonds were also under pressure on Thursday after the FDA approved a generic version of one of the company’s best-selling products.

High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – pared last week’s losses with inflows of $1.389 billion for the week ended Oct. 3, according to fund-flow statistics generated by AMG Data Services Inc.

Funds saw outflows of $1.569 billion in the week ended Wednesday, Sept. 26, the largest outflow since the week ended July 4 when $1.73 billion left the space.

The cumulative outflow for the year now totals $17.59 billion, according to a Prospect News analysis of the reports by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division.

Cable & Wireless prices tight

Cable & Wireless Communications priced a $500 million issue of eight-year senior notes (B2/BB-/BB-) at par to yield 7½%.

The yield printed at the tight end of the 7½% to 7 5/8% yield talk, and inside of initial price talk in the high 7% area, a trader said.

Citigroup was the left lead bookrunner for the debt refinancing deal.

Resideo at the tight end

Resideo Funding priced a $400 million issue of eight-year senior notes (B1/BB+) at par to yield 6 1/8%.

The yield printed at the tight end of yield talk in the 6¼% area.

The deal, related to Honeywell International Inc.’s spinoff of the Honeywell Home business, was quarterbacked by left bookrunner Goldman Sachs.

Intertape at the wide end

Intertape Polymer Group priced a $250 million issue of eight-year senior notes (B2/B+) at par to yield 7%.

The yield printed at the wide end of the 6¾% to 7% yield talk, as well as initial price talk, which was in the high 6% area to 7%.

BofA Merrill Lynch was the left bookrunner.

Proceeds will be used to pay down the plastic and paper packaging company’s $600 million credit facility due June 2023 and for general corporate purposes.

Playtech talk 3¾% area

In the European primary market, Playtech talked its €530 million offering of five-year senior secured notes (Ba2/BB) to yield in the 3¾% area.

The deal is set to price Friday.

Meanwhile, Bilfinger SE postponed a €300 million offering of five-year senior notes (S&P: BB) stating it elected to await more stable market conditions, market sources said.

Pricing on the deal moved north subsequent to investor meetings, a buyside source said.

Dealers opened the book Thursday with initial price talk in the 3¾% area, well wide of earlier discussions in the 3¼% to 3½% context, the source added.

Calendar thins

In the wake of Thursday's action, the active forward calendar is conspicuously thin.

Aside from Playtech, just one deal is in the market as possible Friday business.

W&T Offshore has been roadshowing a $625 million offering of five-year second-lien notes (B3/B).

The deal, which is expected to price Friday, is in the market with initial price talk in the 10% area, sources say.

However, there have been no recent updates on W&T Offshore.

Cable & Wireless trades up

Cable & Wireless’ 7½% senior notes due 2026 were in focus in the secondary space after breaking for trade.

The notes were performing well, a market source said.

They were seen at 101 bid, 101 3/8 offered with most trades at 101, sources said.

More than $35 million of the bonds traded during Thursday’s session.

Covanta weakens

Trading of Covanta’s newly priced 6% senior notes due Jan. 1, 2027 was light during Thursday’s session. However, the notes were seen lagging their issue price.

The notes were trading between 99¾ and par with only about $8 million bonds changing hands during the session, a market source said.

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

Covanta priced a $400 million issue of the 6% notes at par 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.

LBOs trade low

The bonds from two closely watched LBO deals were active in the secondary space on Thursday and trading lower.

Envision’s 8¾% senior notes due 2026 continued their downward trend on Thursday. The notes were seen at 98 3/8 bid, 99 1/8 offered early in the session.

However, they closed Thursday at 98, a ½ point drop from Wednesday’s close, a market source said.

The notes remained active with $25.5 million bonds on the tape by late afternoon.

The notes have traded down since breaking for trade on Sept. 28, which sources attributed to the deal’s weak covenants and weak allocation with a lot of flippers involved in the deal.

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

Proceeds from the LBO financing deal will be used to help fund the buyout of the company by KKR.

Refinitiv’s 8¼% senior notes due 2026 (Caa2/B-/B+) also traded lower in high-volume activity on Thursday.

The notes were seen at 98 3/8 bid, 99 1/8 offered with trades around 98 7/8, sources said. The notes were at 99¾ bid, par 1/8 offered on Wednesday.

About $13.5 million of the bonds traded during Thursday’s session.

As Refinitiv’s unsecured tranche from its four-tranche dual-currency offering further sank below its issue price, its secured tranche of 6¼% senior notes due 2026 (B2/B/BB+) continued to hold above par.

The 6¼% notes were down about ¾ point on Thursday at par bid, par ½ offered, a market source said. They were at par ¾ bid, 101¼ offered on Wednesday.

The notes were active in the run up to their Oct. 1 settlement date.

The covenants on the deal were issuer-friendly, a market source said.

Among the lax covenants was the covenant regarding dividends, with the deal’s sponsors given the ability to payout a dividend of up to $2 billion shortly as soon as the deal closed, sources said.

Refinitiv priced its $4.25 billion equivalent four-tranche offering on Sept. 18 with both dollar-denominated tranches pricing at par.

Proceeds from the deal will be used to back the acquisition of a 55% stake in Thomson Reuters Financial & Risk by Blackstone, Canada Pension Plan Investment Board and GIC.

Mallinckrodt under pressure

Mallinckrodt’s 5½% senior notes due 2025 were under pressure on Thursday after a generic version of one of the pharmaceutical company’s best-selling products was approved by the Federal Drug Administration.

The 5½% notes dropped about 2½ points to close Thursday at 81½.

The drop came after competitor Praxair received FDA approval for a generic version of Mallinckrodt’s INOMAX.

The drug is responsible for 25% of Mallinckrodt’s revenue, a market source said.

Wednesday outflows

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

The fortunes of the high-yield ETFs reversed persuasively, as they sustained $482 million of outflows on Wednesday, the source said, adding that with a succession of strong recent inflows the ETFs were still tracking $1.58 billion of net inflows for the week to Wednesday's close.

Actively managed high-yield funds were essentially flat on Wednesday, sustaining $5 million of outflows on the day, the trader said.

The news of the daily flows preceded a weekly report from Lipper US Fund Flows with dedicated high-yield bonds funds seeing $1.389 billion of net inflows for the week to Wednesday's close.

Indexes down

Three benchmarks for the high-yield secondary market posted large losses on Thursday.

The KDP High Yield Daily index dropped 12 basis points to close Thursday at 70.54 with the yield now 5.77%.

Thursday market the first day of losses for the index on the week. The index was up 1 bps on Wednesday, 4 bps on Tuesday, and 17 bps on Monday.

The ICE BofAML US High Yield index dropped 52.2 bps with the year-to-date return now 2.209%. The index slid 2.7 bps on Wednesday, after a 5 bps gain on Tuesday and a 22.5 bps gain on Monday.

The CDX High Yield 30 index dropped 29 bps to close Thursday at 106.98. The index was down 11 bps on Wednesday and 22 bps on Tuesday after a 20 bps gain on Monday.

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