Ally, E*Trade, upsized SM Energy, Solera lead $2.7 billion post-holiday drive-by deal parade

By Paul Deckelman and Paul A. Harris

New York, Nov. 12 – It was back to work on Wednesday in the high-yield market following Tuesday’s market close in the United States for Veterans Day, and issuers lost no time in ramping up primaryside activity.

When it was all over, some $2.7 billion of new dollar-denominated, junk-rated paper had priced in six tranches, versus the $850 million of domestic and industrialized-country junk debt that had gotten done in three tranches on Monday.

The day’s biggest offering, some $800 million of five-year notes, came from automotive lender and online banking operator Ally Financial, Inc. Like all of the junk paper that came to market on Wednesday, Ally was a drive-by offering that priced just hours after it began shopping that benchmark-sized deal around.

Oil and natural gas exploration and production concern SM Energy Co. upsized its offering of eight-year notes to $600 million.

Solera Holdings, Inc., a provider of software and services to the automobile insurance claims industry, also upsized its transaction, bringing a total of $400 million of add-ons to its existing Audatex North America, Inc. 2021 and 2023 notes.

Financial services provider E*Trade Financial Corp. priced $540 million of eight-year notes, which moved up modestly in the aftermarket on robust volume.

Kennedy-Wilson, Inc., a real estate investment and services company, brought a $350 million addition to its existing 2024 notes to market on Wednesday. Those notes were also heard by traders to have firmed after pricing.

The traders also saw brisk volume in Monday’s offering of eight-year notes from supermarket operator and wholesale grocery distributor SuperValu Inc.

Away from the new deals, Sun Products Corp. was the most active junk credit of the day, as investors reacted positively to the consumer products manufacturer’s earnings report.

Statistical indicators of junk market performance were lower on Wednesday after having been mixed over the previous four sessions.

Ally 3.95% print

A very busy Wednesday primary market saw five issuers bring a combined six tranches to raise a total of $2.7 billion.

Two of the five issuers upsized their deals.

Of the six tranches, three priced at the tight or rich ends of talk, two priced on top of or in the middle of talk, and one came at the cheap end.

All of Wednesday's action came quick-to-market.

Ally Financial Inc. priced $800 million of 3¾% five-year senior notes (B1/BB/BB+) at 99.1 to yield 3.95%.

The deal, which priced on the high-grade desk, came on top of final price talk and was seen in the street at 99½ offered, according to a trader.

Barclays, Citigroup, J.P. Morgan and RBC were the bookrunners for the general corporate purposes deal.

SM Energy upsizes

SM Energy Co. priced an upsized $600 million issue of eight-year senior notes (expected Ba2/confirmed BB) at par to yield 6 1/8%.

The debt refinancing deal was upsized from $400 million.

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

BofA Merrill Lynch was the left bookrunner. JPMorgan and Wells Fargo were the joint bookrunners.

E*Trade eight-year deal

E*Trade Financial Corp. priced a $540 million issue of eight-year senior notes (Ba3/B+) at par to yield 5 3/8%.

The yield printed in the middle of the 5¼% to 5½% yield talk.

JPMorgan, Morgan Stanley, Credit Suisse and Goldman Sachs were the joint bookrunners for the debt refinancing deal.

Solera two-part add-on

Audatex North America, a wholly owned subsidiary of Solera Holdings, priced an upsized $400 million amount of senior notes (Ba3/BB-) in two add-on tranches on Wednesday, according to a market source.

The deal included a $175 million add-on to the 6% notes due June 15, 2021, which priced at 104.5 to yield 5.18%, and a $225 million add-on to the 6 1/8% notes due Nov. 1, 2023, which also priced at 104.5 and yielded 5.48%.

Both tranches were talked at 104 to 104.5, and thus both came at the rich end of price talk.

The overall deal size was increased from $350 million.

Goldman Sachs was the sole bookrunner for the Rule 144A and Regulation S for life deal.

Proceeds, together with cash on hand, will be used to fund an acquisition that the company is in the late stages of negotiating, the price of which could exceed $450 million. In the event that the acquisition is not completed, proceeds will be used for working capital and other general corporate purposes, which may include funding one or more strategic initiatives.

Kennedy-Wilson’s 5 7/8% notes

Kennedy-Wilson, Inc. priced a $350 million add-on to its 5 7/8% senior notes due April 1, 2024 (expected ratings B2/BB-) at par to yield 5.874%.

The reoffer price came at the cheap end of price talk in the 100.25 area.

BofA Merrill Lynch was the left bookrunner. Deutsche Bank, JPMorgan and US Bancorp were the joint bookrunners.

The Beverly Hills, Calif.-based real estate investment and services company plans to use the proceeds to redeem its 8¾% senior notes due 2019.

Talking the deals

HC2 Holdings, Inc. talked its $250 million offering of five-year senior secured notes (Caa1//) to yield in the 11% area, according to an informed source.

Books closed Wednesday, and the deal is set to price Thursday.

Jefferies is the sole bookrunner.

Virgin Australia Holdings Ltd. talked its $300 million offering of non-callable five-year senior notes (B3/B-/) to yield in the 8½% area.

Books were scheduled to close Wednesday.

Goldman Sachs is the bookrunner.

Mercer starts roadshow

Mercer International Inc. began a roadshow on Wednesday for a $650 million two-part offering of senior notes.

The debt refinancing deal, which is expected to price early in the week ahead, features a $250 million tranche of five-year notes and a $400 million tranche of eight-year notes.

Credit Suisse, Barclays and RBC are the joint book-runners.

Alon starts roadshow Thursday

Alon Parnters, LP plans to start a roadshow on Thursday for its $450 million offering of eight-year senior notes.

The roadshow wraps up on Tuesday.

Goldman Sachs and Deutsche Bank are joint bookrunners.

Proceeds, together with the issuance of common units representing limited partner interests in Alon Partners to a subsidiary of Alon USA Energy, Inc., will be used to fund the cash portion of the pending acquisition of Alon Energy's Krotz Springs refinery, as well as to repay bank debt.

Parq Resort roadshow Thursday

Parq Resort & Casino plans to start a roadshow on Thursday for a $200 million offering of seven-year senior secured second-lien notes.

The project financing deal is set to price in the week ahead.

Credit Suisse and Dundee Securities are the joint bookrunners.

Alliance Automotive prices

In the European market, Alliance Automotive Group priced €325 million of seven-year senior secured notes (expected ratings B2/B+) in two tranches on Wednesday, according to a market source.

The deal included a €225 million tranche of 6¼% fixed-rate notes, which priced at 96.556 to yield 6 7/8%. The yield printed at the tight end of yield talk in the 7% area.

In addition, the company priced €100 million of three-month Euribor plus 550 basis points floating-rate notes at 99.5, with a 1% Euribor floor. The spread came on top of spread talk.

Joint bookrunner Credit Suisse will bill and deliver. UBS and Royal Bank of Scotland were also joint bookrunners.

Proceeds will be used to fund the acquisition of the Greny, France-based automotive parts supplier and repair services provider by funds advised by Blackstone and Founding Shareholders.

Elsewhere, Waste Italia SpA talked its €200 million offering of five-year senior secured notes (B2//) with a 10½% coupon at 94.5.

Books close at 3 p.m. ET on Thursday, and the deal is set to price thereafter.

Jefferies has the books.

Fund flows continue positive

Cash flows into dedicated high-yield funds remained positive on Monday, the most recent day for which data was available at Wednesday's close, according to a market source.

On Monday, high-yield exchange traded funds (ETFs) saw $103 million of inflows, while actively managed funds saw $435 million of inflows.

Week-to-date, net inflows come to $1.1 billion, the source said.

New E*Trade is active

In the secondary market, traders saw some modest gains on busy volume in the quickly shopped new 5 3/8% notes due 2022 priced by New York-based online discount stock brokerage service E*Trade Financial.

As the first deal of the day heard to have priced, it saw the most aftermarket activity.

One trader saw more than $35 million of those notes having changed hands, quoting them in a 100¼-to-100 5/8 bid context, up from their par issue price.

A second trader saw the notes moving around between 100¼ bid and 100½ before settling in around the latter figure.

And a third trader pegged the bonds at 100¼ bid, 100¾ offered.

Kennedy-Wilson trades up

Market watchers said that there was some modest upside movement in Kennedy-Wilson’s levels after the real estate investment company priced its $350 million add-on to its 5 7/8% notes due 2024 at par in a same-day transaction.

One trader saw the bonds in a wide bid range between par and 101.

A second saw a more narrow range between 100¼ and 100½, though on “small trading,” he said.

And a third quoted the bonds moving around between par and 100¾ bid.

Ally up from discounted price

A trader said that Ally Financial’s new 3¾% notes due 2019 were going out bid between 99½ and 99¾.

That was up from the 99.1 level at which the Detroit-based automotive lender and online banking company – the former GMAC – had priced its $800 million offering.

But news of the big deal pushed the company’s existing 8% bonds due 2031 down 1 point, at 127 bid.

Its 2¾% notes due 2017 were also easier, at 102 bid.

SuperValu stays busy

Monday’s offering of 7¾% notes due 2022 from SuperValu was among the most active high-yield issues, with a trader estimating volume at around $20 million.

He saw the bonds “right inside there” in a narrow 99 7/8-to-100 1/8 context.

A second trader had the bonds at par bid, 100½ offered, while a third saw them between 99¾ and 100¼ bid.

The Eden Prairie, Minn.-based supermarket operator and wholesale grocery distributor’s quickly shopped $350 million issue had priced at par.

Among Monday’s other deals, a market source saw Greystar Real Estate Partners LLC’s 8¼% senior secured notes due 2022 having moved up to 101¾ bid, 102¾ offered. The Charleston, S.C. -based provider of multifamily property management, development and investment services had priced its $250 million forward-calendar offering at par.

Calgary, Alta.-based oil and natural gas E&P operator Canbriam Energy Inc.’s 9¾% notes due 2019 traded between 93½ and 94½; that $250 million forward calendar deal had priced at a heavily discounted 94 on Friday to yield 11.355% after the offering was restructured, its original seven-year maturity cut back to five years.

Omnicare busy, better

Among other recently priced deals, Cincinnati-based pharmaceutical services provider Omnicare Inc.’s two-tranche issue “was active, and actually traded up a little today,” a trader noted.

He saw its 4¾% notes due 2022 at 101½ bid, while a second also saw them at 101½ bid, 102 offered. More than $5 million had traded by mid-afternoon.

The company had priced $400 million of the notes at par late in the session on Thursday, moving up to around the 101 bid mark when they were freed for aftermarket dealings on Friday.

Its 5% notes due 2024 moved up to 102 bid, 102½ offered, up from 101½ bid, 102 offered on Monday. Over $8 million had traded by mid-afternoon.

The company had priced $300 million of the notes on Thursday at par, and they had moved up to above the 101½ bid level on Friday.

Sun shines in Junkbondland

Away from the new-deal arena, Sun Products was the nom du jour, as investors reacted positively to the quarterly earnings report from the Wilton, Conn.-based manufacturer of laundry detergent and other consumer products.

The company reported earnings on Monday and held its conference call on Wednesday.

A market source said that its 7¾% notes due 2021 were the junk market volume leader, with over $58 million having changed hands, ending at 84 bid.

A second trader said the notes were up half a point at 83½ on “tons of trades.”

At another desk, a source said that the bonds “spiked,” hitting a high of 85½, though the notes “closed a little bit off the top,” around 84.

“They rallied late Monday after earnings,” he said. At that point, the issue had been in an 80-to-81 range.

Indicators stay mixed

Despite the active dealings in Sun Products, a trader opined that there was “nothing too much going on” in the secondary market, as “the focus is still on the primary. That’s where most of the volume has been today, and late last week, where most of the guys are focused on.”

A second trader called Wednesday’s session “one of these ‘day-after-a-holiday’ type days, with nothing too exciting to report.”

Statistical indicators of junk market performance were meantime lower on Wednesday after having been mixed over the previous four sessions.

The KDP High Yield Daily index ended at 72.34, down by 12 bps, after having eased by 1 bp on Friday and again on Monday. The index was not published on Tuesday due to the Veterans Day holiday observance.

For a second straight session, its yield – which would normally move inversely to the index reading and thus rise as the index declined – instead came in by 1 bp to end at 5.28%, its second straight narrowing; it had declined by 3 bps on Monday, even though the index was lower.

The Markit CDX North American High Yield Series 23 index ended off by 1/16 point on Wednesday to end at 107 1/16 bid, 107 3/16 offered, its second consecutive loss. It had also eased marginally on Tuesday, when it was published despite the holiday, after having risen by 3/16 on Monday, continuing a recently choppy pattern of alternating higher and lower sessions.

The Merrill Lynch U.S. High Yield Master II index suffered its first loss after three successive advances on Wednesday, dropping by 0.017%. On Monday, it had improved by 0.026% and was better during Tuesday’s thin session as well, by 0.019%.

The loss left its year-to-date return at 4.666%, down from 4.684% on Tuesday, though up from Monday’s 4.664%. It remained well down from its peak level for the year of 5.847%, recorded on Sept. 1.

According to the FINRA-Bloomberg Active US High Yield Bond index, Wednesday’s junk market volume jumped to $3.64 billion from Tuesday’s $20 million figure, and from the $2.466 billion of trades which got done on Monday.

Stephanie N. Rotondo contributed to this review.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.