Primary stays quiet; Yum! deal on tap; new Teck notes busy, lower; Intelsat up on tender news

By Paul Deckelman and Paul A. Harris

New York, June 1 – The high-yield market opened the month of June on Wednesday the same way it had finished off May the session before, with no new dollar-denominated and fully junk-rated bonds heard to have priced, the third consecutive shutout.

Primaryside players were meanwhile gearing up for a big deal that is expected to price during Thursday’s session, the $2.3 billion of new eight- and 10-year notes from Yum! Brands, Inc.

They’ll also be on the lookout for CVR Partners, LP’s $625 million seven-year secured notes, although there is a possibility the nitrogen fertilizer producer’s deal might price on Friday rather than Thursday.

Among recently priced issues, Canadian mining concern Teck Resources Ltd.’s big two-part offering of five- and eight-year notes remained among the day’s busiest credits, just as they have been each session since their pricing last Thursday. For the first time, though, traders were seeing both tranches of those bonds having retreated.

Other recently priced transactions seen actively trading on Wednesday included health-care companies MultiPlan Inc. and Universal Health Services Inc., aircraft components manufacturer TransDigm, Inc. and, going back a little further, computer hard-drive maker Western Digital Corp.

Away from the new-deal realm, Intelsat SA’s bonds firmed as the communications satellite company released preliminary results of its pending tender offer for several series of its notes.

Statistical market performance measures turned lower across the board on Wednesday after having been mixed over the previous four straight sessions and higher before that. Wednesday was the third lower session in the last 11 trading days.

Europcar at the rich end

Europcar Groupe SA came with the only new issue on Wednesday, a €125 million add-on to its 5¾% senior notes June 15, 2022 (B3/B-) that priced at 104.50 with a 4.514% yield to worst and a 4.879% yield to maturity.

The reoffer price came at the rich end of the 104.25 to 104.5 price talk.

Joint bookrunner Deutsche Bank will bill and deliver. HSBC and SG were also joint bookrunners.

Proceeds will be used primarily to fund the Paris-based car rental company's acquisition program focused on bolt-on acquisitions, franchisees and new mobility services, as well as for general corporate purposes.

Thin calendar

The dollar-denominated primary market remained dead quiet on Wednesday.

A pair of deals were announced on Tuesday.

Both are in the market on short timelines.

Yum! Brands is marketing $2.3 billion of senior notes (B1/BB) in two tranches: eight-year notes that are being guided at 4¾% to 5% and 10-year notes guided 25 basis points behind the eight-year notes.

Also CVR Partners is in the market with $625 million of seven-year senior secured notes (B1/B+) being whispered in the low to mid 8% context.

Both deals were initially heard to be Thursday business.

However, CVR could be Friday's business, a trader said on Wednesday.

The market awaits official price talk on both deals.

The thin flow of post-Memorial Day primary market news is at least partially attributable to some deals that were initially contemplated as post-Memorial Day business being pushed ahead into the pre-Memorial Day week, sources say.

That week's issuance came to $11.2 billion, making it the biggest week in the dollar-denominated new issue market this year to date.

Teck trades actively

In the secondary sphere, traders saw another busy session for the recently priced two-part offering from Teck Resources, with a market source seeing around $22 million of trading in each portion of that megadeal – the 8% notes due 2021 and the 8½% notes due 2024.

“I think there were sellers around for those bonds,” one of the traders opined, adding “they were both lower.”

A second trader agreed, seeing the bonds active at lower levels, with the 8% notes off ¾ point at 101½ bid and the 8½% paper down 3/8 point at 102¼ bid.

At yet another desk, the 8% notes were being quoted down ½ point on the day at 102 bid, while the 8½% notes were down 1/8 point at 102½ bid.

Teck, a Vancouver, B.C.-based mining concern, had priced $1.25 billion of those notes in a regularly scheduled forward calendar offering on Thursday after the transaction was upsized from an original $1 billion.

The deal consisted of $650 million of the 2021 notes and $600 million of the 2024 notes. Both tranches priced at par but quickly sprinted up above the 102 bid level on active volume when they were freed for secondary dealings.

Recent deals trading busily

Several other recently priced issues were seen among the day’s Most Active issues in Junkbondland on Wednesday.

For instance, MultiPlan’s 7 1/8% notes due 2024 were seen trading around 103 1/8 bid, down 1/8 point on the day, on volume of over $17 million.

The New York-based provider of health-care cost solutions priced $1.1 billion of those notes last Wednesday, pricing them off the forward calendar at par via its MPH Acquisition Holdings, LLC unit after the issue was downsized from an originally announced $1.3 billion.

Another health care-sector issuer – King of Prussia, Pa-based hospital operator Universal Health Services – was also among the most widely traded on Wednesday.

A market participant said that its 4¾% notes due 2022 edged up to end slightly over the 102 bid mark, with around $20 million having changed hands, while its 5% notes due 2026 gained ¼ point to end at 100¾ bid, with over $13 million traded.

TransDigm’s 6 3/8% notes due 2026 lost 1/8 point, to 99 7/8 bid, with around $12 million of turnover.

And reaching back several weeks, Western Digital’s 7 3/8% notes due 2023, which priced at par on March 30 but have remained a fixture on the Most Actives list since then – gained ¼ point Wednesday, ending at 104 1/8 point, with over $40 million having changed hands.

Intelsat tender going well

Away from the new deals, a trader said Intelsat bonds were a little bit better after the company put out preliminary results on its tender offer for three series of notes linked to the Intelsat Jackson unit.

The trader saw the 7¼% notes due 2019 rising “maybe 2 points” to hit a high of 76, with over $16 million traded. The 7¼% notes due 2020 were “up a good point” to 71.

Another trader pegged the 2019 paper at 76, up almost 2½ points.

The aforementioned issues are not part of the tender offer. But the 6 5/8% notes due 2022 – one issue that is part of the offer – were called a point better at 68¾ bid.

As of the original early tender deadline, May 31, about $1.9 billion of notes maturing 2021 through 2023 had been validly tendered, accounting for about 48% of the outstanding principal amount.

Intelsat extended the early deadline to June 8.

On May 18, the company had extended the final deadline to June 14 from June 9. Intelsat also reduced the amount of cash holders would receive for each $1,000 of notes tendered.

The tender offer was first announced on May 12.

Intelsat is a Luxembourg-based commercial satellite services provider.

Indicators turn lower

Statistical market performance measures turned lower across the board on Wednesday after having been mixed over the previous four straight sessions and higher before that. Wednesday was the third lower session in the last 11 trading days.

The KDP High Yield Daily index dropped by 5 bps on Wednesday, ending at 67.52, after having been unchanged on Tuesday and up by 2 bps on Friday. The index did not publish on Monday due to the Memorial Day holiday. Wednesday was its second loss in the last seven sessions.

However, its yield, improbably, came in by 2 bps on Wednesday to end at 6.16%. The yield typically moves inversely to the index reading, normally rising on a lower index reading.

The Markit Series 26 CDX North American High Yield index lost 3/32 point on Wednesday, matching the size of Tuesday’s downturn, as it finished at 102 7/8 bid, 102 11/16 offered. It was the index’s fifth straight loss and its eighth such downturn in the last 12 sessions.

And even the previously formidable Merrill Lynch North American High Yield Master II index finally weakened on Wednesday, its first loss after eight straight stronger finishes and third loss in the last 11 sessions.

It retreated by 0.199%, in contrast to Tuesday’s 0.071% advance.

Wednesday’s downturn cut its year-to-date return to 7.932% from Tuesday’s 8.147%, which had been its sixth consecutive new peak level for the year.

The index still remains near its highest closing level since Dec. 31, 2012,when it finished out that year at 15.583%.

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.