Olin, Horizon Pharma, Masonite, MTS Systems, Builders price; funds add $619 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 11 – A busy Thursday session in the dollar-denominated primary market saw a handful of issuers, each bringing a single tranche of notes, price a combined total of $2.28 billion.

Three of Thursday's five deals came as drive-bys.

Olin Corp. priced a $750 million issue of 10-year senior notes at par to yield 5 5/8% in a drive-by.

Horizon Pharma USA, Inc. priced an upsized $600 million issue of eight-year senior notes at par to yield 5½%.

Masonite International Corp. priced a $500 million issue of 8.5-year senior notes at par to yield 5 3/8% in a quick-to-market Thursday trade.

MTS Systems Corp. priced an upsized $350 million issue of eight-year senior notes at par to yield 5¾%.

Builders FirstSource Inc. priced a $75 million tack-on to its 6¾% senior secured notes due June 1, 2027 at 104.50 to yield 5.673%.

There is one deal on the active forward calendar that is set to price before the week draws to a close.

E.W. Scripps set official price talk for its $400 million offering of eight-year senior notes with pricing expected on Friday.

Meanwhile, the new paper was in focus in the secondary space although with mixed results.

MTS Systems’ new paper skyrocketed while Masonite’s notes were largely wrapped around par and Olin’s new paper, at times, lagged its issue price.

While activity in Melco Resorts Finance Ltd.’s recently priced 5 5/8% senior notes due 2027 (Ba2/BB) slowed on Thursday, the notes continued their upward momentum.

Meanwhile, high-yield mutual and exchange-traded funds saw their fifth consecutive inflow with $619 million entering the space for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

Olin 10-year deal

Olin Corp. priced a $750 million issue of 10-year senior notes (Ba1/BB+) at par to yield 5 5/8% in a drive-by.

The yield came in the middle of the 5½% to 5¾% early guidance.

J.P. Morgan Securities LLC, BofA Securities Inc., Citigroup Global Markets Inc., MUFG, PNC Capital Markets LLC, SMBC Nikko Securities America Inc. and Wells Fargo Securities LLC were the joint bookrunners.

The Clayton, Mo.-based ammunition maker plans to use the proceeds to repay term loan debt and for general corporate purposes.

Horizon Pharma upsized

Horizon Pharma priced an upsized $600 million issue of eight-year senior notes (B1/B+) at par to yield 5½%.

The yield printed in the middle of yield talk in the 5½% area and at the tight end of initial guidance in the 5 5/8% area.

Citigroup Global Markets Inc. was the lead bookrunner.

The Dublin-based biopharmaceutical company plans to use the proceeds, along with cash on hand, to redeem all of its 6 5/8% senior notes due 2023 and its 8¾% senior notes due 2024.

The additional proceeds resulting from the $100 million upsizing of the deal will be used to repay debt under the company's term loan B.

Masonite prices tight

Masonite International priced a $500 million issue of 8.5-year senior notes (Ba3/BB+) at par to yield 5 3/8% in a quick-to-market Thursday trade.

The yield printed at the tight end of yield talk in the 5½% area. Initial guidance was in the mid-to-high 5% area.

BofA Securities Inc. and Wells Fargo Securities LLC were the joint bookrunners.

MTS atop tightened talk

In a roadshow deal, MTS Systems priced an upsized $350 million issue of eight-year senior notes (B3/B+) at par to yield 5¾%.

The yield printed on top of final yield talk which came on the low end of earlier official talk in the 6% area. Initial guidance was in the 6¼% area.

The debt refinancing deal upsized to $350 million from $300 million.

Wells Fargo Securities LLC was the left bookrunner.

Builders FirstSource taps

Builders FirstSource priced a $75 million tack-on to its 6¾% senior secured notes due June 1, 2027 (B2/BB-) at 104.50 to yield 5.673% in a quick-to-market Thursday trade.

The deal came at the rich end of the 104 to 104.5 price talk.

Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc. and Wells Fargo Securities LLC were the joint bookrunners.

The Dallas-based building products manufacturer and distributor came to the market in order to fund the special call of 10% of an earlier issue, the 5 5/8% senior secured notes due Sept. 1, 2024. According to the special call provision, up to 10% of those notes have been subject to a 103 call annually during the non-call period, which, in the case of the 5 5/8% notes, expires on Sept. 1, 2019.

At that call date the call premium becomes 104.219.

E.W. Scripps talk 6% area

E.W. Scripps is on deck for Friday with a $400 million offering of eight-year senior notes (B3/B-/B).

The deal was talked to yield in the 6% area on Thursday.

Official talk comes tight to early guidance in the low-to-mid 6% area, according to a trader.

Morgan Stanley & Co. LLC, Wells Fargo Securities LLC, SunTrust Robinson Humphrey Inc., BofA Securities Inc., Fifth Third Securities Inc., PNC Capital Markets LLC and U.S. Bancorp Investments Inc. are the joint bookrunners.

MTS skyrockets

MTS Systems’ 5¾% notes skyrocketed after breaking for trade with the demand for the notes seen during bookbuilding following them into the secondary space.

The notes were seen at 101 5/8 bid, 101 7/8 offered in the late afternoon, according to a market source.

More than $80 million of the bonds were on the tape by the late afternoon.

Masonite wrapped around par

While new paper from MTS Systems skyrocketed in the secondary space, Masonite’s 5 3/8% notes were largely stuck at par.

The notes were seen at par 3/8 bid at the break, but were largely wrapped around par as the afternoon progressed, sources said.

The notes priced tight leaving little room for movement in the secondary space, a market source said.

However, the notes may trade better on Friday, a source said.

Olin lags

Olin’s new 5 5/8% senior notes due 2029 were not faring as well as the other paper to price during Thursday’s session.

The notes dropped below par soon after hitting the secondary space, a market source said. They were seen at 99¾ bid, par ¼ offered.

While the notes lagged their issue price soon after breaking for trade, they were wrapped around par heading into the market close, a source said.

The notes saw about $20 million in reported volume heading into the market close.

Olin recently provided an updated second-quarter and full-year outlook, which put the company’s outstanding junk bonds under pressure, a source said.

The company announced it expected a loss of $15 to $22 million in the second quarter and adjusted EBITDA of $200 to $210 million.

Olin’s 5 1/8% senior notes due 2027 dropped in active trading on the updated numbers and news of the new offering.

The notes were previously trading on a 102 handle. They dropped in active trading over the past two sessions and closed Thursday at 99¾.

Melco gains again

While volume was light on Thursday, Melco Resorts’ newly priced 5 5/8% senior notes due 2027 continued their upward momentum.

The notes were seen at 101 bid, 101¼ offered with $13 million on the tape by the late afternoon, a market source said.

The 5 5/8% notes were strong after breaking for trade on Wednesday, climbing up to par ¾ bid, 101 offered by market close.

Melco Resorts priced an upsized $600 million issue of the 5 5/8% notes at par on Wednesday.

The issue size increased from $500 million.

The yield printed at the tight end of yield talk in the 5¾% area, which tightened from earlier official talk in the 5 7/8% area.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were positive on Wednesday, according to an investor.

High-yield ETFs saw robust inflows of $422 million on the day.

Actively managed high-yield funds saw $50 million of inflows on Wednesday, the investor said.

Late Thursday afternoon the market heard that the combined funds saw $619 million of net inflows during the week to Wednesday's close, according to Lipper US Fund Flows.

Indexes mixed

Indexes were again mixed on Thursday as they have been for much of the week.

The KDP High Yield Daily index regained the 1 point it shaved off during Wednesday’s session to close Thursday at 71.81. However, the yield was flat at 5.43%.

The index was down 1 bp on Wednesday, dropped 12 bps on Tuesday and was flat on Monday.

The ICE BofAML US High Yield index dropped 7.2 bps with the year-to-date return now 10.303%.

The index gained 18.4 bps on Wednesday, dropped 14.8 bps on Tuesday and shaved off 1.8 bps on Monday.

The CDX High Yield 30 index dropped 28 bps to close Thursday at 107.38. The index was down 22 bps on Wednesday, gained 12 bps on Tuesday and fell 38 bps on Monday.

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