Energizer SpinCo, Bellatrix price to cap $8.6 billion primary week; Thursday deals mostly better

By Paul A. Harris and Paul Deckelman

New York, May 15 – The high yield-primary market had an anticlimactic session Friday, after having experienced one of the biggest new-deal sessions of the year on Thursday.

Syndicate sources saw a pair of regularly scheduled deals price off the forward calendar.

Energizer SpinCo Inc., a financing vehicle for the coming spinoff of Energizer Holdings Inc.’s household products business, including its eponymous and iconic line of batteries, priced $600 million of 10-year notes.

Bellatrix Exploration Ltd., a Canadian oil and natural gas exploration and production company, brought a $250 million issue of five-year paper to market, priced a little below par.

The resulting $845 million of new-deal proceeds stood in stark contrast with Thursday’s session – one of the biggest and busiest days seen so far this year, with $5.9 billion of new dollar-denominated and fully junk-rated paper having priced in nine tranches, according to data compiled by Prospect News.

Friday’s two deals – which came too late in the session for any meaningful aftermarket activity – brought the week’s tally of new issues up to $8.64 billion in 19 tranches, although that was still down from the $10.41 billion that had priced in 17 tranches the previous week, ended May 8, according to the data.

The week’s issuance, in turn, lifted the new-deal total for this year so far to $147.44 billion in 232 tranches, running around 15% ahead of the $128.22 billion which had gotten done in 239 tranches by this point on last year’s calendar.

With the day’s new deals not seen in the market, investors’ attention turned to the giant-sized buffet of new paper that had priced on Thursday, and they dug right into it, pushing some of those deals higher on the day in active trading, including Spectrum Brands Holdings, Inc., CNO Financial Group, Inc., Ally Financial Inc. and Genesis Energy, LP.

The new PPL Energy Supply, LLC and FelCor Lodging Trust Inc. deals stayed around the higher levels they had reached in initial aftermarket dealings on Thursday after their respective pricings.

Traders meanwhile reported that Restaurant Brands International Inc.’s new 6.75-year secured notes remained mostly anchored around their par issue price.

Statistical market performance indicators were trending higher on Friday, after having been lower across the board on Tuesday and mixed on Wednesday and Thursday.

Energizer beats talk

Trailing a big Thursday which saw three issuers complete transactions sized at $1 billion or more and four new deals come as drive-bys, Friday’s session saw the market sweep up some of the roadshow deals that had been on the calendar through the week.

Results were mixed. Two deals cleared for a total of $845 million. A further planned transaction was pushed into the week ahead and another was postponed in the hope that patience might serve up a better rate in the future.

Of the two that were completed, one priced inside of price talk while the other came in line with discount and yield talk.

Energizer SpinCo priced a $600 million issue of 10-year senior notes (Ba3/BB) at par to yield 5½%.

The yield printed 12.5 basis points below the tight end of the 5 5/8% to 5 7/8% yield talk. Early guidance had the deal coming in the high 5% to low 6% yield context.

One investor who walked away from the deal when pricing moved inside of talk conceded that it appeared to do just fine without him.

BofA Merrill Lynch was the left bookrunner. J.P. Morgan, Citigroup, Goldman Sachs and MUFG were the joint bookrunners.

Proceeds will be used to help fund the spinoff of the household products business of St. Louis-based Energizer Holdings Inc. to shareholders.

Bellatrix at a discount

Bellatrix Exploration priced a $250 million issue of 8½% five-year senior notes (B3/B-) at 98.03 to yield 9%.

The price and yield came in line with talk which had the notes pricing at an approximately 2 point discount to yield 9%. However pricing was well wide of initial guidance that had been set at 8½% to 8¾%, a market source said.

J.P. Morgan and BMO were the joint bookrunners for the debt refinancing.

Paramount Resources roadshow

The week ahead gets underway to a thin calendar.

Paramount Resources Ltd. plans to start a roadshow on Monday in New York for a $400 million offering of eight-year senior notes (expected B3/confirmed BB-).

Joint global coordinator Barclays will bill and deliver. RBC is also a joint global coordinator.

BMO, HSBC Bank and Scotia are bookrunners.

The Calgary, Alta.-based oil and natural gas exploration, development and production company plans to use the proceeds to fund the conditional call of its 8¼% senior notes due 2017 at 102.75, as well as to repay debt under its revolver and for general corporate purposes including capital expenditures.

Blue Coat downsizes

Another deal expected to price in the week ahead comes from Blue Coat Holdings, Inc., which downsized its offering of eight-year senior notes (Caa2) to $470 million from $570 million on Friday.

The Sunnyvale, Calif.-based cyber security company shifted the $100 million of proceeds to its term loan, upsizing it to $1.15 billion from $1.05 billion.

Commitments on the loan were due on Friday.

Jefferies has the books for the buyout deal.

Meanwhile VistaJet Malta Finance was expected to price its non-rated $400 million offering of five-year senior notes before Friday’s close.

No official talk has been circulated although early guidance was in the 6½% area.

The deal is facing some headwinds, according to a buyside source who said late Friday that it had been pushed into the week ahead.

J.P. Morgan and Jefferies are the joint bookrunners for the debt refinancing and capital expenditures transaction.

And World Acceptance Corp. postponed its $250 million offering of five-year senior notes (B2/B) on Friday.

The deal had been in the market with price talk in the 9% area.

The company’s chief executive officer characterized it as an “opportunistic” offering and expressed the belief that terms could be more favorable in the future.

Outflows on Thursday

Trailing the news that the dedicated high-yield mutual funds saw a modest $88 million outflow in the week to Wednesday’s close, the funds continued to see outflows on Thursday, according to a market source.

High yield ETFs saw $63 million of outflows on Thursday.

Actively managed funds saw $30 million of outflows.

However dedicated bank loan funds saw $50 million of inflows on Thursday, the source said.

Spectrum shows strength

With only the Energizer and Bellatrix deals having priced Friday – and those did not come to market until fairly late in the session, after many players had made an early exit to get a jump on the weekend – “it was a quiet new-issue front today for sure,” a trader said.

He said much of the day’s dealings involved the issues which had priced during Thursday’s $5.9 billion pricing barrage.

“It was all [new] deal stuff carrying most of the inquiries, for sure.

At another desk, a trader said that just about “all of the [Thursday] deals did well.”

He added that “I think the rally in the Treasuries market” – where yields fell sharply after the release of weak U.S. economic data – “helped a lot of this stuff, particularly those Spectrum Brands.”

Spectrum Brands’ 5¾% notes due 2025 were “probably the most active issue of the day,” a market source said, seeing more than $53 million of those bonds having changed hands by the close. He quoted them up 1¼ points on the day at 101¾ bid.

That was well above the levels around 100½ bid which had been seen late in the day on Thursday, after the Middleton, Wis.-based consumer products maker had priced its quickly shopped $1 billion offering of the notes at par. About $31 million of the notes had traded on Thursday.

Another trader said the Spectrum paper ended Friday left in a 101½ to 102 bid context, with just about all of the movement in the issue taking place during the morning. “After lunch, there was zero activity,” he said.

Another trader saw the Spectrum Brands paper doing even better, exclaiming that the bonds “got to be 102 to 102½.”

Thursday deals dominate secondary

Among the other Thursday credits, a trader said that both CNO Financial tranches were “better bid,” seeing them in a 100¾ to 101¼ bid range.

A second trader saw the Carmel, Ind.-based financial services concerns paper in a 101¼ to 101¾ bid range.

Yet another trader saw the company’s 4½% notes due 2020 up 7/8 point on the day at 101½ bid, while its 5¼% notes due 2025 were ¾ point better on the day at 101¾ bid, with over $25 million of each having traded.

CNO priced $325 million of the 4½% notes and $500 million of the 5¼% notes, both at par, after upsizing its regularly scheduled forward calendar offering to $825 million from $800 million.

Thursday’s other two-part issue, from Detroit-based automotive lender and online banking company Ally Financial “did well, both parts,” a trader said.

He saw its 4 5/8% notes due 2022 push up to 99¼ bid from the 98.387 level at which that quick-to-market $400 million had priced to yield 4.9%.

He said that its 3.60% notes due 2018 “were trading at a premium” to par, at par bid, between par and 100¼ bid, well up from the 99.437 at which that $1 billion tranche had priced to yield 3.8%.

Another trader quoted both halves of the Ally deal having gotten as good as 100¼ to 100½ bid.

Houston-based Genesis Energy LP’s 6% notes due 2023were up ½ point at 101¾ bid, with over $10 million having changed hands.

The company had priced $400 million of the notes at par, and they had immediately moved up to 101¼ bid Thursday on volume of more than $28 million.

Restaurant Brands little moved

While most of Thursday’s new deals managed to add to their initial gains on Friday, a trader said that “Burger King never did anything,” referring to the $1.25 billion of 4 5/8% senior secured first-lien notes due 2022 that Oakville, Ont.-based Restaurant Brands International – the owner of the Burger King and Tim Hortons quick-service restaurant chains – had priced at par off the forward calendar.

He saw them trading between 100¼ and 100 3/8 bid.

Those bonds had been the most active issue in Junkbondland on Thursday, with over $145 million having changed hands in initial aftermarket dealings.

Another trader said that over $51 million traded on Friday, seeing the notes unchanged at 100 1/8 bid.

Indicators up on session

Statistical market performance indicators turned higher across the board on Friday, after having been mixed for a second consecutive session on Thursday.

They were mixed versus where they had finished the previous Friday, May 8.

The KDP High Yield Daily Index gained 5 basis points on Friday to end at 71.48, after having dipped by 3 bps on Thursday.

Its yield, meantime came in by 2 bps to 5.24%, after having been unchanged on Thursday. It had also come in by 2 bps on Wednesday.

The index reading was down from last Friday’s 71.56, but the yield was unchanged at 5.24%.

The Markit Series 24 CDX North American High Yield rose by 7/32 point Friday, its second consecutive gain; it had also been up by 3/8 point on Thursday.

It closed at 107 7/32 bid, 107¼ offered, though that was down from 107¼ bid, 107 9/32 offered the previous Friday.

The Merrill Lynch North American Master II high yield index was also higher on the day, rising by 0.127%, its third successive improvement and its fifth in the last six sessions. On Thursday, it had finished up by 0.047%.

Friday’s advance raised its year-to-date return to 3.91% from 3.778% on Thursday. However, it remained a little below its peak level for the year of 3.952%, set on April 27.

The index was up by 0.037% on the week, its second consecutive weekly gain. It had also been up by 0.079% last week.

© 2015 Prospect News.
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