Morning Commentary: NXP add-on deal on tap; Eagle Materials eyed; new FAGE notes continue climb

By Paul Deckelman

New York, July 28 – The high-yield market was reported fairly quiet on Thursday, with one new-deal announcement and another pricing seen possible during the session, according to primary market sources.

In the secondary market, Wednesday’s new issue of 5 5/8% notes due 2026 from Greek dairy products producer FAGE International SA and its U.S. affiliate, FAGE USA Dairy Industry Inc., continued to move higher in brisk morning trading.

A market source said that the notes had gained ¼ point from Wednesday’s round-lot closing levels, pushing up to 102 1/8 bid, with over $15 million having changed hands.

The Athens-based company and its Johnstown, N.Y.-based American unit priced $420 million of the notes at par on Wednesday in a regularly scheduled forward calendar offering.

When those new bonds hit the aftermarket Wednesday, they were heard to have shot up to a 101½-to-102 bid context on heavy volume of more than $95 million.

NXP announces add-on

In the primary market on Thursday, Dutch semiconductor manufacturer NXP Semiconductors NV announced plans to sell a $500 million add-on to the company’s existing 4 1/8% senior notes due 2021 (Ba2/BB+), with pricing expected later in the session.

The notes will be issued by subsidiaries NXP BV and NXP Funding LLC.

Price talk calls for a price in the 101.75% area.

Books are slated to close at 12:30 p.m. ET, with pricing expected thereafter.

High-yield primary market sources said that the Rule 144A for life and Regulation S issue will come to market via underwriter Barclays.

The securities will be immediately fungible with the existing 4 1/8% notes and will carry the same terms, including an investment-grade covenant package, consistent with the company’s existing senior notes due 2021 and 2022.

Like the original notes, the new notes will be non-callable for the life of the issue, other than via a make-whole call at 50 basis points over Treasuries.

NXP plans to use the proceeds from the add-on issue to repay its $200 million of outstanding 3½% senior notes scheduled to come due on Sept. 15, and for general corporate purposes.

NXP originally sold $850 million of 4 1/8% notes due June 1, 2021 earlier this year in a quick-to-market transaction that priced at par via NXP BV and NXP Funding back on May 18.

A secondary market trader said on Thursday morning that the existing 2021 notes were last seen in a 103¾-to-104 bid context.

Eagle Materials seen possible

Elsewhere in the primary market, price talk is expected to surface Thursday for Eagle Materials Inc.’s $300 million offering of 10-year senior notes (Ba1/BBB).

The deal was originally slated to price Friday but could instead price on Thursday, a trader said.

That’s because orders already came to $2 billion on Wednesday, in part because the deal is playing to accounts unaccustomed to looking at anything with a speculative-grade credit rating but among whom the present ultra-low-rate environment is generating a reach for yield.

Initial guidance on Eagle Materials is 4 7/8% to 5 1/8%, the trader said.

Paul A. Harris contributed to this review

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