Primary poised for busy end to week; Calfrac going strong; Alcoa returns to focus; APX off

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 16 – While no new deals priced on Wednesday, the domestic and European primary markets stand poised for a busy end to the week.

At least seven offerings are expected to price before the week comes to a close, sources said.

DNO ASA began an accelerated book-building process for a $400 million minimum private placement of new five-year senior unsecured bonds.

TMX Finance LLC announced plans to start a roadshow Thursday for a $450 million offering of five-year senior secured notes to refinance its 8½% senior secured notes due Sept. 15, 2018.

TMX’s 8½% senior notes due 2018 (Caa2/B-) climbed more than 2 points in high-volume trading on Wednesday after the announcement.

Calfrac Holdings LP’s new 8½% notes due 2026 (B3/B-) continued to dominate trading in the secondary space while MSCI Inc.’s new 5 3/8% notes due 2027 (Ba2/expected BB+) faded into the background.

Alcoa Corp.’s recently priced 6 1/8% senior notes due 2028 (Ba1/BB+) returned to focus with the notes up slightly in high volume trading on Wednesday.

APX Group Inc.’s junk bonds saw losses on Wednesday after the company reported first quarter earnings Tuesday evening.

Backloaded week

The stage is set for a busy finish to the May 21 week with at least seven offerings – deals coming in dollars, euros and pounds sterling – poised to clear before the weekend.

While formal talk has yet to surface, the following deals are expected to price before Friday's close:

• Ithaca Energy (North Sea) plc $350 million senior notes due May 2023 (Caa1/CCC+), Barclays bill and deliver, initial talk mid 9% area;

• Hearthside Food Solutions $375 million eight-year senior notes (Caa2/CCC+), Barclays bill and deliver, early guidance 7¾% to 8%;

• SRS Distribution, Inc. $380 million senior notes due 2026 (Caa2/CCC+) Barclays lead left books, initial price talk 7¾% to 8%;

• BWX Technologies, Inc. $400 million eight notes (Ba3/BB+) via Morgan Stanley, Wells Fargo, JPMorgan, TD, US Bancorp and PNC, initial talk 5½% to 5¾%;

• JW Aluminum $285 million seven-year senior secured notes (B3/B-), Goldman Sachs sole books, initial talk mid-to-high 9% area;

• Kraton Corp. €290 million eight-year senior notes due 2026 (B3/B) via JP Morgan, initial price talk mid 5% area;

• NBG Pangea €400 million unrated senior notes due 2023 via Citigroup, Credit Suisse and National Bank of Greece, initial guidance high 3% area to 4%; and

• Premier Foods Finance plc £300 million senior secured fixed-rate notes due October 2023 (B2/B/B), HSBC physical books, bill and deliver, initial price talk mid 6% area.

Most of the European business is expected to price on Friday, a London-based debt capital markets banker said.

DNO’s offering

Elsewhere, Norwegian oil and gas operator DNO ASA announced that it began an accelerated book-building process for a $400 million minimum private placement of new five-year senior unsecured bonds.

Pareto Securities is acting as lead manager and bookrunner with Danske Bank and SpareBank 1 Markets acting as co-managers and bookrunners.

TMX’s roadshow

TMX Finance announced plans to start a roadshow Thursday for a $450 million offering of five-year senior secured notes via sole bookrunner Jefferies.

The Savannah, Ga.-based consumer finance company – its brands include TitleMax, TitleBucks, EquityAuto Loan and InstaLoan – plans to use the proceeds to refinance its 8½% senior secured notes due Sept. 15, 2018.

TMX Finance’s 8½% senior notes shot up after the company announced the notes would be redeemed through a new senior note offering.

The 8½% notes climbed 2¼ point to trade at 98¼. The notes saw heavy trading volume with more than $20.78 million bonds in play during Wednesday’s session.

Calfrac going strong

Calfrac’s new 8½% notes continued to dominate trading in the secondary space and saw slight gains on Wednesday. The notes were seen at 101 bid, 101¼ offered early in the session, a trader said.

While the notes were wrapped around 101 for most of the day, they closed at 101¼, a market source said.

With more than $34 million of the bonds on the tape by late afternoon, Calfrac’s new notes were again the volume leader on Wednesday.

The new notes also dominated trading activity on Tuesday with more than $54 million traded after the notes priced. The notes were trading between par 5/8 to 101 on Tuesday.

The notes “have one of the higher coupons,” a market source said, which contributed to their secondary market performance.

Calfrac priced the $650 million issue at par on Tuesday at the wide end of the 8¼% to 8½% yield talk.

Calfrac appeared to have a good following, according to a trader. The orders during bookbuilding were said to be approaching deal size at the tight end of talk and exceeded deal size at the wide end.

MSCI out of focus

While Calfrac’s new notes remained in focus, MSCI’s new 5 3/8% notes due 2027 (Ba2/expected BB+) faded into the background.

The new 5 3/8% notes were seen at par bid, par ¼ offered and were trading between par and par 1/8 in muted trading activity.

“They just stayed there all day,” a market source said.

MSCI priced a restructured $500 million issue of nine-year senior notes at par to yield 5 3/8% on Tuesday.

Revisions extended the maturity of the notes to nine years from 8.5 years and call protection to four years from 3.5 years.

The deal had been announced Monday as a quick-to-market trade but remained in the market overnight.

The yield printed at the wide end of yield talk in the 5¼% area.

Alcoa returns to focus

While trading activity surrounding the notes died down on Tuesday, Alcoa’s recently priced 6 1/8% senior notes due 2028 returned to focus as a major volume mover during Wednesday’s session.

The notes were seen up 3/8 point to trade at 101 3/8.

Alcoa priced a $500 million issue of the 10-year senior notes at par to yield 6 1/8% in a Monday drive-by.

The notes put in a strong performance after breaking for trade and immediately traded up to 101.

Prior to issuing the new junk bond, Alcoa announced it was joining with Rio Tinto to advance the large-scale development and commercialization of a carbon-emission free process to produce aluminum in a joint venture backed by Apple.

Alcoa was again in the news Wednesday with the announcement that a previously closed smelting operation in Indiana would be back online by the summer.

APX Group down

APX Group’s junk bonds were off about 1 point on Wednesday after the smart home and security services provider reported first quarter earnings Tuesday evening.

APX’s 8¾% senior notes due 2020 (B1/B-) were seen at 96 on Wednesday after closing Tuesday at 97¼.

APX’s 7 7/8% senior notes due 2022 were down to 97¼ after closing Tuesday at 98¼, a market source said.

However, the “main losers” were APX’s 7 5/8% notes due 2023, a market source said. The 7 5/8% notes were seen at 88½ bid, 89½ offered after previously trading in the 91 to 92 range.

APX reported a net loss of $84.7 million for the first quarter.

Indexes mixed

Benchmarks for the high-yield secondary market were mixed on Wednesday with two seeing losses and one seeing gains.

The KDP High Yield index was down 6 basis points on Wednesday to 70.54 with the yield now 5.86%. The index also posted losses on Tuesday and was down 5 basis points to 70.60 after remaining flat on Monday.

The Merrill Lynch High Yield index sank further into negativity after a brief foray into positive territory on Monday.

The index was down 5.6 bps with the negative year-to-date return now 0.22.

The index was down 18.3 bps on Tuesday, ending a one day stretch with a positive year-to-date return.

The index crossed into positive territory on Monday with a year-to-date return 0.019%.

Monday marked the first time the year-to-date return was in positive territory since April 22.

The CDX High Yield 30 index, in contrast, saw gains on Wednesday, breaking out of a three-day losing streak. The index was up 8 bps to close the day at 106.85.

While up, the gains did not make up for the 37 bps drop it took on Tuesday. The index was also down on Monday and on Friday.

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