European primary active; Transocean dominates; Simmons outperforms; Digicel drops

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 11 – While the domestic primary market was quiet on Wednesday, the European primary market returned to action with two deals pricing and one more launching.

K+S AG priced a €600 million issue of six-year senior notes (S&P: BB) at par to yield 3¼%.

Italy-based specialty paper manufacturer Fedrigoni priced a €125 million add-on to its Euribor plus 412.5 basis points senior secured floating-rate notes at 97.00.

Greek telecom OTE plc launched an upsized €400 million offering of four-year senior notes at 2.45%.

Meanwhile, secondary market activity on Wednesday belonged to the deals that priced on Tuesday.

Transocean Pontus Ltd.’s newly priced 6 1/8% senior notes due 2025 (B1/BB-) dominated secondary market activity with the notes trading over 1 point above their issue price.

However, Simmons Foods, Inc.’s 7¾% first-lien senior secured notes due Jan. 15, 2024 (B1/BB-) were the outperformers of Tuesday’s deals with the notes seen more than 2½ points above their issue price.

Qorvo, Inc.’s 5½% senior notes due 2026, in contrast, struggled in the secondary market with the notes at times dipping below their issue price.

After dominating secondary market activity on Tuesday, DCP Midstream, LP’s 5 3/8% notes remained active on Wednesday although they were largely unchanged from Tuesday’s levels.

With the price of West Texas intermediate crude oil for August delivery dropping $3.50 on Wednesday, California Resources Corp.’s 8% senior notes due 2022 saw a fresh round of activity with the notes down 1½ point.

The secondary space was in general unchanged to off ¼ point on Wednesday, although the issues that were soft were “orderly,” a source said.

However, Digicel Group Ltd.’s junk bonds were down 2½ to 3 points in active trading on Wednesday.

The notes have been on a downward spiral since Moody’s Investors Service changed its outlook on the company to negative from stable.

K+S upsized

Germany-based K+S AG priced a €600 million issue of six-year senior notes (S&P: BB) at par to yield 3¼%.

The deal, which was launched into the market early in the month at a €300 million minimum size, was sized at €400 million early Wednesday when yield talk of 3¼% to 3 3/8% circulated the market.

The deal was playing to €1.1 billion of orders at that point, a source said.

Ultimately the deal upsized by a further €200 million and priced at the tight end of that talk, the source added.

Joint bookrunner Deutsche Bank will bill and deliver. DZ Bank, Goldman Sachs and HSBC were also joint bookrunners.

Fedrigoni taps FRN

Italy-based specialty paper manufacturer Fedrigoni priced a €125 million add-on to its Euribor plus 412.5 basis points senior secured floating-rate notes at 97.00.

The reoffer price came on top of price talk.

BNP Paribas, HSBC, KKR and Ubi Banca were the managers.

OTE upsized

Greek telecom OTE launched an upsized €400 million offering of four-year senior notes at 2.45%.

The offer was upsized from €350 million.

The deal, which played to a €1.8 billion order book, launched five basis points beneath the tight end of the 2½% to 2 5/8% yield talk. Initial talk was 2¾%.

Deutsche Bank and Morgan Stanley are managing the sale.

Transocean dominates

Transocean’s newly priced 6 1/8% senior notes due 2025 dominated secondary market activity, eclipsing all other issues that traded during the day.

The notes were seen about 1 point above their issue price of 99.

They traded between 99¼ to par 1/8 with most trades at par, sources said. More than $148 million of the bonds were on the tape by late afternoon.

“They’re the most active out of the bunch,” a market source said.

Transocean priced a $600 million issue of the 6 1/8% notes at 99 to yield 6.39% in a quick-to-market Tuesday trade.

The coupon and issue price came on top of talk.

While Transocean’s 6 1/8% notes dominated activity, the offshore drilling contractor’s 5 7/8% senior notes due 2024 were also active.

The notes were up about ¼ point to trade at par ¼ with about $13 million of the bonds on the tape.

Simmons outperforms

Simmons Foods’ 7¾% senior notes due 2024 put in the strongest secondary market performance of the deal’s that priced on Tuesday.

The 7¾% notes were seen 2½ to 3 points above their issue price. The notes were quoted at 102 3/8 bid, 102 7/8 offered in the early afternoon, a source said.

They traded in a range of 101 3/8 to 103 throughout Wednesday’s session with the notes set to close the day at 102½, sources said.

“They traded well,” a market source said. The 7¾% coupon “is a high coupon for a first-lien note.”

About $45 million of the bonds changed hands during Wednesday’s session.

Simmons Foods priced a $250 million issue of the 7¾% notes at par in a quick-to-market Tuesday deal.

The yield printed in the middle of yield talk in the 7¾% area and inside of initial talk in the low 8% area.

The deal was initially scheduled to price on Wednesday but timing was accelerated.

Qorvo struggles

While most of Tuesday’s deals traded well above their issue price, Qorvo’s 5½% senior notes due 2026 were at times lagging but largely stuck at their issue price.

The notes were seen trading in a range of 99 7/8 to par 1/8 with most trades at par. About $64 million of the bonds were on the tape during Wednesday’s session.

Qorvo priced an upsized $500 million issue of the 5½% notes at par in a Tuesday drive-by. The deal was upsized from $300 million.

“That’s why,” the deal was stuck at par in secondary activity, a market source said. “They took the profits out by upsizing. They took out a lot of the buyers that would have been involved if they left the deal size where it was.”

DCP Midstream unchanged

DCP Midstream’s 5 3/8% notes due 2025 remained active in the secondary space on Wednesday after dominating activity on Tuesday.

However, the notes were largely unchanged from their previous levels.

The notes were seen trading between par ½ and 101 during Wednesday’s session and were set to close the day at par 7/8, sources said.

“That’s pretty much where they were yesterday,” a market source said. About $22 million of the bonds were on the tape late in the session.

DCP priced a $500 million issue of the 5 3/8% notes at par in a Tuesday drive-by.

The notes quickly climbed to par 7/8 after freeing for trade and dominated activity on Tuesday with more than $77 million of the bonds on the tape.

California Resources down

California Resources’ 8% senior notes due 2022 were among the most actively traded issues of the day outside of the new paper to hit the market.

The notes were down about 1½ points as the price of crude oil dropped about $3.50. They were seen trading between 89½ and 89 7/8 during Wednesday’s session.

The notes were quoted at 91 bid, 91½ offered on Tuesday.

The drop in crude oil comes as Saudi Arabia increases its output, Libya signals it will resume production and trade tensions mounts.

Digicel eyed

While higher beta names were down about ¼ point alongside the overall market, Digicel’s junk bonds were down 2½ to 3 points.

Digicel’s 7 1/8% senior notes due 2022 traded down to 58¼ on Wednesday with about $16 million of the bonds on the tape.

The Hamilton, Bermuda-based mobile phone operator’s 8¼% senior notes due 2022 traded down to 66¾, a market source said. About $21 million of the bonds traded during Wednesday’s session.

Moody’s recently changed its outlook for Digicel to negative from stable due to the company’s high leverage and looming debt maturities. The notes have been on a downward spiral since.

Prior to Moody’s downgrade on June 28, the 8¼% notes were trading around 76 and the 7 1/8% notes were trading around 68.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, the most recent session for which data was available at press time, an investor said.

High-yield ETFs saw $287 million of inflows on the day.

However actively managed accounts were essentially flat, sustaining $5 million of outflows on Tuesday, the investor said.

Indexes mixed

Three benchmarks for the high-yield secondary market remained mixed on Wednesday after a mixed day on Tuesday.

The KDP High Yield index again saw slight gains and was up 6 basis points to close the day at 70.29 with the yield now 5.94%. The index was up 1 bps on Tuesday and 3 bps on Monday.

While the increases have been slight, the index posted its fourth consecutive trading day of gains on Tuesday after seeing eight consecutive trading days of losses.

The Merrill Lynch High Yield index dropped 10.6 bps on Wednesday with the year-to-date return now 0.37.

While down on Wednesday, the index made large gains throughout the week with a 15.4 bps rise on Tuesday and 25.5 bps rise on Monday.

Despite the decrease, Wednesday marked the fourth consecutive trading day the index has been in positive territory.

The CDX High Yield 30 index was also down on Wednesday. The index dropped 24 bps to close the day at 106.36. The index was down 11 bps on Tuesday after a 28 bps rise on Monday.

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