AkzoNobel prices €1 billion; Refinitiv mixed again; CalRes declines; L Brands, Neiman Marcus rise

By James McCandless and Paul A. Harris

San Antonio, Sept. 20 – AkzoNobel NV sold a downsized €1 billion equivalent amount of eight-year senior notes on Thursday, the second of the week’s high profile merger and acquisition deals, while the secondary market saw a refocus on bellwethers and retail names along with new issues.

The AkzoNobel deal, which was downsized from €1,385,000,000, included a downsized $605 million tranche of Starfruit US Holdco LLC notes, which priced at par to yield 8%. The tranche size was decreased from €900 million equivalent. The yield printed at the tight end of the 8% to 8¼% yield talk.

Earlier in the week Refinitiv priced $4.25 billion equivalent of notes in four tranches, in a deal backing the acquisition of a 55% stake in Thomson Reuters Financial & Risk by Blackstone, Canada Pension Plan Investment Board and GIC.

Refinitiv’s dollar-denominated tranches were mixed, once again leading secondary trading.

California Resources Corp.’s 8% notes declined, falling in line behind oil futures.

L Brands, Inc. saw its 6 7/8% bonds move higher.

Neiman Marcus Group, Inc.’s issues also gained in the wake of a mixed second-quarter earnings report.

AkzoNobel prices €1 billion

The second of the week's two high profile merger and acquisition deals cleared the market on Thursday.

AkzoNobel NV sold a downsized €1 billion equivalent amount of eight-year senior notes (Caa1/B-/B-) in two tranches.

The deal, which was downsized from €1,385,000,000, included a downsized $605 million tranche of Starfruit US Holdco LLC notes, which priced at par to yield 8%. The tranche size was decreased from €900 million equivalent. The yield printed at the tight end of the 8% to 8¼% yield talk. Initial talk was in the 9% area. Sole physical bookrunner Barclays will bill and deliver for the dollar-denominated tranche.

The euro-denominated tranche featured a €485 million amount of Starfruit Finco BV notes, which priced at par to yield 6½%, 12.5 basis points inside of yield talk in the 6¾% area, and well inside of initial guidance in the high 6% area to 7%. Physical bookrunner HSBC will bill and deliver for the euro-denominated tranche. Barclays and JPMorgan were also physical bookrunners for the euro notes.

Proceeds will be used to help fund the buyout of AkzoNobel Specialty Chemicals by the Carlyle Group and GIC from AkzoNobel for an enterprise value of €10.1 billion.

Earlier in the week Refinitiv priced $4.25 billion equivalent of notes in four tranches, in a deal backing the acquisition of a 55% stake in Thomson Reuters Financial & Risk by Blackstone, Canada Pension Plan Investment Board and GIC.

Friday euro deals

Much of Friday's new issue activity is expected to take place in Europe.

Dealers there set the table on Thursday.

Italmatch Chemicals SpA talked its €410 million offering of six-year senior secured floating-rate notes (B3/B) at a 500 basis points spread to Euribor.

Proceeds will be used to help fund the acquisition of Italmatch, a Genova, Italy-based specialty chemical additive manufacturer, by Bain Capital from Ardian.

France-based Promontoria MCS Holding SAS talked its €120 million offering of Louvre Bidco SAS senior secured floating rate notes due 2024 with a 550 basis points to 575 bps spread to Euribor at 99.5.

Upon release from escrow, proceeds along with the proceeds from an equity injection and cash on the balance sheet, will be used to fund the merger with France-based debt collector DSOgroup, repay DSO debt, fund DSO's acquisition of an Italian debt collection and factoring company, and for Meanwhile Garrett Motion Inc. downsized its offering of eight-year senior notes (B2/B) to €350 million from €450 million, shifting €100 million to its concurrent bank loan.

The bond deal is also expected to price Friday.

Northern Oil accelerated

At Thursday's close, one dollar deal was on deck for Friday.

Northern Oil and Gas, Inc. accelerated timing on a $350 million tack-on to its 8½% senior secured second-lien PIK notes due May 15, 2023 (Caa1/B+), and set price talk.

Talk has the tack-on coming at a reoffer price of 103.5 to 104, a 7.45% to 7.61% yield to worst (May 15, 2022), and an 8.57% to 8.9% yield to first call (May 15, 2020).

Books close at 2 p.m. ET Friday, and the tack-on is set to price thereafter.

Timing is accelerated, as the roadshow had been scheduled to carry into Sept. 24 week.

$967 million inflow

The dedicated high-yield bond funds saw $967 million of inflows in the week to the Wednesday, Sept. 19 close, according to information posted on the web site of Lipper US Fund Flows.

The flows took a sizable ding on Wednesday, the final session in the present week's reporting period, when high-yield ETFs sustained a whopping $771 of outflows on the day, a trader said.

Actively managed funds saw $32 million of inflows on Wednesday.

The present week's $967 million inflow is the first positive flow in three weeks and trims year-to-date redemptions to $17.41 billion, according to a Prospect News analysis of the data.

It follows the previous week's $862 million outflow.

There have been 15 weekly inflows and 23 outflows in the 38 weeks to date in 2018, the Prospect News analysis shows.

Refinitiv mixed

In the secondary space, Refinitiv’s new dollar-denominated tranches were the leaders again.

The 8¼% notes due 2026 rose about ¼ point to close at around par ½, according to a market source.

The 6¼% notes due 2026 lost about 1 point to close at around par 5/8.

On Wednesday, the 8¼% notes lost about 1 point and the 6¼% notes gained about ¼ point.

“I think of the new issues we’ve seen in the last week or so, this is the one we’re going to be talking about for the next month,” a trader said.

On Tuesday the company priced a downsized $4.25 billion equivalent amount of high-yield notes in four tranches.

The deal also included euro tranches and $9.25 billion equivalent of term loans.

California Resources down

Meanwhile, California Resource’s bellwether 8% notes were seen losing in secondary trading, following the movement of oil futures.

The 8% notes due 2022 lost 3/8 point to close at 92 1/8 bid.

L Brands improves

In the retail space, L Brands’ 6 7/8% bonds were seen rising, according to traders.

The 6 7/8% bonds due 2035 picked up about 1½ points to close at around 85 bid.

Neiman Marcus rises

Elsewhere in retail, Neiman Marcus’ issues gained after initial losses earlier in the week, market sources said.

The 8% notes due 2021 added about 3¼ points to close at around 69 bid. The 7 1/8% notes due 2028 gained about 2½ points to close at 84¼ bid.

On Wednesday, the 8% notes rose about ¼ point and the 7 1/8% notes lost about 4½ points.

On Monday, the company reported rising sales and revenue and a net loss of $75.3 million for the fourth quarter of 2018. Adjusted EBITDA was $56.1 million for the fourth quarter and $477.1 million for the fiscal year, according to a company news release.

“It’s probably the short sellers giving them a bit of a break,” a trader said. “But this one is gonna stay on everyone’s radar for a while.”

Indexes

The KDP High Yield Daily index declined by 7 basis points on Thursday to close at 70.37. The yield gained 2 bps to 5.85%.

The index picked up 2 bps on Wednesday to close at 70.44 with a declining yield of 5.83%.

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