United Rentals, KB Home price; newer notes trade; Teva lifted; Coty falls; WeWork higher

By James McCandless and Paul A. Harris

San Antonio, Oct. 21 – Monday’s primary market session saw two deals price while the secondary market saw a bevy of activity furl around the pharma and retail sectors.

In drive-by action United Rentals (North America), Inc. priced a $750 million split-rated issue of eight-year senior secured second-lien notes.

KB Home priced a $300 million issue of 10-year senior bullet notes.

In the secondary, new notes from Charter Communications, Inc. and VodafoneZiggo continued to make names for themselves, diverging.

In pharma, Teva Pharmaceutical Industries Ltd.’s issues were lifted after the company came to a settlement with two Ohio counties.

Cosmetics name Coty Inc.’s paper fell after the company said it was committed to making asset sales to reduce debt.

Elsewhere, WeWork Cos. Inc.’s notes moved higher amid reports that it could be receiving rescue financing from its largest backer.

New issues

The Monday primary market session generated a strong, steady flow of headline news.

In drive-by action United Rentals (North America), Inc. priced a $750 million split-rated issue of eight-year senior secured second-lien notes (Ba1/BBB-) at par to yield 3 7/8%.

The yield printed at the tight end of yield talk in the 4% area.

KB Home priced a $300 million issue of 10-year senior bullet notes (Ba3/BB-) at par to yield 4.8%.

Initial guidance was in the 5 1/8% area, a trader said.

The calendar

An already sizable calendar grew further on Monday.

Netflix, Inc. is in the market with a $2 billion equivalent of 10.5-year senior bullet deal (current ratings Ba3/BB-) coming in dollar-denominated notes and euro-denominated notes.

The dollar-denominated notes are talked to yield in the 5 1/8% area. Price talk on the euro-denominated notes will be announced on Tuesday, and the general corporate purposes deal is set to price later in the day.

Garda World Security Corp. is expected to sell $779 million of eight-year senior notes during the Oct. 21 week.

Initial guidance has the notes coming to yield in the low 9% area, a trader said.

And Blackboard Inc. plans to price a $243 million offering of five-year second-lien notes on Thursday.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $29 million of outflows on the day.

Newer notes diverge

Newer notes continued to make their mark in Monday activity, traders said.

Stamford, Conn.-based telecommunications company Charter’s recent 4.8% senior secured notes due 2050 dipped ¾ point to close at 100¾ bid.

The notes saw about $25 million on the tape.

After pricing last Tuesday, the notes have sustained high levels of trading.

Netherlands-based cable name VodafoneZiggo’s new $500 million 4 7/8% senior notes due 2030 garnered ¼ point to close at 102 bid.

The deal priced in dollar-denominated and euro-denominated tranches on Thursday.

Teva rises

Meanwhile, in the pharma space, Teva’s issues were lifted, market sources said.

The 3.15% senior notes due 2026 jumped up 2½ points to close at 76½ bid. The 6¾% senior notes due 2028 rose 3¾ points to close at 91¾ bid.

News broke early Monday that the Petach Tikva, Israel-based generic drug producer had reached a settlement in an opioid-related lawsuit that was slated to begin the trial phase this week.

The company was party to the lawsuit along with three major drug distributors, which also reached settlements.

Teva will pay out $20 million and will donate $20 million in opioid addiction medication.

Concurrently, the name announced that it had reached an agreement in principle on a blanket settlement against all remaining lawsuits pending.

The settlement would see the company donate medications it values at $23 billion over the next 10 years while also paying out $250 million in cash over the same period.

“It’s lower than what everybody was anticipating,” a trader said. “I think bondholders see this as a significant reduction of risk going forward.”

Coty falls

Retail name Coty’s paper was seen falling, traders said.

The 6½% senior paper due 2026 dipped 1¼ points to close at 96¾ bid.

Early Monday, news broke that the New York-based cosmetics name is considering a sale of its professional hair and nail products division in an effort to reduce its debt.

The company is also exploring a sale of its Brazilian operations, but stressed that the move is under review until mid-2020.

After a difficult few years, the company is under pressure to boost margins and reduce leverage as the sector ramps up in competitiveness.

WeWork higher

Elsewhere, WeWork’s notes moved on a higher path, market sources said.

The 7 7/8% senior notes due 2025 rose 1¼ points to close at 86 bid.

Late in the day on Monday, reports indicated that the New York-based coworking name, recently troubled by botched financial maneuvers, is going to receive an $8 billion rescue package from large backer SoftBank.

If taken, SoftBank would become the company’s largest owner.

The name is also considering financing offered by JPMorgan.

Indexes

The KDP High Yield Daily index trailed by 5 basis points on Monday, closing at 71.18 with the yield rising to 5.58%.

The index finished unchanged on Friday and Thursday, shifting up 7 bps on Wednesday.

The ICE BofAML US High Yield index gained 5.9 bps with the year-to-date return now at 11.833%.

The index tacked on 1.7 bps on Friday, rose 7.9 bps on Thursday and added 9.1 bps on Wednesday.

The CDX High Yield 30 index reached up 33.29 bps to 107.4398.

The index rose 33.74 bps on Friday, picked up 33.92 bps on Thursday and was positive by 34.04 bps on Wednesday.

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