Faurecia prices €250 million add-on; new notes active in new week; PG&E dives; Ford varies

By James McCandless and Paul A. Harris

San Antonio, Oct. 28 – As the high-yield primary market was slowed by an earnings blackout on Monday, the secondary market began a new week of activity with eyes fixed on newer issuance and newsmakers.

There was a European aspect to much of Monday's news.

France-based Faurecia SE priced a €250 million add-on to its 3 1/8% senior notes due June 15, 2026 at 104.5 on Monday.

The issue price came 12.5 basis points beyond the rich end of price talk in the 104 area and rendered a 2.3863% yield to maturity.

And London-based BBA Aviation plc announced plans to price a $650 million offering of 8.25-year senior notes on Tuesday.

Newer notes from Clarivate Analytics plc, Virgin Australia Holdings Ltd. and Netflix, Inc. were all seeing high levels of activity.

In utilities, PG&E Corp.’s issues dived after a new round of blackouts and expanding wildfires put more pressure on the name.

Carmaker Ford Motor Co.’s paper varied in direction after announcing hundreds of layoffs and the discontinuation of two car models.

Earning blackout slows primary

With the primary market slowed by an earnings blackout, as publicly owned prospective issuers must complete financial reports before coming to borrow cash in the high-yield primary, there was a European aspect to most of Monday's news.

France-based Faurecia priced a €250 million add-on to its 3 1/8% senior notes due June 15, 2026 (expected ratings Ba1/BB+/BB+) at 104.5 on Monday.

The issue price came 12.5 bps beyond the rich end of price talk in the 104 area and rendered a 2.3863% yield to maturity.

And London-based BBA Aviation plc announced plans to price a $650 million offering of 8.25-year senior notes (existing ratings Ba2/BB) on Tuesday.

Initial guidance has the deal coming to yield in the mid-4% area, a trader said.

Presently the new issue market is wide open to known issuers with decent or better credit quality, sources say, adding that such issuers can expect to receive good treatment.

On Friday Clarivate Analytics/Camelot Finance SA priced an upsized $700 million (from $500 million) issue of senior secured notes due November 2026 (B2/B) at par to yield 4½%.

The notes priced 12.5 bps inside of talk in the 4¾% area – talk which, itself, came well inside of initial guidance in the low 5% area.

The Clarivate/Camelot notes burst into the secondary, Friday afternoon, trading at a nice premium, most of which they maintained into the new week, according to a New York-based trader.

When November gets underway issuance is apt to ramp up, sources say.

That's assuming the central bank remains accommodative and financial and political headline news does not conspire to create a backdrop that it too volatile, a sellside source said.

High-yield issuance stood at $220 billion for 2019 to Friday's close, according to Prospect News data.

Given the right backdrop, issuance could hit $250 billion during the run-up to 2020, a syndicate banker said.

Friday inflows

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

High-yield ETFs saw a hefty $658 million of inflows on the day.

Actively managed high-yield funds saw $30 million of inflows on Friday, the source said.

The combined high-yield bond funds have seen $17.3 billion of net inflows for the year to Friday's close, according to the source.

Compare that to the deeply negative cash flows of the dedicated bank loan funds, which saw $32.7 billion of net outflows for 2019 to Friday's close, the source added.

New notes active

New notes priced last week saw activity at high levels on Monday, traders said.

Philadelphia-based intellectual property name Clarivate Analytics’ new 4½% senior secured notes due 2026 landed at 101½ bid.

The upsized $700 million deal came to market on Friday lifted from an initial $500 million.

The notes were issued via Camelot Finance SA.

Meanwhile, Brisbane-based airline Virgin Australia’s new 8 1/8% senior bullet notes due 2024 dipped ¼ point to close at 100½ bid.

The deal priced on Thursday at an upsized $425 million.

Los Gatos, Calif.-based entertainment streaming giant Netflix’s recent 4 7/8% senior paper due 2030 garnered ¼ point to close at 101¼ bid.

After an initial bump in the road, the paper has seen a steady three-day climb.

PG&E dives

PG&E’s notes saw a dive in Monday activity, market sources said.

The 6.05% notes due 2034 dropped 14 points to close at 90½ bid. The 3.3% senior notes due 2027 crashed 10½ points to close at 85½ bid.

The San Francisco-based bankrupt electric utility’s structure dove sharply on Monday after a weekend of blackouts for scores of customers and worsening wildfires in parts of California drove the structure downward.

The company started work on Monday to restore power to the millions that it had cut in a measure to prevent more wildfires.

Despite the effort, a fire north of San Francisco has started to spread and is potentially the company’s fault.

The company told state regulators last week that a transmission tower malfunctioned near the site where the fire originated.

“If this fire is their fault, the shareholders will get nothing,” a trader said. “The stock has been shredded to bits already.”

The name also warned customers on Monday that more blackouts could happen on Tuesday.

Ford varies

Auto name Ford’s issues varied throughout the day, traders said.

The 5.291% senior notes due 2046 shaved off ¼ point to close at 92¾ bid. The 7.45% senior notes due 2031 rose ¾ point to close at 115 bid.

News broke on Monday that the Dearborn, Mich-based car company would cut 450 jobs from an Ontario assembly plant as it discontinues production on its Ford Flex and Lincoln MKT models.

Production on the models ceases at the end of November.

Indexes higher

Three high-yield indexes finished Monday with improvements.

The KDP High Yield Daily index picked up 3 bps on Monday, settling at 71.35 with the yield lowering to 5.46%.

The index hopped up 7 bps on Friday, went unchanged on Thursday and inched up 2 bps on Wednesday.

The ICE BofAML US High Yield index improved by 4.8 bps with the year-to-date return now at 12.136%.

The index gained 9.5 bps on Friday, rose 6.5 bps on Thursday and tacked on 4.8 bps on Wednesday.

The CDX High Yield 30 index garnered 33.02 bps to 107.5372.

The index improved by 33.18 bps on Friday, dipped 33.39 bps on Thursday and rose 33.32 bps on Wednesday.

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