United Rentals, Valvoline, Block Communications price; L Brands jumps; Southwestern Energy sinks

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 10 – The domestic high-yield primary market launched the week with an active session.

Three drive-by deals priced and several more joined the forward calendar.

United Rentals (North America), Inc. priced a $750 million issue of 10.5-year senior notes (Ba3/BB-).

Valvoline Inc. priced an upsized $600 million issue of 10-year senior notes (Ba3/BB).

And Block Communications, Inc. priced a $300 million issue of eight-year senior notes (B1/B+).

The forward calendar swelled on Monday with Buckeye Partners LP, APX Group, Inc., Cimpress plc, Hecla Mining Co. and Zayo Group Holdings Inc. prepping offerings.

Zayo’s deal is expected to be a $3.15 billion megadeal.

Meanwhile, the secondary space saw another sideways day on Monday although losses continued to mount for the energy index.

New deals remained in focus although topical news put the spotlight on several other outstanding issues.

Centene Corp.’s recently priced 3 3/8% senior notes due 2030 (Ba1/BBB-/BB+) remained active with the notes making nominal gains after largely falling flat in secondary activity.

L Brands, Inc.’s junk bonds jumped on news of the imminent sale of its Victoria’s Secret brand.

However, Southwestern Energy Co.’s capital structure was under pressure on Monday as natural gas futures fell to a four-year low.

Big demand for new issues

The Feb. 10 week got underway with a heavy flow of news in the high-yield primary market.

The session saw three on-the-run issuers bring deals that played to big order books.

United Rentals priced a $750 million issue of 10.5-year senior notes (Ba3/BB-) at par to yield 4% in a Monday drive-by.

The yield printed at the tight end of yield talk in the 4% area, and tight to the 4% to 4¼% initial talk.

The deal was heard to be playing to $1.5 billion of demand, late Monday afternoon, according to a trader who had the bonds going out 99 7/8 bid, par ¼ offered, Monday evening.

Valvoline priced an upsized $600 million issue of 10-year senior notes (Ba3/BB) at par to yield 4¼% in a Monday drive-by.

The issue size increased from $500 million.

The yield printed on top of final yield talk, and tight to earlier yield talk in the 4 3/8% area.

The deal was heard to be playing to $3.5 billion of demand, according to a trader who had the new Valvoline 4¼% notes trading at 101½ bid, 102 offered, going out on Monday.

Block Communications priced a $300 million issue of eight-year senior notes (B1/B+) at par to yield 4 7/8% in a quick-to-market trade.

The yield printed at the tight end of yield talk in the 5% area. Initial talk was in the low 5% area.

The deal was a blowout, according to a bond trader who added that just past mid-afternoon on Monday the order book was heard to contain $1.5 billion of orders.

For Tuesday

On deck for Tuesday is Buckeye Partners LP with $1 billion offering of senior notes, which are coming in two bullet tranches.

The deal, which was shopped by means of a Monday investor call, includes five-year notes talked to yield in the 4¼% area, tight to initial guidance in the low-to-mid 4% area, and eight-year notes talked to yield 4½% to 4¾%, tight to initial guidance in the mid-to-high 4% area.

APX Group, the parent of Vivint Inc., talked a $500 million offering of seven-year senior secured notes to yield 6¾% to 7%.

Cimpress plc plans to price a $200 million add-on to its 7% senior notes due June 15, 2026 (existing ratings B2/B).

Pending official talk the whisper is 104.5, two points cheap to the existing paper, a trader said.

Meanwhile, Hecla Mining began a roadshow on Monday for a $475 million public offering of eight-year senior notes (existing ratings Caa1/B-).

Also, Zayo Group Holdings is expected to show up with a $3.15 billion megadeal, this week.

The LBO deal is expected to feature $1 billion seven-year senior secured notes (B1/B) and $2.1 billion eight-year senior unsecured notes (Caa1/CCC+).

Centene active

Centene’s 3 3/8% senior notes due 2030 were improving in active trading on Monday after largely falling flat in the secondary space.

The 3 3/8% notes traded up to par 7/8 with more than $37 million in reported volume, according to a market source.

The notes have largely been stuck in the par ¼ to par ¾ context since hitting the secondary space, which source attributed to the insurance company’s tight pricing.

Centene priced a $2 billion issue of the 3 3/8% notes at par on Feb. 5.

While the notes have largely traded sidewise since pricing, they have remained active with the issue a large, liquid one, sources said.

L Brands gains

L Brands junk bonds jumped in active trading on Monday on news that the struggling company was on the verge of selling its Victoria’s Secret brand.

L Brands 6 7/8% senior notes due 2035 gained 2 points. The notes stood poised to close the day at 102¾, sources said.

There was more than $36 million in estimated volume by the late afternoon.

L Brands 6¾% notes due 2036 were up 1½ points. They stood poised to close the day at 102.

There was more than $29 million on the tape by the late afternoon.

News broke Monday that L Brands is on the verge of announcing the sale of the struggling lingerie retailer Victoria’s Secret to private equity firm Sycamore Partners for more than $3 billion.

People think L Brands will use proceeds from the sale to pay down debt, a market source said.

L Brands’ junk bonds have steadily gained since late January when news broke that embattled CEO Leslie Wexner was considering stepping down and selling the Victoria’s Secret brand.

The 6 7/8% notes due 2035 were in the low 90s in the run up to the news.

Southwestern Energy under pressure

Southwestern Energy’s junk bonds were taking a hit on Monday with the natural gas exploration company’s entire capital structure under pressure as natural gas futures fell to a four-year low.

Southwestern’s 7½% senior notes due 2026 dropped 3½ points to 80¾ in active trading.

The 6.2% senior notes due 2025 were also down about 3½ points to 81¼, according to a market source.

Fitch Ratings revised the outlook for Southwestern Energy to negative from stable on Monday, citing the impact of weak commodity prices, which could drive the company’s leverage higher.

Natural gas futures fell to a four-year low on Monday, settling at $1.766, a decrease of 9.2 cents or 5%.

The downturn in natural gas futures was attributed to mild winter weather conditions limiting demand.

$232 million Friday inflows

The dedicated high-yield bond funds saw $232 million of net inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $177 million of inflows on the day.

Actively managed high-yield funds saw $55 million of inflows on Friday, the source said.

Indexes mixed

Indexes launched the week mixed.

The KDP High Yield Daily index shaved off 1 point to close Monday at 71.54 with the yield now 4.94%.

The index saw a cumulative gain of 30 bps on the week last week.

The ICE BofAML US High Yield index gained 2.3 bps with the year-to-date return now 0.656%.

The index posted a cumulative gain of 61.7 bps on the week last week.

The CDX High Yield 30 index rose 14 bps to close Monday at 109.19.

The index saw a cumulative gain of 66 bps on the week last week.

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