Primary quiet, junk calendar full; Allied offering eyed; NOVA, American Builders flat

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 28 – The domestic high-yield primary market was quiet on Wednesday.

However, the week promises to be backloaded with a full calendar heading into the end of the week and expected to grow.

Allied Universal is expected to tap the market in early May with a $2 to $3 billion megadeal backing its acquisition of London-based security services provider G4S.

Meanwhile, it was equally quiet in the secondary space which saw another sideways day with few surprises from the Federal Reserve Open Committee meeting.

New paper and earnings remained in focus. However, the deals to price during Tuesday’s session fell flat on debut.

NOVA Chemicals Corp.’s 4¼% senior notes due 2029 (Ba3/BB-) and American Builders & Contractors Supply Co., Inc.’s 3 7/8% senior notes due 2029 (B1/B+) were wrapped around par in active trading.

Outside of the new paper, Centene Corp.’s split-rated 2½% senior notes due 2031 (Ba1/BBB-/BB+) remained among one of the worst-performing deals of the year with the notes lower following the company’s earnings announcement.

However, Olin Corp.’s 5 5/8% senior notes due 2029 were on the rise following the chemical company’s earnings report and announced plans to reduce its debt load.

Wednesday’s primary

The dollar-denominated primary market put up a goose egg on a news-heavy Wednesday, as dealers set the table for what promises to be a big finish to April in both the U.S. and European high-yield new issue markets.

Both the active- and shadow calendars grew.

Of note, Allied Universal is expected to show up with $2 billion to $3 billion of high-yield notes backing its acquisition of London-based security services provider G4S during the first week of May.

There will be tranches of secured notes and unsecured notes, according to market sources who add that Credit Suisse will lead the deal (see related stories in this issue).

And notwithstanding an earnings blackout that has yet to take hold for most of the high-yield sectors, don't be surprised if the drive-by market lights up on Thursday, and maybe Friday, as dealers could stage for a big finish to April, in a play for league table position, a trader warned.

Flat

The deals to price during Tuesday’s session had lackluster receptions in the secondary space with both NOVA’s 4¼% senior notes due 2029 and American Builders & Contractors’ 3 7/8% senior notes due 2029 flat on debut.

NOVA’s 4¼% notes were wrapped around par in high-volume activity.

There was more than $43 million of the bonds on the tape.

The Calgary, Alta.-based chemical company priced a $575 million issue of the 4¼% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 4 3/8% area.

American Builders & Contractors’ 3 7/8% senior notes due 2029 were also largely stuck at par in the aftermarket, according to Trace data.

The Beloit, Wis.-based wholesale roofing company priced an upsized $400 million, from $350 million, issue of the 3 7/8% notes at par on Tuesday.

Pricing came at the tight end of yield talk in the 4% area.

Centene trades off

Centene’s 2½% split-rated senior notes due 2031 remained one of the worst-performing deals of the year with the notes again trending lower following the health care company’s earnings report.

While volume was light, the notes were off about ¾ point to trade down to a 96-handle, despite an earnings beat.

They closed Wednesday at 96¼, according to Trace data.

Centene reported revenue of $29.98 billion which beat analyst expectations for revenue of $29.43 billion.

EBITDA was $1.523 billion which was largely in line with expectations for EBITDA of $1.529 billion.

The tightly priced notes have been underwater since hitting the aftermarket in mid-February.

They traded down to a 93-handle in mid-March as investors fled low-coupon, long-duration bonds amid a skyrocketing 10-year Treasury yield.

However, the notes have steadily improved and were trading on a 97-handle heading into the company’s earnings report.

Centene priced a $2.2 billion issue of the 2½% notes at par on Feb. 10.

Olin gains

Olin’s 5 5/8% senior notes due 2029 were posting gains in active trading following the chemical and ammunition manufacturer’s earnings report.

The 5 5/8% notes added ½ point to close the day at 108½, according to a market source.

The off-the-run name was active on Wednesday with more than $15 million on the tape.

Olin saw a large earnings beat and announced plans to pay off $1 billion in debt with cash from its operations, according to a market source.

The company reported revenue of $1.92 billion versus expectations for revenue of $1.91 billion.

EBITDA was $540 million versus estimates for $488 million.

$185 million Tuesday outflows

The dedicated high-yield bond funds sustained $185 million of net daily outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $145 million of outflows on the day.

Actively managed high-yield funds sustained $40 million of outflows on Tuesday, the source said.

Indexes mixed

Indexes were again mixed on Wednesday with some flat while others posted nominal gains.

The KDP High Yield Daily index closed Wednesday flush with Tuesday at 69.61. However, the yield gained 4 bps to 3.9%.

The index added 6 points on Tuesday and 1 point on Monday.

The ICE BofAML US High Yield index shaved off 1.1 bps with the year-to-date return now 1.905%.

The index inched up 1.6 bps on Tuesday and 9 bps on Monday.

The CDX High Yield 30 index gained 16 bps to close Wednesday at 109.81.

The index shaved off 3 bps on Tuesday and inched up 3 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.