Surgery Partners, Realogy on tap; Kodiak Gas widens talk; Nexeo trades up; Inmarsat gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 25 – While no new high-yield deals priced during Monday’s session, the active forward calendar grew.

Surgery Partners, Inc. plans to start a roadshow on Tuesday for a $430 million offering of eight-year senior notes with pricing expected prior to the week’s close.

Realogy Group LLC is expected to price $400 million of eight-year senior notes on Wednesday.

Allison Transmission Inc. is expected to attempt to place $500 million of 10-year senior notes (expected ratings Ba3/BB) in late March or early April.

Price talk for Kodiak Gas Services LLC’s $400 million offering of eight-year senior notes, which was expected to price last Friday, was heard to have widened on Monday.

In the European high-yield primary market, Netherlands-based Leaseplan began a roadshow on Monday in London City for a €1.35 billion two-part offering of five-year senior secured notes (B1/BB+/BB-).

Meanwhile, trading volume was light on Monday on another soft day for the secondary market, sources said.

While slow to trade, Nexeo Plastics’ 10 1/8% senior notes due 2026 were seen at a premium to their issue price.

Inmarsat plc’s junk bonds were active and making gains on Monday after the company announced plans to price $1.3 million of senior notes as part of its leveraged buyout.

California Resources Corp.’s bellwether 8% senior notes due 2022 gave back its gains from last week as crude oil futures continued their slide amid fears of a slow down in global growth.

Surgery Partners roadshows

The active forward calendar grew on Monday.

Also, a bit of light shone on the spring shadow calendar, as the final week of March got underway in the primary market.

As to the active calendar, Surgery Partners plans to start a roadshow on Tuesday for a $430 million offering of eight-year senior notes.

Early guidance has the notes coming to yield in the 9¼% to 9½% area, a trader said.

The debt refinancing deal, via left bookrunner Jefferies, is set to price during the present week.

Realogy expected Wednesday

Realogy Group is expected to price $400 million of eight-year senior notes on Wednesday.

Initial guidance is in the mid-to-high 9% area, a trader said.

JP Morgan is leading the debt refinancing deal.

Kodiak widens talk

Meanwhile, the Kodiak Gas Services deal, which was held over from last week, was heard to have backed up further, in terms of rate, on Monday.

The latest price in front of the market is 10%, sources say, adding that the deal has undergone further covenant changes.

On a roadshow last week Kodiak Gas marketed a $400 million offering of eight-year senior notes (Caa2/B-/B).

The notes were talked to yield 9¼% to 9½%, on Friday – well wide of early guidance in the 8½% to 8¾% area.

Alison Transaction in the pipeline

Allison Transmission is expected to attempt to place $500 million of 10-year senior notes (expected ratings Ba3/BB) with a yield in the low 6% area, a market source said.

Citigroup will lead the debt refinancing deal which is expected to kick off during the late part of March or in early April (see related story in this issue).

Leaseplan starts roadshow

In the euro-denominated market, Netherlands-based Leaseplan began a roadshow on Monday in London City for a €1.35 billion two-part offering of five-year senior secured notes (B1/BB+/BB-).

The deal is coming in fixed-rate and floating-rate tranches.

Left global coordinator Deutsche Bank will bill and deliver.

The Amsterdam-based provider of automobile leasing and fleet management services plans to use the proceeds, together with cash on hand, to fully redeem its existing notes, as well as to fund an interest reserve account with 2.5 years of interest expense on new notes, and for general corporate purposes.

Nexeo trades up

Nexeo Plastics’ 10 1/8% senior notes due 2026 were trading at a premium to their issue price in the secondary space, although volume was light.

The 10 1/8% senior notes were quoted at 99 1/8 bid, 99 7/8 offered early in the session, according to a market source.

The notes traded in a wide range of 98.42 to par, a source said.

There was a dealer buy trade at 99¾ which was followed a short time later by a dealer sell trade at par, the source said.

About $10 million of the bonds were on the tape by the late afternoon.

Nexeo Plastics priced a $410 million issue of 10 1/8% notes on Friday.

The yield printed 50 basis points beyond the wide end of the 9¾% to 10% yield talk.

The issuer also brought extensive covenant changes prior to pricing related to how the company may disburse cash and incur additional debt.

Inmarsat jumps

Inmarsat’s junk bonds were active and making gains on Monday after the company announced it would be tapping the capital markets to fund its leveraged buyout.

Inmarsat’s 4 7/8% senior notes due 2022 rose 3/8 points to 101½ on Monday. More than $13 million of the bonds changed hands.

Inmarsat’s 6½% senior notes due 2025 rose 2 5/8 points to 105 5/8, according to a market source. About $7 million of the bonds were on the tape.

The junk bonds were active after Inmarsat announced it would be bringing $3.3 billion in loans and $1.13 billion of senior notes to fund the leveraged buyout of the company by Apax, Warburg Pincus, Canada Pension Plan Investment Board and Ontario Teachers’ Pension.

California Resources down

California Resources’ 8% senior notes due 2022 gave back their gains from last week.

The notes dropped 1¼ points in high volume activity to close Monday at 78½, sources said.

More than $14 million of the bonds were on the tape by the late afternoon.

The notes were posting gains last week alongside crude oil and traded north of 80 last Wednesday. However, the notes have since given back those gains.

The barrel price of WTI crude oil for April delivery continued to slide on Monday, settling at $58.82, a decrease of 22 cents or 0.04%.

After trading north of $60 in intraday trading last Wednesday, crude oil futures have tumbled alongside the broader market on concern about a slowdown in global growth.

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 trader.

High-yield ETFs sustained $106 million of outflows on the day.

However, actively managed high-yield funds saw $80 million of inflows on Friday, the trader said.

Heading into the end of the first quarter of 2019, sentiment in the junk bond market, as reflected by the flows of retail cash, stands in stark contrast to the chill that weighed upon the market in the first quarter of 2018.

In the year to Friday's close (March 22) the combined funds saw $11.6 billion of net inflows, the source noted, adding that in 2018, to the March 22 close, the combined funds had sustained $18.6 billion of outflows.

Indexes drop

Indexes started the week on soft footing after a soft day on Friday.

The KDP High Yield Daily index dropped 7 bps to close Monday at 70.05 with the yield 5.93%.

While the index was also down on Friday, it closed last week with a cumulative gain of 23 bps on the week.

The ICE BofAML US High Yield index dropped 9.1 bps with the year-to-date return now 6.863%. The index sank below 7% year-to-date returns on Friday after surpassing it just the day before.

While down on Friday, the index saw a cumulative gain of 27.4 bps on the week.

After sinking below 6% year-to-date returns on March 9, the index popped back above it on March 11.

The index initially shot past 6% returns on Feb. 25 after passing 5% returns on Feb. 12.

The CDX High Yield 30 index dropped 14 bps to close Monday at 105.97. The index saw a cumulative loss of 36 bps on the week last week.

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