NFP prices add-on; Standard does a split-rate; recent Valeant again firms; Algeco up on financing news

By Paul Deckelman and Paul A. Harris

New York, Dec. 11 – Activity in the recently red-hot high-yield primary market was distinctly cooler on Monday, with syndicate sources reporting just one small truly junk bond deal having priced by the session’s end, in contrast to last week, which saw several sessions of multi-billion-dollar issuance.

Insurance brokerage company NFP Corp. had the day’s sole dollar-denominated and fully junk-rated deal – an upsized $150 million add-on to its existing $500 million July 2025 notes, which the company had sold earlier in the year.

Away from that lone deal, the sources said that diversified holding company Standard Industries Inc. priced an upsized $900 million split-rated issue of 10-year notes.

Both of those deals were opportunistically timed and quickly shopped drive-by transactions.

The sources further heard that toymaker Mattel, Inc. – a newly fallen angel – was shopping a $1 billion eight-year deal around to potential investors, with pricing anticipated this week.

Secondary market traders meantime saw continued very active trading, at better levels, in Canadian drug manufacturer Valeant Pharmaceuticals International, Inc.’s recently priced eight-year megadeal.

They also saw brisk volume in such other recently priced names as Itron, Inc., Continental Resources, Inc. and Jeld-Wen, Inc.

Apart from the new or recently priced names, Algeco Scotsman Global Finance plc’s 2019 notes shot up by nearly 10 points in busy dealings, and its other outstanding issue also improved, on the news that the maker of portable storage units and modular structures had lined up a new debt package to refinance its existing capital structure, including those outstanding notes.

Statistical market performance measures were higher across the board for a second consecutive session on Monday. Those indicators had turned better on Friday after having been mixed on Thursday, which in turn had followed Wednesday’s lower-all around performance, the first such losing session since Nov. 15.

NFP upsizes tap

In the sole deal to come with straight-across junk ratings on Monday, NFP Corp. priced an upsized $150 million add-on to its 6 7/8% senior notes due July 15, 2025 (Caa2/CCC+) at par.

The issue size was increased from $125 million.

The reoffer price came at the rich end of initial price talk of 99.5 to par.

BofA Merrill Lynch, Barclays, JP Morgan, Morgan Stanley, KKR and Jefferies were the joint bookrunners.

The New York-based insurance broker plans to use the proceeds to fund acquisitions.

Split-rated Standard Industries

In the crossover space Standard Industries Inc. priced an upsized $900 million issue of split-rated 10-year senior notes (Ba2/BBB-) at par to yield 4¾% in a quick-to-market Monday deal.

The issue size was increased from $750 million.

The yield printed in the middle of yield talk in the 4¾% area. Initial guidance was 4¾% to 4 7/8%.

BofA Merrill Lynch was the left bookrunner.

The Parsippany, NJ-based company plans to use the proceeds to fund a tender offer for its 5 1/8% senior notes due 2021.

Mattel markets $1 billion junk

Concurrent with news that Fitch Ratings and Moody's Investors Service lowered its credit ratings to speculative grade, Mattel, Inc. showed up with $1 billion of eight-year senior notes Ba2/BB-/BB), which it plans to price during the Dec. 11 week.

BofA Merrill Lynch, Citigroup, Wells Fargo, MUFG, RBC, Mizuho and HSBC are the joint bookrunners.

The El Segundo, Calif.-based toy manufacturer plans to use the proceeds plus cash on hand, to pay off its 1.7% senior notes due 2018 upon or before maturity, to pay off its commercial paper program and to pay off its revolving credit facility.

Inter Media announces €300 million

In the European primary market Inter Media and Communication SpA announced a €300 million offering of guaranteed bonds due 2022.

Goldman Sachs is the global coordinator and bookrunner.

Proceeds will be used to refinance debt and provide working capital.

The prospective issuer is a unit of Football Club Internazionale Milano SpA.

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 $12 million of outflows on the day.

Asset managers, however, saw $50 million of inflows on Friday.

Bank loan funds were negative on Friday, sustaining $55 million of outflows on the day, the source said.

Valeant the volume leader

For a second successive session, traders noted that the big recently priced offering from Valeant Pharmaceuticals International was the most actively traded junk bond of the day Monday, with over $44 million seen having changed hands, on top of Friday’s market-leading $41 million of turnover.

And for a second day in a row, the new 9% notes due 2025 firmed smartly, with one trader pegging the notes at 101¾ bid, calling them up 1 point on the day.

A second trader saw the new notes in a 101 1/8-to-101 5/8 bid context, which he said was a 1 1/8 point rise.

The notes had also shot up by 1¼-to-1½ points on Friday.

The Laval, Que-based drug manufacturer had priced $1.5 billion of the notes at 98.611 last Monday, to yield 9.25%.

The bonds had quickly moved up to around the par level in initial aftermarket dealings following that unscheduled drive-by offering, and continued to steadily firm after that.

Valeant’s existing paper was meantime also up sharply for a second consecutive session on Monday; its 5 7/8% notes due 2023 firmed to 91¼ bid, a gain of ¾ point on the day, on volume of over $8 million.

On Friday, the issue had jumped by 1¾ points.

Valeant’s 6 1/8% notes due 2025 improved to 90¼ bid, up 1 3/8 points on the session, with over $20 million of that paper having traded. On Friday, those bonds were 7/8 point better, with over $12 million having traded.

Recent deals trade around

Aside from the new Valeant issue, traders saw continued activity in some of the other bonds which came to market last week.

Itron, Inc.’s 5% notes due Jan. 15, 2026 were seen holding steady at 100¾ bid, on volume of more than $30 million.

That’s about where the notes had gone home on Friday

The San Jose, Calif.-based provider of technology systems and services to utilities and cities priced $300 million of the notes at par Friday in a regularly scheduled forward calendar offering.

Oklahoma City-based oil and natural gas exploration and production company Continental Resources’ 5% notes due 2022 were seen by a trader in a 99½-to-99 7/8 bid context.

That was down about 1/8 point on the session.

The notes continues to struggle, having dipped from their par issue price shortly after that $1 billion drive-by deal – upsized from $750 million originally – priced last Monday, and having been below par ever since then.

Both halved of Jeld-Wen’s new deal were seen about unchanged on Monday, with its 4 5/8% notes due 2025 holding steady at 100 5/8 bid and its 4 7/8% notes due 2027 hanging in around 100½ bid.

The Klamath Falls, Ore.-based door and window manufacturer had priced $400 million of each of those notes at par on Thursday in a scheduled forward calendar offering.

Algeco up on financing deal

Away from the new issues, a trader said that Algeco Scotsman 10¾% notes due 2019 had zoomed by more than 9 points on the session, ending at 100¼ bid, on volume of more than $10 million.

The company’s 8½% notes due 2018 gained 5/8 point on the day to end at 99 7/8 bid, on volume of over $23 million.

The trader noted that the bonds were up on the news that the Baltimore-based provider of modular space and secure portable storage containers and temporary structure had announced a senior debt package arranged by a syndicate of lending institutions and a preferred stock facility with a group of other financing providers.

Proceeds from the financing – or any debt issued in lieu of the loans under the facilities, which could be in the form of loans, securities or other debt instruments – may be publicly or privately placed and may be denominated in euros or dollars. They will be used to refinance the Algeco group’s existing capital structure, including its senior secured notes due 2018 and senior unsecured notes due 2019. (See related story elsewhere in this issue.)

CenturyLink seen better

Elsewhere, CenturyLink’s bonds were seen solidly better across the board.

The Monroe, La.-based wireline telecom operator’s 6¾% notes due 2023 jumped by 1 3/8 points, to 96½ bid, with over $20 million traded, while its 7½% notes due 2024 gained almost 1 full point to finish at 97½ bid, with over $10 million of volume.

The notes rose in tandem with CenturyLink’s New York Stock Exchange-traded shares, which rose by $1.20, or 8.18%, to end at $15.87. Volume of 37.2 million shares was more than 2½ times the norm.

The shares rose, and brought the bonds along for the upside ride, on the news that the company had signed a big contract with the state of Pennsylvania to provide data networking services to its many thousands of employees.

PetSmart gets pummeled

On the downside, PetSmart’s several issues were taking a pounding on Monday.

The Phoenix-based pet food and pet supplies retailer’s 8 7/8% notes due 2025 closed down 5/8 point, at 74½ bid, with over $32 million traded.

Its 7¾% notes due 2022 “traded like a real dog today,” one of the traders quipped, noting that the bonds swooned by over 2½ points to end at 71 bid, on volume of over $30 million.

The company’s 5 7/8% notes due 2025 lost 1 ½ points to end at 84½ bid, with about $9 million traded.

A market source cited news reports indicating investor angst over the possibility that PetSmart – which took on substantial debt earlier this year to buy Chewy.com, an online seller of pet supplies – might decide to spin the valuable segment off to its private-equity sponsors, aided by a loose covenant structure that would allow such a transaction to take place.

Indicators stay strong

Statistical market performance measures were higher across the board for a second consecutive session on Monday. Those indicators had turned better on Friday after having been mixed on Thursday, which in turn had followed Wednesday’s lower-all around performance, the first such losing session since Nov. 15.

The KDP High Yield Daily Index rose by 4 basis points on Monday to close at 71.87. It had been unchanged on Friday at 71.83, after having lost 5 bps on Thursday to finish there.

Its yield meantime was unchanged on Monday at 5.28%. In Friday, it had come in by 1 bp, versus Thursday’s 2 bps widening.

The Markit CDX Series 29 index gained more than 1/16 point on Monday, ending at 108 bid, 108 1/16 offered.

It was the third straight gain for the index, which had also firmed by 7/32 point on Friday and 1/16 point on Thursday, following losses in two straight sessions before that.

The Merrill Lynch North American High Yield Master II Index was up by 0.065% on Monday, its second straight gain after two sessions on the downside. It had also been up by 0.036% on Friday.

That improvement raised the index’s year-to date return to 7.288% on Monday from Friday’s 7.219% close. However, its year-to-date return remains off from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

© 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.