Morning Commentary: High-yield primary quiet; Avantor heard arranging financing for VWR purchase

By Paul Deckelman

New York, May 5 – The high-yield bond market opened up on a quiet note on Friday morning, seeming to take a breather after two consecutive busy sessions which saw $1.85 billion of new U.S. dollar-denominated and fully junk rated paper price in two tranches on Wednesday and another $2.15 billion of such paper from domestic or industrialized-country borrowers get done in four tranches on Thursday.

A source at a hedge fund observed that “the only deal being actively marketed” in the dollar sphere was Tapstone Energy LLC’s $300 million offering of five-year notes, which is being offered to investors via BofA Merrill Lynch.

However, he noted that the Oklahoma City-based independent oil and natural gas company’s prospective debt-refinancing deal, which comes with two years of call protection, isn’t expected to price until early next week.

The news that Avantor Performance Materials, Inc. plans to acquire VWR International LLC in a transaction valued at some $6.4 billion set up the likelihood of a new bond deal sometime in the coming weeks.

Avantor, a Center Valley, Pa.-based supplier of ultra-high-purity materials for the life sciences and advanced technology industries that was formed in August 2010, when New Mountain Capital purchased the business from Covidien Inc., was heard by syndicate sources to be arranging bank debt and bond financing via Goldman Sachs & Co., Barclays, and Jefferies LLC.

There were no details immediately available on the size, structure or timing of either the bank financing or the bond deal.

Radnor, Pa.-based VWR was bought by Madison Capital Partners in 2007 and went public in October 2014. It is a provider of product, supply chain, and service solutions to laboratory and production customers.

Under the agreement, VWR is being bought for $33.25 in cash per share, reflecting an enterprise value, including assumed debt, of about $6.4 billion.

Closing is expected in the third quarter, subject to the expiration of a “go-shop” period, the expiration or termination of the applicable waiting period under Hart-Scott-Rodino Antitrust Improvements Act and European Commission approval, obtaining any required clearance, consent or approval under applicable foreign antitrust laws, VWR shareholder approval, and other customary conditions.

Following the closing, New Mountain Capital will be the lead shareholder of the combined company.

In the secondary market, traders did not report any notable trading in any of the recently priced new issues, including Thursday’s deals from gaming operator Wynn Resorts Ltd., power production company GenOn Energy LLC, builder AV Homes, Inc. and metals miner New Gold Inc.

The New Gold and Wynn transactions had been quoted higher in late aftermarket trading on Thursday.

A trader said that “the only notable thing is that all these deals are pricing at the tight end to the price talk and trading to premiums.”

Sara Rosenberg contributed to this review

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