Primary quiet, though market awaits Chemours, Schulman slates; Quicken, other recent deals busy

By Paul A. Harris and Paul Deckelman

New York, May 4 – The high-yield market began the first full trading week in May on a quiet note, with no new dollar-denominated, fully junk-rated paper seen having come to market, in contrast to the $1.05 billion that priced in three tranches on Friday.

High yield syndicate sources, however, were looking forward to the expected Tuesday pricing of a sizable junk deal, with Chemours Co. – a Wilmington, Del.-based performance chemicals maker being spun off from industry giant DuPont – seen bringing a $2.5 billion equivalent three-part offering of dollar- and euro-denominated notes.

The new-deal arena also saw plastics maker A. Schulman Inc. getting ready to hit the road to market $375 million of eight-year notes.

In the secondary realm, recently priced new issues continue to see most of the action, particularly Friday’s $1.25 billion split-rated offering from online lender Quicken Loans Inc.; for a second straight session, the quasi-junk deal, attracting interest from both high-yield investors and higher-grade market participants looking for yield, was the most actively traded name in the junk space.

There was considerable activity as well for a second straight session in Friday’s 10-year issue from hotel operator Extended Stay America, Inc.

Friday’s 10-year deal from telecommunications infrastructure provider Zayo Group LLC also saw some brisk trading, as did offerings from earlier in the week from heavy equipment lessor Ahern Rentals, Inc. and semiconductor manufacturer Micron Technology, Inc.

Statistical measures of market performance were mixed on the session, after having been higher across the board on Friday. It was the second mixed day in the last three sessions.

Chemours sets talk

The primary market put up a goose egg on Monday, as no deals were priced.

However there was news.

Chemours set price talk for its $2.5 billion equivalent three-part offering of senior notes (B1/BB-).

A $1,125,000,000 tranche of eight-year notes is talked to yield in the 6¾% area.

Talk on the dollar-denominated eight-year notes shaped up at the tight end of the 6¾% to 7% initial guidance, according to a trader.

A $1 billion tranche of 10-year notes, which come with five years of call protection, is talked to yield in the 7% area.

That talk is also tight to earlier guidance that had the 10-year notes coming 25 basis points to 37.5 bps behind the dollar-denominated eight-year notes, the trader added.

The order books for the dollar-denominated tranches were heard to be at the deal size on Monday morning, a trader said.

The three-part deal also includes a €350 million tranche of eight-year notes talked to yield in the 6¼% area.

Books close at 10:30 a.m. ET on Tuesday and the deal is set to price subsequently.

Credit Suisse, J.P. Morgan, BofA Merrill Lynch, Barclays, Citigroup and Goldman Sachs are the joint bookrunners.

A. Schulman to roadshow

A. Schulman plans to start a roadshow on Tuesday for a $375 million offering of eight-year senior notes (B3/B+).

The acquisition deal is expected to price later this week.

BofA Merrill Lynch, J.P. Morgan and Citigroup are the joint bookrunners.

Proceeds will be used to help fund the acquisition of Evansville, Ind.-based global composite plastics company Citadel Plastics Holdings, Inc.

A. Schulman is a global plastics supplier, based in Fairlawn, Ohio.

Solid week, pending rates

The first full week of May could see as much as $6 billion to $10 billion of issuance, so long as interest rates remain supportive, a trader said on Monday.

The 10-year Treasury, which was yielding 2.15% Monday afternoon, sold off last week in the wake of a Federal Open Market Committee meeting that left investors with the impression that due to slowness in the U.S. economy coming out of winter and moderating job gains the Fed has its finger off the interest-rate trigger for the time being.

Outflows

Cash flows for dedicated high-yield accounts were negative on Friday, the most recent session for which data was available at press time, sources said.

High yield ETFs saw $444 million of daily outflows on Friday.

Actively managed accounts saw $110 million of outflows.

Last Thursday Lipper-AMG reported that dedicated high yield accounts sustained $859.1 million of outflows for the week to the April 29 close.

Quicken again busy

In the secondary market, a trader said “the names from Friday were active today.”

He said that Quicken Loans’ $1.25 billion split-rated (Ba2/BBB-) offering of 10-year senior notes “was the most active name. The rest of them were not big volume.”

He saw the Detroit-based online lender’s notes in a 101 to 101½ bid context.

That was roughly in the same vicinity that the notes had initially traded on Friday following the regularly scheduled forward calendar offering’s pricing at par.

At another desk, a trader pegged the new bonds up a bit more than ¼ point on the day, seeing them go out around 101 7/16 bid.

With trading coming from both traditional junk bond accounts as well as high-grade investors looking to pick up a little yield by reaching down and dabbling in a split-rated issue, Quicken was, for a second straight session, easily the biggest-volume credit.

One market source said that over $93 million of the notes had changed hands, on top of turnover exceeding $122 million on Friday.

Extended Stay, Zayo active

Back among the purely junk-rated issues that priced on Friday, a trader saw Extended Stay America’s 5¼% notes due 2025 trading between 100¾ and 101 bid.

A second trader quoted the Charlotte, N.C.-based hotel operator’s new paper at 100¾ bid, which he called down 3/8 point from the levels reached in Friday’s initial aftermarket dealings after the $500 million scheduled forward calendar deal priced at par.

As was the case on Friday, when over $58 million of the notes had traded when the issue was freed for secondary dealings, Monday’s volume of over $25 million was heavy enough to land the Extended Stay notes on the junk market’s Most Actives list.

That was also the case with Zayo Group’s 6 3/8% notes due 2025. A market source said that nearly $10 million of the notes had traded by the close.

Boulder, Colo.-based telecommunications infrastructure provider Zayo and its Zayo Capital, Inc. financing subsidiary had priced $350 million of the notes at par on Friday in a drive-by transaction that hit the market too late for any meaningful secondary dealings.

On Monday, the market source saw the Zayo bonds at 100¾ bid, a price level seconded by a trader at another shop.

A third trader located Zayo’s bonds at 100 5/8 bid, 101 1/8 offered, which he called up 1/8 point on the session.

One of the traders said that Friday’s other transaction – from Dallas-based building products provider PrimeSource Building Products – “didn’t trade all that much.”

He saw the bonds going home at 100½ to 100¾ bid.

On Friday, the company had priced $200 million 9% notes due 2023 at par, after that scheduled forward calendar offering, done via PriSo Acquisition Corp., was downsized from an originally shopped $230 million, with the other $30 million being shifted to the company’s concurrent pending term loan deal, which was upsized to $355 million from $325 million originally.

Ahern bonds ease

A trader said that Ahern Rentals’ 7 3/8% senior secured second-lien notes due 2023 were about ¼ point easier on Monday, quoting the issue at 100¼ bid, 100½ offered.

A second trader located the notes at 100 5/16 bid, calling that a loss of about 1/16 point, with over $19 million traded.

Ahern, a Eugene, Ore.-based heavy equipment rental and leasing company, priced $450 million of the notes at par on Thursday after the scheduled forward calendar deal was downsized from an original $500 million.

Going back a little further, one of the traders said that Micron Technology’s 5 5/8% notes due 2026 were going home at 99¼ bid, up 1/8 point on the day on volume of over $11 million.

Micron, a Boise, Idaho-based semiconductor manufacturer, priced $1 billion of new junk paper in an opportunistically timed drive-by offering on Monday, consisting of the $450 million of 5 5/8% notes and $550 million of 5¼% notes due 2024. Both tranches priced at par.

A muted Monday

Apart from the trading in the new and recent deals, one of the traders said that he “really didn’t see anything” outside of that.

“It was a pretty muted day in general, activity-wise, apart from those few [new-deal] things. ” he opined.

“Nothing priced and there was not a lot of price action across the board in general.

“Nothing jumped out.”

Indicators turn mixed

Statistical measures of market performance were mixed on Monday, after having been higher across the board on Friday. It was the second mixed day in the last three sessions.

For a second straight session, the KDP High Yield Daily Index edged up by 1 basis point, closing at 71.68. Those gains followed three straight losses last week.

However, its yield – which normally moves inversely to the index and typically falls when the index reading rises – did exactly the opposite, rising by 3 bps to 5.21%, after having been unchanged on Friday. It was the third rise in the yield over the last four sessions.

The Markit Series 24 CDX North American High Yield Index was unchanged on Monday, holding at the same 107¼ bid, 107 9/32 offered level at which it had ended on Friday, when it rose by 5/32 point, its first gain after four straight losses.

The Merrill Lynch North American Master II high yield index was up 0.099% on Monday, its third straight improvement; on Friday, it had moved up by 0.016%.

The latest advance lifted its year-to-date return to 3.893%, up from 3.791% on Friday, although it remained below its peak level for the year, 3.952%, set last Monday.

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