Reynolds brings drive-by add-on; recent issues stay firm; energy credits lower

By Paul Deckelman and Paul A. Harris

New York, July 18 – The high yield primary market saw one new deal come to market on Monday, as consumer food packaging maker Reynolds Group Holdings Ltd. did a quickly shopped $250 million add-on to its existing eight-year secured notes that the company sold last month.

Traders quoted the new notes in a range around their issue price.

There were no other developments Monday in the domestic primary market, although there was news coming out of the European wing of the primary market, involving prospective issuers Lecta SA, Gamenet Group SpA and United Group BV.

Back in the domestic market some of the recently priced new deals remained active and continued to trade well, including those from heavy-equipment rental company Cloud Crane, LLC, from motor oil manufacturer and marketer Valvoline Inc. and from television station ownership company Nexstar Broadcasting Group Inc.

Away from the new issues, traders saw quiet dealings on what one of them called “a typical summer Monday.”

A number of oil and natural gas names, such as Chesapeake Energy Corp., Continental Resources, Inc. and Freeport-McMoRan Inc. were lower, in line with easier world crude oil prices.

Statistical market performance measures turned firmer on Monday, after having been lower across board on Friday and mixed on Thursday. Including five consecutive gains in the past two weeks, it was their sixth higher finish in the last nine sessions.

Reynolds comes rich

In the primary market Reynolds Group priced a $250 million tack-on to its 5 1/8% senior secured notes due July 15, 2023 at 103.5 to yield 4.331% on Monday, according to an informed source.

The yield printed at the rich end of the 103 to 103.5 price talk.

Credit Suisse Securities (USA) LLC was the sole bookrunner.

The Auckland, New Zealand-based food and beverage packaging manufacturer plans to use the proceeds to refinance debt.

The issuing entities are Reynolds Group Issuer Inc., Reynolds Group Issuer LLC and Reynolds Group Issuer (Luxembourg) SA.

Lecta starts Tuesday

There was news in the European high yield primary.

Lecta SA plans to start a roadshow on Tuesday in London for a €590 million two-part offering of senior secured notes, according to a market source.

The notes are coming in tranches of six-year floating-rate notes, which come with one year of call protection, and seven-year fixed-rate notes, which come with three years of call protection.

Tranche sizes are to be determined.

The floating-rate notes will have a coupon of Euribor plus at least 600 basis points with a Euribor floor of 0%. The new issue price will be no more than 99.

The roadshow moves to Amsterdam on Wednesday and to Paris on Thursday.

The Rule 144A and Regulation S for life deal is set to price on Friday.

Joint bookrunner Deutsche Bank will bill and deliver. Credit Suisse, BBVA and UniCredit are also joint bookrunners.

Proceeds will be used to refinance debt.

Simultaneously with the launch of the notes, Lecta announced an exchange in which it is offering new floating-rate notes for its €390 million of existing senior secured floating-rate notes due 2018.

The new notes will have the same terms as a new issue of notes to be sold for cash.

On closing of the new notes and the exchange, Lecta will issue a 30-day redemption notice for its existing floating-rate notes and its €200 million of 8 7/8% senior secured notes due 2019.

Lecta is a Barcelona, Spain-based manufacturer and distributor of specialty paper for labels and flexible packaging, coated paper for publishing and commercial printing, and other print media.

Gamenet starts roadshow

Gamenet Group SpA began a roadshow on Monday for a €200 million offering of five-year senior secured notes, according to a market source.

The roadshow wraps up on Thursday, and the Rule 144A and Regulation S for life notes are set to price thereafter.

Credit Suisse is the lead left bookrunner. UniCredit, Banca IMI, Jefferies and UBS are the joint bookrunners.

The notes come with two years of call protection.

The Rome-based gaming company plans to use the proceeds to refinance its 7¼% senior secured notes due 2018.

United talk 104.75 to 105.25

United Group BV talked a €150 million tap of its 7 7/8% senior secured notes due 2020 at 104.75 to 105.25, according to a stabilization notice released on Monday.

Credit Suisse Securities (Europe) Ltd. is the stabilization coordinator.

The notes become callable after Nov. 15, 2016 at 103.938.

The prospective issuer is an Amsterdam-based cable and satellite television provider.

Reynolds holds near issue

In the secondary market, Reynolds Group’s new 5 1/8% senior secured notes due 2023 were being quoted at a 103¼ to 103 ¾ bid range, in line with the deal’s pricing at 103½.

Traders did not immediately report any aftermarket trades in the credit.

Reynolds priced the original $1.35 billion of those notes at par back on June 13, along with $800 million of 7% senior notes due 2024 and $750 million of five-year senior secured floating rate notes due 2021.

Recent issues stay firm

Traders saw considerable activity in some of the recently priced new deals, mostly at higher levels.

For instance, one said that Cloud Crane’s 10 1/8% second-priority senior secured notes due 2024 was up 5/8 point on the day, pegging the bonds at 102 5/8 bid, 103 5/8 offered.

At another desk, a market source saw the notes at 102½ bid, a gain of 5/16 point, on volume of over $16 million – one of the most active issues in Junkbondland on a generally inactive session.

The Pittsburgh-based heavy-equipment rental company had priced $470 million of the notes at par on Friday in a regularly scheduled forward calendar offering; they moved up to around 102 bid in very active dealings of around $44 million.

Valvoline’s 5 ½% notes due 2024 were 3/8-point gainers on the day, a trader seeing them finish at 103¾ bid, with over $16 million traded.

The Covington, Ky.-based motor oil manufacturer and marketer – being spun off from chemical maker Ashland Inc. – priced $375 million of the notes last Wednesday at par in a scheduled calendar deal.

The bonds immediately moved up to a 102 to 103 bid context when they hit the aftermarket and have continued firming since then.

A trader said that Nexstar Broadcasting’s 5 5/8% notes due 2024 “were up slightly today,” seeing them at 101 3/8 bid.

More than $12 million of the Irving, Texas-based television station group ownership company’s bonds moved around.

Nexstar priced $900 million of those notes last Wednesday at par in a quick-to-market transaction, and they moved up to around the 101 bid mark when they were freed for secondary dealings.

“Those were the ones that were actually trading,” one of the market sources said of the recent new deals.

Energy issues off

Elsewhere, energy-related names were seen softer on the din line with a retreat in oil prices.

Chesapeake Energy’s 8% notes due 2022 were quoted ¼ point lower at 90 bid, with around $12 million of the Oklahoma City-based oiler’s bonds traded.

Denver-based Continental Resources’ 4½% notes due 2023 were seen by a trader off about ¼ point, at 96 3/8 bid, though volume was under $10 million.

Phoenix-based Freeport-McMoRan’s 3 7/8% notes due 2023 were one of the day’s big losers, off 1 ½ points at just under 87 bid, with about $15 million traded.

The benchmark U.S. crude grade, West Texas Intermediate for August delivery, lost 71 cents on the New York Mercantile Exchange Monday, settling in at $45.24 per barrel.

Brent crude for September delivery likewise swooned by 65 cents on the London ICE Futures Exchange, settling at $46.96 per barrel.

Indicators firmer on session

Statistical market performance measures turned firmer on Monday, after having been lower across board on Friday and mixed on Thursday. Including five consecutive gains in the past two weeks, it was their sixth higher finish in the last nine sessions.

The KDP High Yield index was actually unchanged on the day, holding steady at the same 69.26 level at which it had finished on Friday, when it had eased by 2 bps after having gained 3 bps on Thursday. The index recently put together a streak of 10 consecutive trading days during which it had advanced.

Its yield meantime rose by 1 bp to 5.50%, its second straight 1-bp gain. Those two small rises occurred after the yield came in by 4 bps on Thursday to finish at 5.49% – a new low for the year – after having been unchanged on Wednesday. Before that, it had tightened over 10 straight sessions.

The Markit Series 26 CDX index rose by nearly 3/32 point on Monday after three straight losses, including Friday’s 3/32 point downturn. Those losses followed five straight gains.

The Merrill Lynch High Yield index gained 0.021% on Monday, after having retreated by 0.026% on Friday. It was the second gain in the last three sessions.

Monday’s advance raised its year-to-date return to 12.217%, up from 12.193% on Friday. The cumulative return is a little lower than last Tuesday’s 12.223%, which had been its fourth consecutive new peak level for the year.

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