Nuance drives by, PVH taps euro market; new Reynolds bonds continue rise; Toys up on re-fi news

By Paul Deckelman and Paul A. Harris

New York, June 14 – The recently red-hot high yield new-issue market dialed things back a little on Tuesday, failing to top the $1 billion mark for the first time in more than a week.

Syndicate sources said that just one new dollar-denominated and fully junk-rated issue from a domestic or industrialized-country borrower came to market during the session – a quickly shopped $300 million issue of eight-year notes from software provider Nuance Communications, Inc.

That was a far cry from Monday’s session – one of the busiest seen so far this year – when just over $4.9 billion had been priced by five issuers in a total of seven tranches.

Monday’s signature deal – the $2.9 billion three-part behemoth of a bond deal from Reynolds Group Holdings Ltd., the maker of the eponymous brand-name aluminum foil product – was seen doing well in the aftermarket in heavy trading, with its eight-year notes piece particularly strong.

Market sources also saw brisk dealings in some of the other deals that priced on Monday, including US Foods Holding Corp., AK Steel Holding Corp. and L Brands Inc.

Friday’s offering from Weatherford International Ltd. continued to lose ground.

Away from the dollar-denominated new-deal market, the syndicate sources reported a relatively unusual euro-denominated deal from a domestic company, the apparel maker PVH Corp.

Apart from the new deals, Toys “R” Us’ existing bonds shot up on positive news from the specialty retailer on its debt refinancing plans.

Statistical market performance measures were lower on Tuesday for a third consecutive session, after having been mixed last Thursday.

Nuance atop sweetened talk

Nuance Communications, Inc. priced Tuesday's sole dollar-denominated deal, a $300 million issue of eight-year senior notes (Ba3/BB-) that came at par to yield 6%.

The yield printed on top of revised yield talk; earlier talk, as well as initial guidance, were in the 5¾% area.

Morgan Stanley and Barclays were the joint bookrunners for the drive-by deal.

The Burlington, Mass.-based provider of voice and language solutions plans to use the proceeds for general corporate purposes including potential acquisitions.

In the wake of Nuance, the dollar-denominated active forward calendar is clear heading into the Wednesday session.

PVH eight-year bullet

In the European market, New York-based PVH Corp. priced a €350 million issue of non-callable eight-year senior notes (Ba2/BB+) at par to yield 3 5/8%.

The yield printed on top of yield talk.

Active bookrunner Barclays will bill and deliver.

BofA Merrill Lynch, Citigroup, JPMorgan and RBC were the joint bookrunners.

Proceeds will be used for general corporate purposes.

The issuer is a New York City-based company that designs, sources, manufactures and markets men’s, women’s and children’s apparel and footwear.

Verallia talk 102.5 area

France-based Verallia Packaging SAS talked a €500 million add-on to the Horizon Holdings III SAS 5 1/8% senior secured notes due Aug. 1, 2022 in the 102.5 area.

Books close Wednesday.

Credit Suisse, Deutsche Bank, Barclays, BNP Paribas, Nomura and SG are managing the sale.

The notes become callable after Aug. 1, 2018 at 102.563.

Verallia is one of two euro-denominated deals on the active calendar.

Cott Corp., with headquarters in Toronto and Tampa, is on the road in Europe with a €450 million offering of eight-year senior notes (B3/B-).

The roadshow wraps up on Thursday in Paris.

Joint bookrunner Deutsche Bank will bill and deliver. JP Morgan, Wells Fargo, BofA Merrill Lynch and SunTrust are also joint bookrunners.

Mixed flows

The cash flows of the dedicated high yield bond funds were mixed on Monday, the most recent session for which data was available at press time, a trader said.

High yield ETFs sustained $194 million of outflows on the day.

It was the second consecutive big daily outflow from ETFs, the trader said, noting that they sustained $666 million of outflows last Friday.

The now-distinct possibility that voters in England might choose to leave the European Union when they vote next week appears to be eroding the appetite for risk, the trader remarked.

Meanwhile the flows of the actively managed funds were flat to slightly positive, at $5 million of inflows, on Monday, the trader said.

Reynolds rolls on

In the aftermarket, “Reynolds was very busy, the largest volume,” one of the traders said.

He saw its new 5 1/8% senior secured notes due 2023 trading at 100¼ bid, a ¼-point gain on the day, with over $137 million of the notes having changed hands.

The new Reynolds 7% senior unsecured notes due 2024 had firmed to 101 3/8 bid, a gain of 7/8 on the day, with over $63 million having traded.

And its floating-rate senior secured notes due 2021 were being quoted at 99½ bid, up ¼ point on the day, with over $44 million traded.

A second trader saw the bonds at 100 ¼ bid, 101 3/8 bid and 99 ¼ bid, respectively.

The Auckland, NZ.-based maker of the popular Reynolds Wrap aluminum foil and other consumer foods packaging products, had priced $750 million of the floaters at 99 to yield 350 basis points over Libor in a quick-to-market offering on Monday.

It had also priced $1.35 billion of the secured seven-year notes and $800 million of the unsecured eight-year notes, both at par.

Monday issues active

Among the other deals that got done on Monday, a trader saw the US Foods 5 7/8% notes due 2024 at 100½ bid.

A second saw the paper at 100 3/8 bid, with over $58 million having traded.

The Rosemont, Ill.-based foodservice distributor priced $600 million of those notes at par in a quick-to-market offering that was upsized from $500 million originally.

L Brands’ new 6¾% notes due 2036 – an unusual 20-year tenor – were seen trading at 100 1/8 bid, a gain of ¼ point on the session. More than $23 million of the notes had traded.

The Columbus, Ohio-based retailer had priced an unscheduled $700 million of the notes at par on Monday; the notes initially eased a little from their issue price, but regained that lost ground on Tuesday.

AK Steel’s new 7½% senior secured notes due 2023 “were hanging in there right around their [par] issue price,” a trader said. More than $38 million traded on Tuesday.

The West Chester, Ohio-based specialty steel manufacturer had priced a quickly shopped $380 million of the notes at par on Monday.

While those notes were steady, the company’s existing paper was easier, as investors reacted negatively to the addition of a dollop of structurally senior new secured debt to the capital structure.

Its unsecured 7 5/8% notes due 2020 were down a deuce on the day at 87 bid, with $11 million of turnover.

Weatherford gets walloped

For a second straight session, Weatherford International Ltd.’s two tranches of new bonds were getting pushed lower.

Traders did not have an immediate explanation, other than weakness in the overall energy sector on lower oil prices.

The Swiss oilfield services company’s 7¾% notes due 2021 fell to 97¾ bid on Tuesday, with over $26 million traded, a market source said, while its 8¼% notes due 2023 backtracked to below 97 bid, on volume of $32 million.

Both of those tranches had been trading around 98½ at the close on Monday – and both $750 million tranches had actually priced at par in a regularly scheduled forward calendar transaction on Friday.

Toys rakes in the gains

Away from the new deals, Toys ‘R’ Us’ debt was boosted Tuesday by news out late Wednesday regarding a refinancing plan.

A trader said the 10 3/8% notes due 2018 jumped 8 points from early June trades to end at 99. The 8½% notes due 2017 were seen a shade higher at 98.

The trader also saw the 7 3/8% notes due 2018 rising “almost 7½ points” to 89.

“It’s been a month though” since the last round-lots trades, he said.

Another market source pegged the 7 3/8% notes at 89¼ bid, up nearly 9 points on the day.

As for the term loan B-4, it improved to 87½ bid, 89½ offered from about 84½ bid, 86½ offered, according to a trader.

The company disclosed on Monday that noteholders of about half of its $850 million in debt maturing in 2017 and 2018 have agreed to support the refinancing by participating in an exchange offer.

The plan is to refinance up to about 89% of the existing notes in the exchange offer.

Additionally, the company disclosed that a third party has agreed to purchase up to $50 million of new debt, subject to the successful completion of the exchange offer.

“This is an important step in refinancing the other bonds and loans in the structure because the 2017, 2018 maturity wall threatened to force the company into a free fall restructuring,” wrote Gimme Credit LLC analyst Kim Noland in a comment released Tuesday afternoon. “This all was likely made easier because of Toys’ improving results for the last holiday season and the 2015 fiscal year.”

Toys ‘R’ Us is a Wayne, N.J.-based toy retailer.

Indicators’ loss deepens

Statistical market performance measures were lower for a third consecutive session on Tuesday, after having been mixed last Thursday.

The KDP High Yield Daily index fell by 34 basis points on Tuesday to end at 67.61, its third straight loss. On Monday, it retreated by 16 bps.

Its yield widened by 12 bps Tuesday, to end at 6.15, its third straight widening. It had also risen by 5 bps on Monday.

The Markit Series 26 CDX North American High Yield index was down by ¼ point on Tuesday to end at 102 bid, 102 1/32 offered, its fourth straight loss.

On Monday, it had fallen just over half a point.

The Merrill Lynch North American High Yield Master II index was down by 0.531% on Tuesday, after having eased by 0.218% on Monday.

That dropped its year-to-date return to 8.318% from Monday’s 8.897%, which in turn was down from its peak level for the year so far of 9.433%, set last Wednesday.

© 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.