Europe dominates primary as Kloeckner, CMC price; CMA CGM upsizes; Intelsat busy

By Paul Deckelman and Paul A. Harris

New York, July 6 – The domestic dollar-denominated high-yield primary market continued its early-summer siesta on Thursday, with no issues seen even being actively marketed, let alone having priced. It was the fourth straight session of inactivity. The most recent pricings were recorded last Thursday, June 29.

But in the absence of dollar-market activity, the European high-yield market continued to hold center stage, with a pair of deals heard by syndicate sources as having priced.

German plastics packaging manufacturer Kloeckner Pentaplast brought a €395 million issue of six-year PIK toggle notes to market. Proceeds are slated for debt refinancing and to fund an acquisition.

Italian civil engineering company CMC di Ravenna meantime priced €250 million of five year notes. It plans to use the proceeds for debt repayment.

The European primary sources said French container-ship operator CMA CGM SA upsized its five year note offering and set yield talk as it wrapped up the roadshow for its deal, meaning a Friday pricing is a possibility.

Back in the domestic market, traders said that flows remained light as the July 4 holiday week was drawing to a close and they saw no overwhelming market theme.

Recently priced new issues were mostly quiet. Intelsat Jackson Holdings SA’s eight-year megadeal and j2 Cloud Services, LLC’s eight-year notes were the only recent issues to crack Thursday’s Most Actives list. Other Intelsat paper was also involved in respectably busy trading.

Rite Aid Corp.’s most widely traded issue was in retreat for a second straight session, giving back some of the gains that paper notched on last week’s news of a major asset sale by the drugstore chain operator.

Statistical market performance measures were lower across the board for a second consecutive session on Thursday. They had turned southward on Wednesday for the first time since June 21, after being mostly higher on Monday heading into the holiday break and mixed for the four consecutive sessions before that.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – fell deeper into the red this week, the flows’ third downturn in a row after three straight weeks before that of gains, according to numbers released on Thursday. Some $1.16 billion more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, July 5, on top of net outflows of $1.74 billion last week, ended June 28, and $128 million during the week ended June 21 (see related story elsewhere in this issue).

Kloeckner prices atop talk

July in the high-yield primary market has been an all-Europe show and Thursday was no exception.

Germany’s Kloeckner Pentaplast priced a €395 million issue of six-year PIK toggle notes (S&P: CCC+) at par to yield 8½%.

The yield printed on top of talk that had been fixed in the 8½% area.

The notes pay a cash coupon of 8½%, which steps up by 75 basis points to 9¼% for PIK payments.

Credit Suisse was the left bookrunner. Deutsche Bank and Rabobank were the joint bookrunners.

Proceeds will be used to refinance debt and to help fund the acquisition of Linpac Group.

CMC prints at 6 7/8%

CMC di Ravenna priced a €250 million issue of five-year senior notes (B2/B) at par to yield 6 7/8%.

BNP Paribas and UniCredit Bank were the joint global coordinators and joint physical bookrunners.

The Ravenna, Italy-based civil engineering firm plans to use the proceeds to repay debt.

CMA CGM upsizes

Looking to the final session of the week, CMA CGM upsized its offering of five-year senior notes (B3/CCC+) to €600 million from €500 million and set yield talk in the 6½% area on Thursday.

The issuer is also considering a carve-out tranche of seven-year notes with yield talk at 50 basis points wide of the five-year notes.

Bookrunner BNP Paribas will bill and deliver for the debt refinancing deal.

Other possible European business ahead of the coming weekend includes France-based Antalis International with a €325 million offering of seven-year senior secured notes (B3//B) and RAC Group with a £275 million offering of Class B1 secured notes that have a 5.5-year expected maturity.

Meanwhile the only whiff of news in the dollar-denominated primary market comes from British performance automobile maker McLaren Automotive which is roadshowing a £525 million equivalent two-part offering of five-year senior secured notes, to be sold in dollar- and euro-denominated tranches.

The European roadshow wraps up on Friday.

A roadshow in the United States is set to take place during the week ahead.

The sound of crickets pervades the new issue market in the United States, in part because the Independence Day holiday on Tuesday turned into a four- or five-day weekend commencing last Friday for numerous market participants, sources say.

Some on the buyside have extended this summer holiday all the way to the coming weekend, an investment banker said on Thursday.

Hence news flow in the dollar-denominated primary market should remain muted into the coming weekend.

Summertime stillness

In the secondary market, a trader characterized Thursday’s session as “fairly quiet – which is not surprising” for the week of July 4, particularly with many market participants having taken the whole week off.

He said that “we’re assuming” that Friday would be equally quiet, if not more so.

Dollar-denominated domestic primary activity will resume “next week, at the earliest,” and he opined that “we’d like the market, hopefully,” to be busier in the upcoming week.

Intelsat stirs interest

Among specific issues, the trader said that Intelsat’s recently priced 9¾% notes due 2025 “were pretty busy, volume-wise, today,” with over $25 million of that paper changing hands, topping the junk market’s Most Actives list.

But he said that the bonds “didn’t really go anywhere much,” staying right around the par level.

A second market source also saw those notes finishing right at par, calling them up 1/8 point on the day.

However, at another desk, a trader pegged the bonds in a range of 99 3/8 to 99¾, calling that down 1/8 to ¼ point on the day.

That $1.5 billion offering by the Luxembourg-based communications satellite company’s wholly owned Intelsat Jackson Holdings subsidiary priced at par on June 19 in a quick-to-market transaction and has orbited around that issue price ever since then.

Several other more established Intelsat issues were also seen trading around. One market source saw the company’s 5½% notes due 2023 finishing at 82 7/8 bid, down 3/8 point on the session on volume of more than $15 million.

The Intelsat Luxembourg SA 7¾% notes due 2021 were quoted up ¾ point, ending at 55 bid.

There was no fresh financial news out on the company. But Intelsat did note the successful launch on Wednesday of the company’s Intelsat 35e satellite via billionaire tech entrepreneur Elon Musk’s SpaceX Falcon 9 launch vehicle. That lift off, from Cape Canaveral, Fla., had been delayed twice over the previous several days due to computer glitches aboard the launcher.

j2 Cloud comes off peak

Elsewhere among the recently priced deals, a market source said that j2 Cloud Services’ 6% notes due 2025 eased slightly, calling them off 1/8 point on the day, as the issue ended at an even 103 bid on “fairly respectable” volume of over $9 million.

The Los Angeles-based internet cloud services provider’s $600 million regularly scheduled forward calendar offering had priced at par on June 22 after having been upsized from an originally shopped $550 million.

It quickly jumped above the 102 bid level in initial aftermarket dealings and continued to strengthen to current levels above 103 bid after that.

Rite Aid retreat continues

Away from the new or recently priced issues, Rite Aid’s most actively traded issue was down for a second consecutive session on Thursday.

A trader said the company’s 6 1/8% notes due 2023 “were pretty busy – with all of the deal news going on, they were off about ¾ point.”

At another desk, the bonds were seen down by around 13/16 point on the day, finishing at 97 11/16 bid, with around $15 million traded.

A third market source pegged the notes at 98 bid, calling them down ½ point.

Those notes had also eased by around ¼ point on Wednesday, backing off from some of the sizable gains that the credit had racked up over the previous several sessions on the news that Camp Hill, Pa.-based Rite Aid, the third-largest U.S.-based drugstore chain operator, would sell 2,186 of its roughly 4,600 stores to larger industry rival Walgreens Boots Alliance Corp. for some $5.125 billion, promising to use most of the net proceeds from that transaction to pay down its more than $7 billion of balance-sheet debt and cut its 6.8 times leverage ratio of net debt as a multiple of trailing adjusted EBITDA in half.

That sale follows the decision by the two companies to not proceeds with the merger agreement they had unveiled back in October 2015, fearing that the deal would not gain the approval of federal antitrust regulators.

Energy names not active

A trader noted the complete lack of trading in major energy sector credits, which had recently been firming smartly in line with an eight-session rise in world crude oil prices, but which had fallen back, some on sizable volume, on Wednesday, when crude fell by more than $1 per barrel on world commodity markets.

Crude recovered some of that on Thursday, with West Texas Intermediate for August delivery ending up 39 cents per barrel on the NYMEX, settling at $45.52.

But “the names that would trade momentum-wise with that would be the California Resources’ 8s, they didn’t really trade much at all today.

“A lot of times you see Oasis Petroleum’s 6 7/8 as well. But there really was no volume on either one of those. People don’t know which direction to go.”

Indicators remain lower

Overall, a trader suggested, “there were not a lot of big movers, not a ton of volume – nothing really notable.”

Statistical market performance measures were lower across the board for a second consecutive session on Thursday. They had turned southward on Wednesday for the first time since back on June 21, after being mostly higher on Monday heading into the holiday break and mixed for the four consecutive sessions before that.

The KDP High Yield Daily Index lost 5 basis points on Thursday to end at 72.07, its second straight loss. The index had plunged by 10 bps on Wednesday after being unchanged on Monday and retreating by 2 bps last Friday.

The index was not published on Tuesday in observance of the Independence Day holiday in the United States.

Its yield rose by 2 bps for a second session in a row, to 4.99%, after being unchanged on Monday and rising by 1 bp on Friday, which was its first widening out after coming in over the previous four straight trading days.

The Markit CDX Series 28 High Yield Index finished down by more than 5/16 point on Thursday, at 106 7/16 bid, 106 ½ offered, its third successive loss. It had also been down 3/16 point on Wednesday and was marginally lower on Tuesday, when the index did publish despite the holiday.

And the Merrill Lynch North American High Yield Index was down for a second straight session, retreating by 0.155%, after easing 0.009% on Wednesday – its first setback after eight straight advances before that, including gains of 0.017% on Tuesday, when the index published even with the market closed for July 4, and 0.067% on Monday.

Thursday’s downturn dropped the index’s year-to-date return to 4.828% from 4.99% on Wednesday. Those levels remain below its high point for the year to date of 5.173%, recorded on June 14.

© 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.