Dollar pricings again absent, but Blue Line, Vermilion slate; Avis prices euro deal; Intelsat gains go on

By Paul Deckelman and Paul A. Harris

New York, March 1– March began on Wednesday in Junkbondland pretty much the same way that February had concluded on Tuesday – with no U.S. dollar-denominated and fully high-yield-rated issues seen having priced, although several new offerings were announced.

It was the third consecutive session during which no dollar-denominated junk bonds came to market.

The euro-denominated segment of the market meanwhile remained busy, as familiar domestic issuer Avis Budget Group Inc. priced €250 million of eight-year paper.

The car-rental giant’s new euro deal was the third such offering from a U.S.-based high-yield issuer in the last week.

Back among the dollar-denominated market, syndicate sources said that construction-equipment company BlueLine Rental is expected to price some $1.025 billion of seven-year paper in Thursday’s session.

And they said that Canadian oil and natural gas producer Vermilion Energy Inc. began a roadshow for a $300 million eight-year offering that is expected to price next week.

Away from the primary sphere, satellite communications company Intelsat SA’s various bonds firmed solidly in very active dealings for a third straight session, with investors greeting the news that it will merge with industry peer OneWeb LLC in what is expected to be a de-leveraging transaction.

Valeant Pharmaceuticals International, Inc.’s bonds – which got hammered down on Tuesday in response to the Canadian drugmaker’s disappointing financial results and guidance – rebounded from those closing lows in busy trading on Wednesday.

Statistical market performance measures were higher across the board on Wednesday, their second stronger session in the last three trading days. They had turned mixed on Tuesday for the third time in four sessions.

Avis €250 million

Wednesday continued a trend seen throughout the February-March crossover week: Europe generated the preponderance of primary market news in the high-yield bond market.

New Jersey-based Avis Budget Group priced a €250 million issue of eight-year senior notes (BB-) at par to yield 4½%.

The yield printed on top of yield talk in the 4½% area.

Joint bookrunner Morgan Stanley will bill and deliver for the debt refinancing deal. BofA Merrill Lynch, Citigroup and Deutsche Bank were also joint bookrunners.

Avis Budget became the third North American issuer to raise cash in the euro-denominated high-yield primary market during the past week.

Quintiles IMS Inc., headquartered in Durham, N.C., priced €1.43 billion of 3¼% senior notes due March 15, 2025 last Thursday.

On the same day San Francisco-based Levis Strauss & Co. priced a €475 million issue of 3 3/8% senior notes due 2027.

Stonegate Pub early talk

Meanwhile in the sterling-denominated market Stonegate Pub Co. Financing plc circulated initial price talk for its £585 million two-part offering of five-year senior secured notes (B2/B).

The Barclays deal includes £395 million of fixed-rate notes, which come with two years of call protection, initially guided to yield 5% to 5¼%.

The offer also includes £190 million of floating-rate notes, which come with one year of call protection, initially guided with a Libor plus 450 to 475 basis points coupon, at par.

The roadshow is scheduled to wrap up on Thursday.

BlueLine brings $1.025 billion

In the dollar-denominated market BlueLine Rental is guiding $1,025,000,000 of seven-year notes in the high 9% to 10% area.

The debt refinancing deal, which is being led by BofA Merrill Lynch, was marketed by means of a non-deal roadshow and is expected to price on Thursday.

Vermilion Energy roadshow

Vermilion Energy started a roadshow in Toronto on Wednesday for a $300 million offering of eight-year senior notes (expected ratings B2/BB-).

A roadshow in the United States is scheduled to get underway on Thursday.

The debt refinancing deal is set to price on March 8.

JP Morgan, BofA Merrill Lynch, TD, Scotia, BMO, CIBC, National Bank of Canada and RBC are the joint bookrunners.

The primary market is about to awake from its late February/early March slumbers, a trader said on Wednesday.

Wake-up call

Two forces constricting the new issue supply – an earnings blackout during which prospective issuers had to generate fresh financial numbers, and the JP Morgan Global High Yield & Leveraged Finance Conference – are now in the rearview mirror, the trader said on Wednesday.

Thursday could be a heavy day in the new-issue market, with the banks rolling out as many as four new deals, the source said.

And March is expected to be a busy month in the new deal market, the trader said.

Tuesday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Tuesday, the most recent session for which data was available at press time, the trader said.

High-yield ETFs sustained $69 million of outflows on the day.

Actively managed funds sustained $80 million of outflows on Tuesday.

However the cash flows of the dedicated bank loan funds remained strongly positive on Tuesday, the trader said.

The loan funds saw $204 million of inflows on the day.

Intelsat issues improve

Away from the new deals, a trader saw Intelsat’s various bonds up for a third consecutive session on Wednesday, saying that the Luxembourg-based communications satellite company’s Intelsat Jackson Holdings SA notes and its Intelsat (Luxembourg) SA bonds “were finally starting to kind of find their own level.”

He said that the notes were “up anywhere from ½ to 2 points” across the company’s capital structure.

As had been the case on both Monday and again on Tuesday, trading activity in the Intelsat paper was brisk, with a number of its issues dominating the Most Actives list.

Intelsat’s 5½% notes due 2023 were once again its busiest bond, tacking on another two points on Wednesday to close at 85½ bid, with over $79 million having changed hands. That was on top of the over $116 million of volume seen on Tuesday and the more than $30 million seen on Monday, with the bonds having firmed smartly over that stretch from the lower 70s.

Its 7¼% notes due 2019 firmed by 5/8 point, to end at 97 1/8 bid, with over $61 million having traded, in addition to Tuesday’s more than $84 million and the $26 million seen on Monday. Those bonds have firmed from around the 90 bid level over the last three sessions.

And its 7¼% notes due 2020 rose 11/16 point on Wednesday to end just under the 94 bid mark, with more than $53 million having traded. Those bonds were also up by around 10 points since the beginning of the week in very active trading, including volume of over $24 million on Monday and another $83 million of turnover on Tuesday.

Intelsat’s paper has sharply gained altitude on the news that it plans to merge with fellow satellite company OneWeb; the combined entity will be given a $1.7 billion equity injection by Tokyo-based tech powerhouse SoftBank, which currently owns 43% of Arlington, Va.-based OneWeb.

On Intelsat’s Tuesday conference call following the release of its 2016 fiscal fourth quarter and full-year results, company executives said that as part of that combination, Intelsat will soon launch a series of note exchanges that aim to ultimately reduce its overall debt load by as much as $3.6 billion and bring its leverage ratio of net debt as a multiple of adjusted EBITDA down as well to around 6.6 times from its current levels around 8.8 times.

Valeant bounces back

Elsewhere, Valeant Pharmaceuticals International’s bonds were seen on the rebound on Wednesday; the Laval, Que.-based drugmaker’s paper had been lower on the day on Tuesday after the company reported disappointing earnings and guidance, which had caused those bonds to lose between 1 and 2 points across the board in active dealings.

“They were still active” on Wednesday, a market source said, with its most widely traded issue, the 6 1/8% notes due 2025 up by ¼ point to 80¾ bid, on volume of over $40 million – although those notes had plunged by more than 1½ points on Tuesday on turnover of more than $97 million.

Valeant’s 6 3/8% notes due 2020 firmed by 1 3/8 points on Wednesday to end at 92¼ bid. With over $35 million having changed hands; this issue had lost 1 5/8 points on Tuesday, with over $25 million having traded.

Indicators turn higher

Statistical market performance measures were higher across the board on Wednesday, their second stronger session in the last three trading days. They had turned mixed on Tuesday for the third time in four sessions.

The KDP High Yield Daily index rose by 3 basis points on Wednesday to end at 72.66, after having lost 4 bps on Tuesday, which had been its first downturn after five straight sessions of gains.

Its yield came in by 1 bp to close at 4.93%, after having been unchanged on Tuesday and having tightened over the five consecutive sessions before that.

The Markit CDX Series 27 High Yield index posted its third consecutive gain on Wednesday after having suffered two losses in a row before that, improving by 7/16 point to end at 108 1/8 bid, 108 3/16 offered. It had also edged up marginally on Tuesday, on top of Monday’s 3/32 point rise.

And the Merrill Lynch High Yield index rose by 0.258% on Wednesday, its eighth consecutive improvement after one loss and its 13th such upturn in the last 15 trading days. The index had risen by 0.089% on Tuesday.

The latest gain upped its year-to-date return to 2.924% – its eighth straight new peak level for 2017, up from the previous zenith of 2.924% on Tuesday. It also marked the first time so far this year that the year-to-date gain has topped the 3% level.

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