Wesco clears the market; Targa prices; Sealed Air, goeasy lag; Outfront, Scientific Games trade up

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 13 – The domestic high-yield primary market remained active on Wednesday with five deals clearing the market, including one long-delayed offering.

After several revisions, Wesco PattonAir priced $2,075,000,000 of junk bonds in three tranches in a challenging acquisition/merger financing that first hit the market in mid-October.

In drive-by action, Targa Resources Partners LP and Targa Resources Partners Finance Corp. priced an upsized $1 billion issue of senior notes due March 1, 2030 (expected ratings Ba3/BB), and Murphy Oil Corp. priced a $550 million issue of eight-year senior notes (expected ratings Ba2/BB+/BB+).

Cascades Inc. and Cascades USA Inc. priced three tranches of senior notes (Ba3/BB-) in a dual-currency deal.

And Vector Group Ltd. priced a $230 million add-on to its 10½% senior notes due Nov. 1, 2026 (Caa1/B-).

Meanwhile, new paper was in focus in the secondary space. However, the reception was mixed.

Scientific Games Corp.’s two tranches of senior notes (Caa1/B-) outperformed with the notes climbing well above their issue price despite the tight pricing.

Outfront Media Capital LLC and Outfront Media Capital Corp.’s 4 5/8% senior notes due 2030 (B1/BB-) were also trading at a premium to their issue price.

However, Sealed Air Corp.’s 4% senior notes due 2027 (Ba3/BB+) and goeasy Ltd.’s 5 3/8% senior notes due 2024 (Ba3/BB-) saw lackluster receptions in the secondary space.

Endeavor Energy Resources, LP’s 5¾% senior notes due 2028 (B1/BB-) and Nexstar Media Group, Inc.’s 5 5/8% senior notes due July 15, 2027 (B3/B) were also active following the pricing of add-ons.

While both notes were trading well above their reoffer price, they were still below their levels prior to the add-on.

Outside of recent issues, Intelsat SA’s junk bonds were under pressure on Wednesday as concern mounted about legislative support for a public auction for the C-band spectrum.

Wesco clears

The news flow in the high-yield primary market remained intense on Wednesday.

The session saw Wesco PattonAir complete a challenging acquisition/merger financing that first hit the market in mid-October.

The issuer priced $2,075,000,000 of junk bonds in three tranches.

The deal featured two secured tranches (B3/B).

These included an upsized $650 million tranche of 8½% five-year notes that priced at 99.00 to yield 8.751%, in line with final talk that specified an 8½% coupon at 99 to yield 8¾%.

The tranche size increased from $600 million.

The secured portion of the deal also included a downsized $900 million tranche of 9% seven-year notes that priced at 99.00 to yield 9.197%, in line with talk that specified a 9% coupon at 99 to yield 9.2%.

The tranche size decreased form $950 million.

The secured portions of the deal also underwent covenant changes (see related story in this issue).

In a sole unsecured tranche, a downsized $525 million amount of 13 1/8% eight-year senior notes (Caa2/CCC+) priced at 97.00 to yield 13.755%, again in line with talk that specified a 13 1/8% coupon at 97 to yield 13.76%.

The tranche size decreased from $550 million.

On Wednesday morning, dealers announced an additional $100 million tranche of 8.25-year PIK holdco notes with talk of 13¾% (PIK only) at par.

There was no further word on that tranche at press time.

Last week, a $600 million term loan was withdrawn from the market, and proceeds were shifted to the bonds.

Pricing on Wesco ballooned as it wound its way through the market.

The five-year secured notes, which priced to yield 8¾%, had earlier been talked to yield 8¼% to 8½%.

The seven-year notes, which came to yield 9.197%, had earlier been talked to yield 8¾% to 9%.

The unsecured notes, said by sources to have faced the most resistance from investors, and which priced to yield 13.755%, were initially in the market talked at a spread to the seven-year secured notes that, at the time, would have implied a yield in the low-to-mid 11% area.

Targa upsized and tight

Targa Resources priced an upsized $1 billion issue of senior notes due March 1, 2030 (expected ratings Ba3/BB) at par to yield 5½% in a drive-by.

The issue size increased from $750 million.

The yield printed at the tight end of the 5½% to 5¾% yield talk. Initial guidance was in the high 5% area.

Cascades dual-currency deal

Cascades priced three tranches of senior notes (Ba3/BB-) in a dual-currency deal.

It included an upsized $350 million amount of notes due Jan. 15, 2026 that priced at par to yield 5 1/8%.

The tranche size increased from $300 million. The yield printed at the tight end of yield talk in the 5¼% area. Initial talk was in the low 5% area.

The deal also included a $300 million amount of notes due Jan. 15, 2028 that priced at par to yield 5 3/8%.

The yield printed at the tight end of yield talk in the 5½% area. Initial talk was in the mid 5% area.

The transaction also included a Canadian dollar-denominated tranche: C$175 million of notes due Jan. 15, 2025 that priced at par to yield 5 1/8%, at the tight end of yield talk in the 5¼% area.

Murphy’s drive-by

Murphy Oil Corp. priced a $550 million issue of eight-year senior notes (expected ratings Ba2/BB+/BB+) at par to yield 5 7/8%.

Initial talk had the public deal coming to yield in the 6% to 6¼% area.

And Vector Group priced a $230 million add-on to its 10½% senior notes due Nov. 1, 2026 (Caa1/B-) at 98.501 to yield 10.81% on Wednesday, according to market sources.

The issue price came in line with unofficial guidance, according to a trader.

The calendar

The Wednesday session also generated news of deals that remain on the active forward calendar.

ASGN Inc. talked its $500 million offering of 8.5-year senior notes (B2/B) to yield 4¾% to 5%.

Official talk comes tight to initial guidance in the 5% area.

Books were scheduled to close late Wednesday, and the deal is set to price Thursday morning.

And Israel-based Teva Pharmaceutical Industries Ltd. (Ba2/BB/BB) set initial price talk in its $1.5 billion equivalent two-part offering of non-callable notes due January 2025, coming in dollar- and euro-denominated tranches.

The dollar-denominated notes have early talk in the high 7% area.

The euro-denominated notes have early talk in the mid-to-high 6% area.

An international roadshow, underway now, is set to wrap up on Monday.

Scientific Games trades up

Scientific Games’ two tranches of senior notes were trading well above their issue price in high volume activity in the secondary space.

The gaming company’s 7% senior notes due 2028 were seen at 101¼ bid, 101½ offered, according to a market source. More than $77 million of the bonds were on the tape by the late afternoon.

The market for the 7¼% senior notes due 2029 was 101 7/8 bid, 102 1/8 offered. The bonds saw more than $50 million in reported volume during Wednesday’s session.

While Scientific Games had the lowest credit rating of the six issuers that priced drive-by deals during Tuesday’s session, the company’s tranches were the best performers.

The notes priced tight. However, they still carried a comparatively high yield to recent issues and proceeds were being used to refinance its soon-to-mature issue, sources said.

Scientific Games priced a $700 million tranche of the 7% senior notes at par in a Tuesday drive-by.

The yield printed at the tight end of the 7% to 7¼% yield talk. Initial talk was 7¼% to 7½%.

The deal also included a $500 million tranche of the 7¼% notes which priced at par.

Pricing also came at the tight end of the 7¼% to 7½% yield talk. Initial talk was 7½% to 7¾%.

Proceeds will be used to redeem the gaming company’s 10% senior notes due 2022 in full.

Outfront at a premium

Outfront Media’s 4 5/8% senior notes due 2030 were also trading at a premium to their issue price on Wednesday, despite pricing tight.

The notes were seen at 101 bid, 101¼ offered, a market source said. The bonds saw more than $90 million in reported volume during Wednesday’s session.

Outfront priced a $500 million issue of the 4 5/8% notes at par on Tuesday.

The yield printed at the tight end of the 4 5/8% to 4¾% yield talk and tight to early guidance in the high 4% area.

Sealed Air weak

Sealed Air’s 4% senior notes due 2027 saw a lackluster reception in the secondary space.

While there were some buys of the notes just over par, the only real bid for the notes was at 99 7/8, a market source said.

The notes were active with about $30 million in reported volume during Wednesday’s session.

They were also lagging their issue price after breaking for trade on Tuesday and were changing hands in a range of 99¾ to par, another source said.

The lackluster reception for the notes in the secondary space was attributed to the light coupon.

Sealed Air priced a $425 million issue of the 4% notes in a Tuesday drive-by.

The yield priced at the tight end of the 4% to 4¼% yield talk and inside of initial talk in the 4¼% area.

goeasy lags

goeasy’s 5 3/8% senior notes due 2024 also saw a lackluster reception in the secondary space with the notes just above par.

While the 5 3/8% notes changed hands as high as par 3/8, the primary market in the notes was 99¾ bid, par offered.

The notes also saw about $30 million in reported volume.

While the notes carried a higher coupon than the other deals to hit the market on Tuesday, the company was a Canadian subprime lender, a market source said.

While the deal was upsized and priced at the tight end of talk, some buy-side sources were not interested in becoming involved with the credit.

goeasy priced an upsized $550 million issue of the 5 3/8% notes at par on Tuesday. The issue size increased from $500 million.

The yield printed tight to yield talk in the 5½% area. Initial talk was in the mid 5% area.

Add-ons

Endeavor Energy’s 5¾% senior notes due 2028 were active on Wednesday after the company priced an add-on during the previous session.

While trading at a premium to the reoffer price, the 5 ¾% notes were still changing hands below their previous level.

The market for the 5¾% notes was 104¼ bid, 104½ offered, a market source said. Prior to the add-on, the notes were changing hands at 106.

Endeavor priced a $500 million add-on to its 5¾% at 104.00 to yield 4.991% in a Tuesday drive-by.

The add-on spurred activity in the notes, which saw more than $23 million in reported volume during Wednesday’s session.

Nexstar Media’s 5 5/8% senior notes were also active on Wednesday and trading at a premium to their reoffer price,

The 5 5/8% notes were seen at 105 1/8 bid, 105½ offered, according to a market source. They stood poised to close the day at 105¼.

More than $33 million of the bonds were on the tape during Wednesday’s session.

Nexstar priced a $665 million add-on to the 5 5/8% notes at 104.875 to yield 4.853% in a Tuesday drive-by.

Prior to the add-on the notes were changing hands at 106.

Intelsat under pressure

Intelsat’s junk bonds were under pressure on Wednesday as concern mounted about congressional support for a public auction of the C-band spectrum.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 were among the most actively traded issues in the secondary space with the notes sliding 6 points to close the day at 70½, according to a market source.

The notes saw more than $150 million in reported volume.

Intelsat’s 9½% notes due 2023 slid 7¾ points to 77½ with more than $68 million in reported volume.

The 8½% senior notes due 2024 dropped 2¼ points to 96¾.

The sell-off was sparked over concern about congressional support for a public auction for the C-band spectrum to support wireless network providers in the adoption of 5G, according to a market source.

Intelsat and a consortium of other satellite broadcasters had been lobbying for a private auction.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed, and largely flattish on Tuesday, a market source said.

High-yield ETFs sustained $60 million of outflows on the day.

Actively managed high-yield funds saw $10 million of inflows on Tuesday, according to the source who added that the combined funds had seen $17.8 billion of net inflows in the year 2019, to Tuesday's close.

Indexes

Indexes were down slightly on Wednesday after a mixed start to the week.

The KDP High Yield Daily index dipped 1 bp to close Wednesday at 71.1 with the yield now 5.23%.

The index dropped 14 bps on Tuesday.

The ICE BofAML US High Yield index slid 10.3 bps with the year-to-date return now 11.882%.

The index gained 4.3 bps on Tuesday but remained shy of the 12% threshold which the index dipped below last Friday.

The CDX High Yield 30 index dipped 20 bps to close Wednesday at 107.3. The index dropped 14 bps on Tuesday.

© 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.