Platform, Precision, Titan price, trade actively; market weak again; funds out $622 million

By Paul Deckelman and Paul A. Harris

New York, Nov. 8 – The high-yield primary market saw a trio of deals price during Thursday’s session, collectively generating about $1.45 billion of new dollar-denominated and fully junk-rated paper, roughly double Wednesday’s issuance from a pair of transactions, according to data compiled by Prospect News.

All three of the day’s issues were forward calendar offerings.

Chemicals producer Platform Specialty Products Corp. had the big deal of the day, $550 million of eight-year notes, which priced at a discount to par.

There was also pair of $400 million deals, with vehicle wheel and tire manufacturer Titan International Inc. rolling out an issue of six-year secured notes while Canadian oilfield services company Precision Drilling Corp. brought an eight-year unsecured offering.

Secondary market traders said that all three of the day’s transactions saw brisk aftermarket activity, with Precision Drilling’s new notes doing especially well.

But a planned new deal from NRG Energy, Inc. failed to materialize. The electricity generator announced an $870 million offering of 10.25-year senior notes in the morning but after the close said it was not going ahead due to market conditions.

Traders meantime said that recent new issues such as Kratos Defense & Security Solutions, Inc. and QEP Resources Inc. traded busily – each still at hefty premium to their respective issue prices, but both off their recent highs.

Away from the new issues, it was another day of market weakness amidst investor angst over weak earnings and uncertainly about what, if anything, will be coming out of Washington in terms of tax code changes.

Cenveo Inc. was one of the big losers on the day after the company reported third-quarter results that included a sizable net loss versus a year-ago profit, completely missing analysts’ expectations. The news overshadowed a company announcement of an asset sale.

Oil and natural gas company names such as California Resources Corp. and Denbury Resources Inc. lost ground, failing to be helped by an upturn in world crude oil prices after two straight sessions of decline.

Other losers included names such as Valeant Pharmaceuticals International Inc., Tesla Inc. and Rite Aid Corp.

Level 3 Communications had a particularly big loss on the day.

But other telecommunications operators recently under intense pressure, such as wireline telecommunications providers like Frontier Communications Corp. and CenturyLink, Inc. were rebounding from their recent depths.

Statistical market performance measures were down for a third consecutive session on Thursday.

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 – continued their recent negative trend this week, with $622 million more leaving those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, on top of the $1.2 billion outflow reported last Thursday (see related story elsewhere in this issue).

Platform at a discount

In a busy Thursday primary market session, Platform Specialty Products priced a $550 million issue of 5 7/8% eight-year senior notes (Caa1/B+) at 99.212 to yield 6%.

The yield printed at the wide end of yield talk that had been set in the 5 7/8% area. That talk came in line with initial talk in the high 5% area.

Credit Suisse Securities (USA) LLC, Barclays, Goldman Sachs & Co., Citigroup Global Markets Inc. and UBS Investment Bank were the joint bookrunners for the debt refinancing deal.

Precision Drilling atop talk

Precision Drilling priced a $400 million issue of senior notes due Jan. 15, 2026 (B3/BB/BB-) at par to yield 7 1/8%.

The yield printed on top of yield talk that was fixed in the 7 1/8% area.

Joint bookrunner RBC Capital Markets LLC will bill and deliver. Credit Suisse Securities (USA) LLC is also a joint bookrunner.

The Calgary, Alta.-based oilfield services company plans to use the proceeds to fund a concurrent tender offer for its 2020 notes and a portion of its 2021 notes.

Titan secured deal prices

Titan International priced a $400 million issue of six-year senior secured notes due 2023 (B3/B-) at par to yield 6½%.

The yield printed on top of the 6½% area yield talk.

Goldman Sachs & Co. was the bookrunner.

The Quincy, Ill.-based company plans to use the proceeds to finance the repurchase of its $400 million of 6 7/8% senior secured notes due 2020 via a tender offer.

NRG postpones

NRG Energy was in the market with an $870 million offering of 10.25-year senior notes (expected ratings B1/BB-) – but the drive-by deal was a no-show during the session and then after the close the company said it was no longer going ahead, blaming “broader market conditions.”

The deal was marketed by means of a Thursday morning conference call with investors and had been expected to price by Thursday’s close.

Citigroup Global Markets Inc. was the left bookrunner for the Rule 144A and Regulation S with registration rights offer. Credit Agricole CIB and Deutsche Bank Securities Inc. were joint bookrunners.

The Princeton, N.J.-based wholesale power-generation company had planned to use the proceeds to fund a tender for its 6 5/8% senior notes.

Canyon talk 10¾% to 11%

Canyon Consolidated Resources, LLC talked its $375 million offering of five-year senior secured first-lien notes (B3/B) to yield 10¾% to 11%.

An excess cash flow sweep is offered at 103, increased from 102.

Books closed Thursday and the deal, via Jefferies, is set to price Friday.

HAYA upsizes

In the European market, HAYA Real Estate priced an upsized €475 million of five-year senior secured notes (B3/B-) in two tranches.

The deal included €250 million of 5¼% fixed-rate notes and €225 million of Euribor plus 512.5 basis points floating-rate notes.

The overall amount was increased from €450 million.

Morgan Stanley led the deal.

Proceeds will be used to repay debt, to fund a dividend, to maintain a cash balance and for general corporate purposes.

Verisure announces €1.15 billion

Verisure Midholding AB announced in a Thursday press release that it intends to offer €1,145,000,000 equivalent of euro and Swedish krona-denominated senior notes due 2023.

The Malmo, Sweden-based provider of security systems plans to use the proceeds, together with drawings on a proposed upsizing of its senior credit facilities, to take out its senior notes due 2023, to repay outstanding amounts under its revolving credit facility, to make a distribution to shareholders and for general corporate purposes.

Day’s issues trade actively

In the secondary market, traders said that the three new deals making their respective debuts on Thursday were all actively traded when they hit the aftermarket, with Precision Drilling’s 7 1/8% notes due January 2026 doing especially well.

One trader saw those bonds in a 101½ to 102 bid context, well up from their par issue price.

At another desk, a market source pegged the new issue at 101½ going home on market-topping volume of over $39 million.

Titan International’s 6½% senior secured notes due 2023 were seen moving up from their par issue price, with one trader locating them in a 100¼ to 100½ bid range.

Several other traders saw the notes doing even better than that, going out at 100¾ bid. More than $32 million of the new bonds changed hands.

A trader, noting that the new Platform Specialty Products 5 7/8% notes due 2025 had priced at a discount to par – 99.212 to yield 6% – “you’ve got to entice ’em [buyers] somehow.”

Those notes were seen by another trader moving between par and 100¼, while a third saw them finishing at 100¼ bid, with more than $20 million of the West Palm Beach, Fla.-based specialty chemicals maker’s bonds trading on the day.

Recent deals off their highs

Several recently priced new issues were seen actively trading around on Thursday – still well up from their respective par issue prices but off their initial aftermarket highs.

A trader saw Kratos Defense & Security Solutions’ 6½% senior secured notes due 2025 falling back to a 101 5/8 bid, 102 3/8 range on Thursday.

That was down from the peak secondary levels around 102¾ that those bonds had reached Wednesday after the San Diego-based defense contractor had priced its $300 million forward calendar issue at par.

Two other traders separately saw the Kratos issue finishing the day at 102 bid, on volume of more than $23 million.

Wednesday’s other deal, Parsippany, N.J.-based branded consumer food products producer B&G Foods, Inc.’s 5¼% add-on-notes due April 2025, was seen on Thursday in a 101 to 101¼ bid range, with a trader saying that he “did not see a ton of them trading.”

Those notes had priced at 101 bid to yield 5.084% after the quickly shopped issue was upsized to $400 million from the originally announced $350 million. It had not been seen trading around on Wednesday immediately after its pricing.

Monday’s new deal from QEP Resources Inc. was being quoted Thursday around 101 5/16 bid, down from its recent highs of 102¼, on turnover of more than $14 million.

The Denver-based oil and natural gas exploration and production company had priced $500 million of those 5 5/8% notes due March 2026 at par in a quick-to-market offering and they had shot up to, and above, the 102 bid level right out of the gate when they hit the aftermarket.

Energy names trade off

Away from the new deal sphere, energy names were generally lower on Thursday despite an upturn in world crude oil prices after two days on the slide.

Sector benchmark California Resources’ 8% notes due 2022 “was one of the more active issues” on the day a trader said, seeing more than $24 million of the Los Angeles-based energy E&P company’s paper trading at 73 1/8 bid, down 3/8 point.

Plano, Texas-based sector peer Denbury Resources’ 6 3/8% notes due 2021 plunged to 70 bid at the close, down 7 points, but a market source said that there was not much volume in the credit, “only a bunch of smallish trades.”

Jones Energy Inc.’s 6¾% notes due 2022 finished down more than a deuce on the day at 76 bid.

The energy credits were off even though oil prices saw their first upturn after two days of losses, with December-delivery West Texas Intermediate crude finishing up 36 cents per barrel in New York Mercantile Exchange trading, settling at $57.17, while January-contract North Sea Brent crude gained 44 cents per barrel in London dealings, ending at $63.93.

Cenveo slides on loss

One of the day’s big losers was Cenveo after the Stamford, Conn.-based commercial printing company reported an unexpected loss, which hammered its 6% notes due 2019 down to below 63 bid, a loss of more than 5½ points from where the bonds had most recently traded, last week.

Cenveo swung to a net loss of $28.1 million from a year-ago profit of $9.4 million.

Analysts were looking for per-share earnings around 14 or 15 cents – but were shocked when that figure instead came up as an 82 cent loss.

Sales slid to $329.5 million from $382.7 million a year ago.

Third-quarter adjusted EBITDA fell to $24.3 million from $37.8 million last year.

The numbers overshadowed the company announcement that it had sold its office products envelope business, Quality Park Products, to LSC Communications for an undisclosed sum.

Telecom names rebound

Over the past few sessions, wireline telecommunications names have been getting whacked around as that whole sector has been seeing a secular decline in its business as more customers “cut the cord” and abandon traditional phone service completely in favor of cellphones and the internet.

But on Thursday traders saw some of those names bouncing from their recent depths.

Little Rock, Ark.-based CenturyLink’s 7½% notes due 2024 gained 7/8 point to end at 98¼ bid, with over $39 million traded.

Sector peer Frontier Communications’ 11% notes due 2025 gained 3/16 point, ending just under 77½ bid, with over $29 million of volume.

A trader saw Stamford, Conn.-based Frontier’s 10½% notes due 2022 “really get smoked” and plunge some 9 points on the day, down to the 71 bid level.

But he dismissed that as a fluke, “a likely bad print,” noting that those bonds had been trading around 80 bid most of the day before that one late downside trade – and said that they were back up to near 80 at the end of the day, which he called about unchanged.

Another trader called the big plunge on no real news “crazy.”

But Broomfield, Colo.-fiber optic network operator Level 3 – now a unit of CenturyLink on a sale that closed Nov. 1 – was seen finishing on the downside for real on Thursday.

Its 5 3/8% notes due 2025 swooned by nearly 3 points to 98 3/8 bid, with over $13 million traded.

Overall market weakness

A trader said that generally, “the market was significantly weaker today, something we haven’t really seen in a while.”

He said that “while we’ve seen tech names, or hospitals, or some other individual sector lower, this was more broad-based, with things down generically ¼ to ½ point.”

Other losers on the day included Canadian drugmaker Valeant Pharmaceuticals International, whose 6 1/8% notes due 2025 lost 3/8 point to end at 84 5/8 bid, with over $17 million having traded, while its 6 3/8% notes due 2020 did even worse, down ¾ point at 99 bid, on $14 million of volume.

Camp Hill, Pa.-based drugstore operator Rite Aid’s 6 1/8% notes due 2023 fell ½ point to close at 88½ bid, with over $24 million having changed hands.

Palo Alto, Calif.-based electric car manufacturer Tesla’s 5.3% notes due 2025 eased by 5/8 point to 94 bid, with $29 million traded.

Indicators continue lower

Statistical market performance measures were down for a third consecutive session on Thursday. They had turned lower all around on Tuesday and then stayed that way, after having been mixed last Friday and again on Monday.

The KDP High Yield Daily Index saw its second big decline in a row and its third downturn overall, as it nosedived by 25 basis points to close Thursday at 71.82 – the first time the index has fallen below a 72 reading since Aug. 30, when it finished at 71.97.

Thursday’s big fall came on top of Wednesday’s plunge of 16 bps. The index had also finished down 4 bps on Tuesday after gaining 2 bps each on both Friday and Monday.

Its yield widened out for a fourth consecutive session, rising by 9 bps to 5.32%, after having moved up by 6 bps on Wednesday, by 3 bps on Tuesday and by 1 bp on Monday, following Friday’s 7 bps tightening.

The Markit CDX Series 29 High Yield Index saw its third loss in a row, retreating by around 5/16 point to close at 107 15/32 bid, 107½ offered, after having lost 3/16 point on Wednesday and nearly 9/32 point on Tuesday. On Monday it had risen by 1/8 point, its first gain after three straight downside sessions.

And the Merrill Lynch North American High Yield Master II Index saw a sixth straight loss, dropping by 0.376%, on top of Wednesday’s 0.338% easing.

The latest loss dropped the index’s year-to date return to 6.59% from Wednesday’s close at 6.992%, which had been the first time the index has closed below the psychologically significant 7% mark since Sept. 28, when it finished at 6.954%.

The year-to-date return also remains well down from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

© 2015 Prospect News.
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