TransDigm again taps market; Dun & Bradstreet prices; Colfax dominates; Weatherford jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 1 – The high-yield primary market maintained its brisk pace in the first session of February with two issuers pricing $2.2 billion over four tranches.

Dun & Bradstreet Corp. priced an upsized $1.45 billion of notes in two tranches.

TransDigm Inc. returned to the market on Friday for the second time in a week to price a $200 million tap on their secured notes and issue $550 million of subordinated notes.

The coming week also promises to be active with CommScope Inc. slated to price its $3 billion three-tranche offering.

The European high-yield primary market also saw some action with Parts Europe SA pricing a €175 million non-fungible add-on to its senior secured floating-rate notes due May 1, 2022 (B3/B).

Meanwhile, the secondary space rounded out a strong week on firm footing with the market continuing its upward momentum.

Colfax Corp.’s newly priced 6% senior notes due 2024 and 6 3/8% senior notes due 2026 (Ba2/BB+) dominated activity in the secondary space with both notes trading sharply above their issue price.

TransDigm’s 6¼% senior notes due 2026 were trading down after the company’s add-on. The additional unsecured tranche continued to put pressure on TransDigm’s outstanding junk bonds.

The company’s 6 3/8% subordinated unsecured notes due 2026 continued to trade down in high-volume activity.

Weatherford International plc’s capital structure saw large gains on Friday with its junk bonds rising 3 to 6 points following the company’s fourth-quarter earnings report.

Dun & Bradstreet upsizes

Dun & Bradstreet Corp. priced an upsized $1.45 billion of notes in two tranches.

The deal included an upsized $700 million tranche of 7.5-year senior secured notes (B2/B/BB) which priced at par to yield 6 7/8%.

The tranche increased from $500 million.

The yield printed at the tight end of revised yield talk in the 7% area.

Earlier talk was in the 7¼% area. Initial guidance was in the mid-7% area.

BofA Merrill Lynch was the left bookrunner for the secured notes.

Dun & Bradstreet also priced a downsized $750 million tranche of eight-year senior unsecured notes (Caa2/CCC/B-) at par to yield 10¼%.

The tranche size decreased from $850 million.

The yield printed at the wide end of the 10% to 10¼% yield talk. Initial talk was in the 10¼% to 10½% area.

Citigroup Global Markets Inc. was the left bookrunner for the unsecured notes tranche.

Overall, the two-part bond offer increased to $1.45 billion from $1.35 billion, while a concurrent bank loan decreased to $2.53 billion from $2.63 billion.

Proceeds from the downsized loan and unsecured notes were shifted to the secured notes.

Both the secured notes tranche and the bank loan were heard to be playing to $3 billion of demand, apiece, on Friday morning, a trader said.

Proceeds will be used to finance the acquisition of Dun & Bradstreet by an investor group led by CC Capital, Bilcar LLC, Cannae Holdings and Thomas H. Lee Partners.

Quick turnaround for TransDigm

Two days after it priced an upsized $3.8 billion issue of secured notes and abandoned an effort to place subordinated notes, TransDigm Inc. returned to the market on Friday.

The aerospace company issued a $200 million tap of secured notes and $550 million of subordinated notes.

TransDigm priced the $200 million add-on to its 6¼% senior secured notes due March 15, 2026 (Ba3/B+) at 101to yield 6.07%. The issue price came on top of price talk.

Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc., Barclays, RBC Capital Markets LLC, Credit Agricole CIB and KCM Capital Partners are the joint bookrunners for the secured notes.

Proceeds will be used to fund a portion of the acquisition of Esterline Technologies Corp.

TransDigm also priced $550 million of eight-year senior subordinated notes (B3/B-) at par to yield 7½%. The yield printed on top of yield talk.

Morgan Stanley, Credit Suisse, KCM, Citigroup, Barclays, RBC, Credit Agricole and HSBC were the joint bookrunners for the subordinated notes.

TransDigm plans to use the proceeds from the subordinated notes to redeem its 5½% senior subordinated notes due 2020.

On Wednesday, TransDigm withdrew a $1 billion tranche of eight-year senior subordinated notes. Those proceeds were shifted to the 6¼% secured notes.

Preference for secured paper

Investors are keen to move higher on the capital structure, sources all around the market, in Europe as well as in the United States, tell Prospect News.

Transactions that came to market in the January-February crossover week provide evidence which supports this assertion.

For example, on Wednesday, TransDigm, pulled its $1 billion offering of senior subordinated notes, and shifted the proceeds to its concurrent secured tranche.

Then on Friday, with the market continuing to heat up, the company returned with $550 million of that $1 billion amount, and succeeded in pricing it.

The ultimate $550 million size that priced Friday gives some indication of what the demand was for the original $1 billion offering, a trader said on Friday.

Dun & Bradstreet downsized its tranche of unsecured notes and priced it at the wide end of talk, while upsizing its secured notes tranche.

Orders for the Dun & Bradstreet secured paper far exceeded the size of the issue, sources said, adding that no such color was available for the unsecured notes.

Looking to the week ahead, CommScope is seeking to issue $3 billion of notes in two tranches of secured paper and one tranche of unsecured, sized at $1 billion apiece.

Demand for the secured tranches was building nicely, heading into the latter part of the past week, an investor told Prospect News, adding that demand for the unsecured notes was lagging well behind.

In Europe as well, investors express a definite preference for secured paper, a London-based debt capital markets banker said on Friday.

Parts Europe prices FRN

Given this color, it is perhaps no surprise that two of the three deals that have priced thus far in the 2019 European high-yield new issue market – in what has been a slow start to the new year – feature secured paper.

The most recent came from Parts Europe SA, formerly Autodis SA.

The Paris-based distributor of aftermarket spare parts priced a €175 million non-fungible add-on to its senior secured floating-rate notes due May 1, 2022 (B3/B) with a 550 basis points spread to Euribor at 99.25.

The issue price came at the rich end of the 99 to 99.25 price talk.

BNP Paribas and Goldman Sachs International were the joint bookrunners.

Goldman Sachs will bill and deliver.

The notes are co-terminus with the Autodis senior secured floating-rate notes due May 1, 2022.

However, the new notes will not become fungible with the existing Autodis notes, the source said.

Colfax dominates

New paper from Colfax dominated trading activity in the secondary space on Friday with the notes sharply above their issue price.

Colfax’s 6% senior notes were quoted at 101½ bid, 102 offered.

They were trading hands around 101 5/8 with more than $79 million of the bonds on the tape by the late afternoon, according to a market source.

Colfax’s 6 3/8% senior notes were quoted at 101 5/8 bid, 102 offered and were changing hands at 101 7/8 in the late afternoon, sources said.

More than $67 million of the bonds were on the tape by the late afternoon.

The notes were in high demand during bookbuilding. which followed them into the secondary space, sources said.

Colfax priced $1 billion in two tranches on Thursday. The deal included a $600 million tranche of the 6% notes which priced at par.

The yield printed at the tight end of the 6% to 6¼% yield talk. Initial guidance was in the 6½% area.

The deal also included a $400 million tranche of the 6 3/8% notes which priced at par.

The yield printed 12.5 bps beneath the tight end of the 6½% to 6¾% yield talk.

Initial guidance was in the 7% area.

The deal played to more than $4 billion of orders, sources said.

TransDigm trades down

TransDigm’s $200 million add-on to its 6¼% senior notes pushed the notes down from their previous trading level.

While the 6¼% senior notes were trading at a premium to the 101 reoffer price of the add-on, they dropped ½ point from Thursday’s close.

The notes traded down to 101¼, a market source said.

They remained active with more than $47.5 million of the bonds on the tape by the late afternoon.

TransDigm priced an upsized $3.8 billion issue of the 6¼% notes at par on Wednesday.

TransDigm’s 6 3/8% senior notes due 2026 were again trading down in high-volume activity after the aerospace components maker’s additional offerings.

The 6 3/8% notes dropped ¾ point to 95¾, according to a market source. More than $19 million of the bonds were on the tape by the late afternoon.

The 6 3/8% notes were also trading down in the run-up to TransDigm’s initial offering, which priced on Wednesday.

Prior to the new offerings, the 6 3/8% notes were trading in the 98½ range.

Weatherford jumps

Weatherford’s capital structure rose between 3 and 6 points on Friday after the company announced fourth-quarter earnings.

Weatherford’s 9 7/8% senior notes due 2024 were the most active in the capital structure. The notes rose 4¼ points to 69 5/8, according to a market source.

More than $23 million of the bonds were on the tape by the late afternoon.

Weatherford’s 8¼% senior notes due 2023 rose 3¾ points to 68 with more than $11.5 million of the bonds changing hands during Friday’s session.

The 5 1/8% senior notes due 2020 rose 6½ points to 83½ with more than $7 million of the bonds on the tape.

Weatherford’s capital structure was on the rise despite an earnings miss.

Weatherford reported non-GAAP loss per share of 14 cents for the fourth quarter, which missed analyst expectations of a loss per share of 12 cents.

Revenue came to $1.43 billion, which also missed analyst expectations of $1.44 billion.

However, Weatherford reported $210 million in adjusted EBITDA and $65 million in free cash flow, which many considered a positive.

The oilfield services company will continue to work towards its goal of reducing leverage from its current level of below 10x using sale proceeds, free cash flow and EBITDA, Prospect News reported.

The company had a net leverage ratio of 17x at the beginning of 2018. (See related article in this issue.)

Thursday inflows

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

High-yield ETFs saw $572 million of inflows on the day.

Actively managed high-yield funds saw $40 million of inflows on Thursday, the trader said.

News of Thursday's daily flows follows a report that the combined high-yield funds saw a relatively meager $73 million of net inflows for the week to Wednesday's close, according Lipper US Fund Flows.

With the month of January now in the book, the combined high-yield funds have seen $4 billion of net inflows, year-to-date, including $1.6 billion of inflows to the high-yield ETFs, the trader said.

Indexes mixed

Indexes were mixed on Friday. However, all closed the week with large cumulative gains.

The KDP High Yield Daily index rose 27 bps on Friday to close the day at 69.40 with the yield now 6.29%.

The index was up 13 bps on Thursday, 21 bps on Wednesday and 2 bps on Tuesday after a 3 bps drop on Monday.

The index saw a cumulative gain of 60 bps on the week.

The ICE BofAML US High Yield index continued to skyrocket on Friday after jumping past 4% year-to-date returns on Wednesday.

The index rose 12.6 bps on Friday with the year-to-date return now 4.719%.

The index rose 45.6 bps on Thursday, 24.4 bps on Wednesday, and 15.5 bps on Tuesday after dropping 16.7 bps on Monday.

The index saw a cumulative gain of 81.4 bps on the week.

The CDX High Yield 30 index dropped 15 bps to close Friday at 105.9.

The index rose 33 bps on Thursday, 72 bps on Wednesday and 8 bps on Tuesday after a 22 bps drop on Monday.

The index saw a cumulative gain of 76 bps on the week.

© 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.