KB Home prices; TransDigm jumps post-earnings; McDermott gains; Dun & Bradstreet improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 5 – The domestic high-yield primary market saw one drive-by deal price on Tuesday with two more on deck before the week draws to a close.

KB Home priced $400 million of senior bullet notes (B1/BB-) in two tranches.

Clear Channel Worldwide Holdings Inc. and CommScope Inc. are slated to price a cumulative $5.2 billion in new paper before the week draws to a close with guidance for Clear Channel’s offering tightening.

Meanwhile, Tuesday marked another strong day for the high-yield secondary space with the market up more than ¼ point.

While weaker on Monday, TransDigm Inc.’s recently priced senior notes jumped in high-volume activity on Tuesday following the aerospace component maker’s first-quarter earnings report.

Dun & Bradstreet Corp.’s recently priced senior notes also saw marked improvement on Tuesday with the unsecured tranche continuing to skyrocket and the secured tranche closing the day at issue price.

McDermott International Inc.’s 10 5/8% senior notes due 2024 (B2/B-) rose in high-volume activity on Tuesday following news of recently awarded contracts.

KB Home’s drive-by

In Tuesday's primary market, KB Home priced $400 million of senior bullet notes (B1/BB-) in two tranches.

The deal featured $300 million of new eight-year notes which priced at par to yield 6 7/8%. The yield printed at the tight end of yield talk in the 7% area and inside of initial guidance in the 7¼% area.

In addition, the Los Angeles-based homebuilder priced a $100 million add-on to its 7 5/8% senior bullet notes due May 15, 2023 at 105.25 to yield 6.03%.

The price came at the rich end of the 105 to 105.25 price talk. Initial guidance was 104.5.

Deutsche Bank Securities Inc., BofA Merrill Lynch, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC are the joint bookrunners.

Proceeds will be used to refinance KB Home’s 4¾% senior notes due May 2019.

Clear Channel tightens

On deck for the mid-week period, two issuers have been holding roadshows for a combined total of $5.2 billion across four tranches.

Clear Channel Worldwide Holdings, spun off from iHeartMedia Inc. in January, is roadshowing $2.2 billion of five-year senior subordinated notes (expected ratings Caa1/CCC+).

Guidance on the deal tightened to the 9½% area from the 10% area on Tuesday, a trader said.

As the market awaits official talk, the deal is set to price on Wednesday afternoon or Thursday morning.

Clear Channel Outdoor joins CommScope, which is also on the active forward calendar with a $3 billion offering of notes coming in three tranches sized at $1 billion each.

Pricing is expected on Thursday.

The Hickory, N.C.-based provider of infrastructure services for communication networks is selling $1 billion of five-year senior secured notes with initial talk in the 6% area.

In another secured tranche CommScope intends to sell $1 billion of seven-year senior secured notes with initial talk in the 6½% area.

In the sole unsecured tranche, the company is selling $1 billion of eight senior notes with initial talk in the high 8% area.

TransDigm’s earnings

TransDigm’s recently priced senior notes jumped in high-volume activity on Tuesday after the aerospace components maker reported first-quarter earnings.

TransDigm’s 6¼% senior secured notes due 2026 (Ba3/B+) rose about 5/8 points on Tuesday.

They were quoted at 101½ bid, 102½ offered in the mid-afternoon and closed the day at 101 7/8, sources said.

More than $44 million of the bonds were on the tape by the late afternoon.

The notes were weak on Monday and dropped below their reissue price of 101 to close the day around par ¾.

TransDigm initially priced a $3.8 billion issue of the 6¼% notes at par but returned to the market just two days later to price a $200 million tap of the notes at 101.

TransDigm’s 7½% senior subordinated notes due 2027 (B3/B-) jumped more than 1 point in high-volume activity on Tuesday.

The notes closed Tuesday at par after closing Monday at 99, a market source said.

TransDigm priced $550 million of the 7½% notes at par last Friday.

While both tranches were weak on Monday, they jumped following the company’s first-quarter earnings report.

TransDigm beat analyst expectations on both the top and bottom lines.

TransDigm reported non-GAAP earnings per share of $3.85 versus analyst expectations for earnings per share of $2.62.

TransDigm reported revenue of $993.3 million versus analyst expectations for revenue of $847.96 million.

Net sales increased 17.1% while net income declined 37.2% year-over-year, according to a market source.

EBITDA increased 21.2% to $486.7 million.

Dun & Bradstreet improves

Dun & Bradstreet’s recently priced senior notes were also improved on Tuesday as the overall market continued to gain strength.

The data analytics company’s 10¼% senior unsecured notes due 2027 continued to skyrocket in the secondary space.

The notes jumped 1 point in high-volume activity. They were quoted at 101 5/8 bid, 102 1/8 offered and closed Tuesday at 102 1/8, according to a market source.

More than $29 million of the bonds were on the tape by the late afternoon.

Dun & Bradstreet’s secured tranche was also on the rise on Tuesday after trading down during Monday’s session.

The notes were up about ½ point. They were quoted at 99¾ bid, par offered and closed the day at par, sources said.

Dun & Bradstreet priced a $700 million tranche of the 6 7/8% notes at par and a $750 million tranche of the 10¼% notes at par on Friday.

While the secured tranche was oversubscribed during bookbuilding, prior to Tuesday it was trading below par with the pricing of the notes too tight, a source said.

In contrast, the unsecured tranche has skyrocketed since hitting the secondary space despite a lackluster demand during bookbuilding.

McDermott gains

McDermott’s 10 5/8% senior notes due 2024 saw large gains on Tuesday after the company announced two new contracts.

The 10 5/8% notes rose 2¼ points during Tuesday’s session to close the day at 93¼. More than $34.5 million of the bonds were on the tape by the late afternoon.

The notes were making large gains after the engineering, procurement, construction and installation company serving the energy industry was awarded a “mega” contract in excess of $1 billion.

The contract to build the $10 billion Golden Pass Liquid National Gas export terminal in Southeast Texas was awarded to McDermott, Chiyoda International and Zachry Group in a joint venture.

Exxon Mobile and Qatar Petroleum is commissioning the project.

In addition to the Golden Pass mega contract, McDermott announced on Tuesday it was awarded a contract to construct on off-shore floating production unit in Australia.

Indexes gains continue

Indexes marked another day of gains on Tuesday after starting the week on strong footing and ending last week with large cumulative gains.

The KDP High Yield Daily index rose 21 basis points to close Tuesday at 69.67 with the yield now 6.2%.

The index was up 6 bps on Monday after a cumulative gain of 60 bps on the week last week.

The ICE BofAML US High Yield index shot past 5% returns on Tuesday.

The index jumped 41 bps with the year-to-date return now 5.246%.

The index was up 11.7 bps on Monday after a cumulative gain of 81.4 bps on the week last week.

The index surpassed 4% year-to-date returns on Jan. 30.

The CDX High Yield 30 index rose 19 bps to close Tuesday at 106.31. The index was up 22 bps on Monday after a cumulative gain of 76 bps on the week last week.

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