Upsized PQ prices, new bonds jump, Trilogy prices too, recent deals trade well; Freeport eases on Q1

By Paul Deckelman and Paul A. Harris

New York, April 25 – After a one-day hiatus on Monday that saw no new dollar-denominated, fully junk -rated bond deals price – the first such goose egg seen in the market since April 1 – the high yield primary sphere got back into its groove on Tuesday, pricing a pair of regularly scheduled forward calendar offerings totaling a face amount of $1.075 billion.

The big deal of the day was specialty chemicals manufacturer PQ Corp.’s upsized $625 million issue of 6.5-year secured paper.

Traders said that those bonds surged right out of the gate when they were freed for secondary market dealings, and the new issue was Junkbondland’s most active credit on the day.

Also coming to market on Tuesday was international wireless telecom provider Trilogy International Partners LLC, which did a $450 million three-year note issue.

With the new PQ bonds leading the way, other new or recently priced deals from issuers Regional Care Hospital Partners’ Holdings, Inc., Fresh Market, Inc., Protection 1 and Altice NV were all seen doing better.

Away from the new issues, Freeport-McMoRan Inc.’s bonds were seen mostly lower after the metals mining and energy company reported a wider year-over-year net loss in the first quarter and less-than-expected revenues.

Statistical market performance measures turned mixed on Tuesday, after having been lower across the board on Monday, their first such setback since April 7. It was the third mixed session in the last four trading days.

PQ upsized and inside of talk

In Tuesday's primary market PQ Corp. priced an upsized $625 million issue of springing-maturity senior secured notes due Nov. 15, 2022 (B2/B+) at par to yield 6¾%.

The deal size was increased from $500 million.

The yield printed 25 basis points beneath the tight end of the 7% to 7¼% yield talk.

Citigroup was the left bookrunner. Credit Suisse, Morgan Stanley, J.P. Morgan, Jefferies, Goldman Sachs, Deutsche Bank and KeyBank were the joint bookrunners.

The notes feature a springing maturity six months inside of the existing Eco Services Operations LLC 8½% senior notes due Nov. 1, 2022 if those notes have not been refinanced.

Proceeds will be used to refinance the existing PQ and Eco Services credit facilities and PQ’s second-lien notes concurrent with the merger of PQ and Eco Services. As result of the $125 million upsize, $25 million will be added to balance sheet, and $100 million will be used to reduce senior unsecured debt.

Trilogy wraps novel structure

In a deal that generated considerable buzz in the market for its novel three-year non-call-six-months structure, Trilogy International Partners LLC priced a $450 million issue of 13 3/8% three-year notes at 99.00.

Deutsche Bank was the sole bookrunner.

The Bellevue, Wash.-based wireless telecommunications company plans to use the proceeds to refinance its 10¼% senior secured notes due Aug. 15, 2016.

The company has operations in Latin America, the Caribbean and New Zealand.

Ardagh accelerates timing

Ardagh Group accelerated timing on its $2.85 billion equivalent four-part offering of notes, cutting short a planned two-day roadshow in London and moving up the roadshow in the United States.

The new timeline put the deal in front of investors in London Tuesday only; the London leg of the roadshow previously was expected to continue on Wednesday.

The U.S. roadshow is now scheduled to take place during the Wednesday to Friday timeframe; that leg had previously been expected to carry into the week ahead.

The deal is now expected to price on Friday, whereas the original schedule had it pricing on Wednesday, May 4.

The offer includes $2 billion equivalent of seven-year senior secured notes, which become callable after three years at par plus 50% of the coupon, and $850 million equivalent of eight-year senior unsecured notes, callable after three years at par plus 75% of the coupon.

Both the secured and unsecured notes are being offered in tranches of dollar-denominated and euro-denominated notes, with tranche sizes to be determined.

The dollar-denominated deal is going well, according to a trader who added that the secured tranche is being discussed in the low 5% yield context, while the unsecured tranche is being discussed in the low 8% yield context. Both tranches are playing to $300 million to $500 million of demand, apiece, the trader added.

Discussions on the euro-denominated tranches, meanwhile, have the euro-denominated secured notes coming in the mid-4% yield context, with the unsecured euro notes coming 2.5% behind the secured notes, according to a London-based sellside source.

Citigroup is the bookrunner.

Proceeds will be used to help finance the acquisition of assets from Ball Corp. and Rexam plc. The acquisitions include certain metal beverage can manufacturing assets and support locations in Europe, the United States and Brazil, when Ball’s proposed acquisition of Rexam becomes complete.

Travelodge starts roadshow

In the sterling-denominated market, Travelodge began a roadshow on Tuesday in London for a £360 million two-part offering of seven-year senior secured notes.

The deal is coming in tranches of fixed-rate notes, which come with three years of call protection, and floating-rate notes, which come with one year of call protection. Tranche sizes remain to be determined.

The debt refinancing deal is expected to price on Friday.

Global coordinator Goldman Sachs will bill and deliver. Barclays is also a global coordinator.

New PQ paper pops

In the secondary market, traders said that the big story of the day was, as one put it, “just these new PQs getting active.”

He saw the Malvern, Pa.-based specialty chemicals company’s new 6¾% secured notes due 2022 “generically” in a 102 to 103 bid context – well up from their par issue price – almost as seen as they were freed for aftermarket action, later tightening that to 102½ to 103.

A second trader pegged the bonds in a 102 to 102¾ bid range.

Around the close of the session, a market source at another desk said that the new deal had zoomed to 103 1/8 bid, with over $76 million changing hands, the biggest-volume junk issue of the day.

Traders meanwhile did not immediately report any initial aftermarket dealings in the new 13 3/8% notes due 2019 from Trilogy International Partners, the day’s other new issue.

Friday deals keep firming

The traders saw the new deals that came to market last week mostly trading higher on Tuesday, on brisk volume.

For instance, Friday’s offering of 8¼% senior secured notes due 2023from Brentwood, Tenn.-based acute-care facilities owner and operator Regional Care “was doing better,” one of the traders said on Tuesday, seeing that paper up ½ point, to 103½ bid.

A second trader saw the bonds up 5/8 points, to 103 5/8 bid, on volume of more than $22 million.

That $800 million offering had priced at par on Friday off the forward calendar and had immediately jumped to around the 102 bid level when the bonds were freed, with over $46 million of initial aftermarket activity after pricing.

On Monday, a market source saw them moving up further, rising to 102¾ bid, on volume of more than $40 million, while a second trader saw them going out that day at 103, setting the stage for Tuesday’s improvement.

Friday’s other new deal – St. Louis-based specialty food retailer Fresh Market’s 9¾% senior secured first-priority notes due 2023 – were also seen by a trader on Tuesday to have moved up by ½ point, to 98 5/8 bid, with over $12 million traded.

That $800 million deal had priced on Friday at 99 to yield 9.951% via special financing vehicle Pomegranate Merger Sub, Inc., as a regularly scheduled forward calendar offering.

They had traded actively in initial aftermarket dealings on Friday, hanging around their issue price on volume of over $48 million.

On Monday, over $53 million of those notes traded, moving in a wide swath between 97 7/8 and just a shade over the 99 bid level.

Recent deal trade robustly

Also among last week’s offerings, a trader said that NBTY, Inc.’s 7 5/8% notes due 2021 gained ¼ point on the session, to 100 7/8 bid, on volume of over $11 million.

A second trader, though, called the bonds unchanged at 100½ bid.

The Ronkonkoma, N.Y.-based maker of vitamins and nutritional supplements, priced $1.075 billion of those bonds off the forward calendar on Thursday at par to yield 7.624%.

A trader said that last Wednesday’s big secured bond offering from Chicago-based alarm monitoring and security services provider Protection 1 was 1 point better on the day, at 103¼ bid, continuing Monday’s rebound from the somewhat lower levels that had been seen on Friday.

At another desk, a market source said the bonds were going home on Tuesday at 103 3/8 bid, up 1 1/8 points on the session, with over $20 million having traded.

The company had priced $3.14 billion of those notes on Wednesday at par in a regularly scheduled transaction off the forward calendar.

However, terms on the deal – done through special-purpose vehicles Prime Security Services Borrower LLC and Prime Financing, Inc. – did not hit the market until Thursday.

More than $225 million of the notes traded on Thursday, rising as high as above the 103 bid level during the morning, before coming back in to settle around 101 7/8 bid later in the day.

On Friday, another $46 million changed hands, with the bonds coming in from the previous day’s highs to end at 101½ bid, setting the stage for the gains seen on Monday and again on Tuesday.

Going back a little further, Luxembourg-based telecom and cable provider Altice’s 7½% senior secured notes due 2026 edged up by 1/8 point on Tuesday to close at 100 1/8 bid, on volume of over $17 million.

The company had priced some $2.75 billion of those bonds last Monday at par in a quick-to-market offering via its Altice Financing SA subsidiary, after the deal was upsized from $2.25 billion originally.

The bonds were actively traded in subsequent sessions, mostly hovering a little above their issue price in a par to 100½ bid context.

Freeport falters on wider loss

Away from the new-deal arena, a much-wider year-over-year loss and word of a workforce reduction resulted in weakness in Freeport-McMoRan’s bonds on Tuesday.

A trader saw the 3.55% notes due 2022 losing a point to close at 79½, with over $21 million of those bonds having moved around.

Its 4.55% notes due 2024 slipped almost half a point to 78 3/8, with over $14 million traded.

The 3 7/8% notes due 2023 held steady at 78½, the trader said, on volume of over $12 million.

For the 2016 first quarter ended March 31, the Phoenix-based metals and mining company reported a loss of $4.18 billion, or $3.35 per share, far wider than last year’s red ink of $2.47 billion, or $2.38 per share, the previous year.

On an adjusted basis, however, the loss amounted to just 16 cents per shares. Analysts polled by Zacks Investment Research had forecast a loss of 20 cents per share.

But revenue came to $3.53 billion, down from $4.15 billion in the year-ago period and down as well from analyst expectations of around $3.67 billion.

Freeport also said that it was planning to slash its oil and gas workforce by 25%. And the company is continuing to explore sale options for certain assets.

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday, after having been lower across the board on Monday, their first such setback since April 7. It was the third mixed session in the last four trading days.

The KDP High Yield Daily index continued on its losing path for a third straight session, dropping by 6 basis points to end at 67.24, on top of Monday’s 10 bps decline. It was the fourth loss for the index in the last seven sessions.

Its yield rose by 4 bps to 6.25%, its second such widening in the last three sessions. It had been unchanged on Monday and had widened by 3 bps on Friday, which followed seven straight tightening sessions before that.

The Markit Series 26 CDX North American High Yield index, on the other hand, edged up by 1/16 point on Tuesday to finish at 103 3/16 bid, 103 7/32 offered. It was its second gain in the last three sessions. On Monday, the index had slid by 11/32 point.

The Merrill Lynch North American High Yield Master II index saw its first gain on Tuesday after two losses in a row, improving by 0.154%, versus Monday’s 0.087% retreat.

Tuesday’s upturn lifted the index’s year-to-date return to 6.61% – a new peak level for the year so far – versus 6.446% on Monday and versus the previous high point for the year, 6.564% on Thursday, which had been the ninth consecutive new 2016 year-to-date peak level.

Stephanie N. Rotondo contributed to this review.

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