EG and TruckPro are on the road; AerCap, NFP new notes trade up; WeWork lower

By Paul A. Harris and By James McCandless

Portland, Ore., Oct. 4 – Two deals are being marketed next week and on the upcoming high-yield primary calendar.

EG Group/EG Global Finance plc is working out details on a €1.26 billion equivalent offering of six-year senior secured notes.

And, TruckPro LLC expects to wrap up its roadshow for $300 million of seven-year notes.

The high yield secondary market saw continued focus on new issues and newsmakers in Friday’s activity.

New notes priced by AerCap Holdings NV and NFP Corp. pushed upward after becoming free to trade on Friday.

WeWork Cos. Inc.’s paper was seen moving lower amid reports of impending layoffs.

Transport company Uber Technologies, Inc.’s notes were positive, snapping a losing streak.

Two for the road

Primary market news flow remained light on Friday.

England-based EG Group/EG Global Finance plc plans to start a roadshow on Monday for a €1.26 billion equivalent offering of six-year senior secured notes (B2/B/B+) coming in tranches of dollar-denominated and euro-denominated notes.

Left global coordinator Barclays will bill and deliver.

Early guidance remains to be announced, according to an investor active in both dollar- and euro-denominated high-yield bonds.

However, the existing EG Global Finance dollar-denominated 6¾% senior secured notes due February 2025 and the euro-denominated 4 3/8% senior secured notes due February 2025 are trading at discounts to par, the investor said, reckoning that the new EG dollar-denominated notes will come north of 7% and the euro-denominated notes will come north of 5%.

EG joins TruckPro LLC, presently conducting a roadshow for a $300 million offering of seven-year senior secured notes (B3) through Tuesday.

Initial guidance is in the 10% area, according to market sources.

TruckPro is a work in progress, said the investor who added that there is still some wood to chop as the deal heads toward a midweek execution.

Beyond those two deals that are on the road there is not a lot of visibility on how much new issue activity is in store for the week ahead, a debt capital markets banker said on Friday.

Apart from a decent pipeline of committed financings there are some opportunistic refinancing deals that could appear, the source said.

However, a number of those opportunistic deals that had been expected October business sped up their timelines and came in September when issuing widows briefly opened against a backdrop of volatility-generated economic and geopolitical headlines, according to the banker.

Real hot or real cold

Buyside receptiveness to new deals lately tends to run either very warm or very cold, sources say.

Deals from on-the-run issuers with decent or better credit quality are gathering big crowds, enabling issuers to drive tight pricing, a syndicate banker said, adding that those deals tend to trade well in the secondary market.

Highly leveraged deals from off-the-run names, featuring feeble protection for lenders, tend to get the cold shoulder, and in some cases the brushoff, the banker said.

In the former category, Beacon Roofing Supply, Inc. brought a $300 million offering of 4½% senior secured notes due November 2026 in a September 25 drive-by that saw the deal get done at the tight end of price talk and inside of initial guidance.

Those notes were trading at a premium to their par new issue price on Friday: par ¼ bid, par ¾ offered.

In the latter category, following a roadshow worthy of Homer, Shutterfly Inc. priced $785 million of 8½% senior secured notes due October 2026 (B1/B) at 94.371 (the steepest discount the market has seen since February 2018, sources say) to yield 9 5/8%.

As pricing went north and covenant concessions were piled on, dealers themselves took down some of the concurrent bank loan, agreeing not to sell it for less than 95 for six months, sources say.

Complaints – in addition to traditional laments about pricing and covenants – centered on a business model that was challenging to understand and a certain amount of back-channel disenchantment with sponsor Apollo Global Management LLC.

The Shutterfly 8½% notes due October 2026 were trading at 93¼ bid, 94¼ offered, on Friday, versus the 94.371 issue price, a trader said.

The cash flows of the dedicated high-yield bonds have been strongly positive, year to date, and the buyside is roundly believed to have cash to put to work.

Those technical forces typically embolden issuers to attempt ultra-tight pricing and to strip away lender protection with issuer friendly language in the offering documents.

In one of the oldest maxims of the junk bond market, a cash laden buyside typically brings forth the hairy deals.

However, that is not the case at present, the syndicate banker said.

Right now, high-yield investors, notwithstanding the cash they need to put to work, are planting their feet.

Investors are presently being very cautious with respect to risk, the banker explained.

New notes up

In the secondary, two new issues from Thursday became free to trade, both seeing positive movement, traders said.

Dublin-based aircraft leasing company AerCap’s new resettable junior subordinated notes due 2079 pushed up to 101½ bid.

About $61 million of the new notes traded by the close.

The $750 million new issue was priced at par, printing at the tight end of 5 7/8% to 6% yield talk.

Elsewhere, New York-based insurance brokerage NFP’s new 8% senior notes due 2025 landed at 100½ bid after pricing at par on Thursday.

The deal came to market at $250 million.

WeWork lower

Real estate startup WeWork’s paper moved lower at the end of the week, traders said.

The 7 7/8% senior paper due 2025 shaved off ½ point to close at 83½ bid.

According to Friday reports, the New York-based coworking company is expected to enact layoffs by the end of the month.

The name has seen a non-stop deluge of negative press after mishandling an initial public offering bid that resulted in the exit of its chief executive officer.

Also being considered is a variety of asset sales in order to cut costs after its valuation was significantly reduced in recent weeks.

Uber positive

Transporter Uber’s notes rose, snapping a four-day downward push, market sources said.

The 8% senior notes due 2026 picked up ½ point to close at 99½ bid.

As the San Francisco-based transportation technology name launches new services, ever-present concerns about profitability continue to loom.

In recent weeks, the company has laid off hundreds of employees as it works to get costs under control.

More pressure continues to come from regulatory scrambles, with California recently deciding to require companies to give full-time benefits to contract workers.

PG&E declines

In utilities, PG&E Corp.’s issues were in decline, market sources said.

The 6.05% notes due 2034 gave back 2½ points to close at 111 bid.

About $19 million was on the tape by day’s end.

On Friday, the San Francisco-based bankrupt electric utility said that it had received $34.35 billion in debt financing commitments for its reorganization plan.

In a filing in bankruptcy court, the company said that the money comes from leading banks and that the terms are better than what a group of stakeholders are pushing for in a competing plan.

This week, a group of various stakeholders pushed a bankruptcy judge to terminate the company’s exclusive right to propose a restructure, arguing that competition between plans would lead to a more favorable outcome.

The judge will render a decision on the matter later in the month.

Thursday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $332 million of outflows on the day.

Actively managed high-yield funds saw $90 million of outflows on Thursday, the source said.

News of Thursday's daily flows follows a Thursday afternoon report that the combined funds saw $198 million of inflows in the week to Wednesday's close, according to information reported by Lipper US Fund Flows.

That weekly inflow follows the previous week's $258 million outflow.

However, for the year 2019 to Thursday's close the combined funds are well into the green, having seen $15.8 billion of net inflows on the year to that point, the source said.

Indexes mixed

Three high-yield indexes were mixed.

The KDP High Yield Daily index shed 1 basis point on Monday, finishing the week at 71.05 with the yield rising to 5.55%.

The index lost 16 bps on Thursday, dropped 19 bps on Wednesday and declined by 2 bps on Tuesday.

The index dropped a collective 50 bps this week.

The ICE BofAML US High Yield index gained 15.8 bps with the year-to-date return now at 11.017%.

The index shaved off 9.7 bps on Thursday, crashed 43 bps on Wednesday and lost 6.9 bps on Tuesday.

The CDX High Yield 30 index picked up 35.68 bps to finish at 106.4045.

The index moved lower by 36.75 bps on Thursday, fell 36.67 bps on Wednesday and declined by 35.5 bps on Tuesday.

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