Morning Commentary: Prestige Brands brings $200 million tap to busy primary; Live Nation notes rise

By Paul A. Harris

Portland, Ore., March 16 – Prestige Brands, Inc. plans to price a $200 million fungible add-on to its 6 3/8% senior notes due March 1, 2024 (current ratings Caa1/B-) in a Friday drive-by.

Price talk is par ½ to 101.

Morgan Stanley & Co. LLC, Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and RBC Capital Markets LLC are the joint bookrunners for the debt refinancing deal.

Prestige Brands joins a busy Friday calendar that features four more deals expected to clear the market before the weekend.

Husky Injection Molding Systems Ltd. (Titan Acquisition Ltd.) is selling $750 million of eight-year senior notes due 2026 (Caa2/CCC+). The buyout deal, being led by BofA Merrill Lynch, is talked at 7½% to 7¾%, wider than initial talk in the low 7% area.

Tullow Oil plc is selling $650 million of seven-year senior notes (expected B3/confirmed B). The Credit Agricole, J.P. Morgan Securities deal is talked at 7% to 7¼%.

Parkland Fuel Corp. plans to price $500 million of eight-year senior notes (B1/BB-). The BofA Merrill Lynch-led deal was whispered in the high 5% area.

And Iridium Communications Inc. is selling $360 million of five-year senior notes (Caa1/CCC) via Deutsche Bank. Talk is 10¼% to 10½%.

Among recent issues, the new Live Nation Entertainment, Inc. 5 5/8% senior notes due 2026 (B1/B+) were trading well in the secondary market on Friday morning at par ¾ bid, 101¼ offered, a trader said.

The $300 million issue priced at par on Thursday.

Issuer face rising rates

The above list of Friday deals might have included two additional deals announced on Thursday, and subsequently postponed, sources say.

CNX Resources Corp. announced a $500 million offering of eight-year senior notes (confirmed B3/expected B-) as a drive-by on Thursday. It was subsequently talked in the 6½% area, at the wide end of initial guidance in the low to mid 6% area.

However, the company thought its rate ought to be in the 6% to 6¼% context, and declined to pay more, a trader said.

Elsewhere Brookfield Residential Properties Inc. was expected to price a $600 million offering of eight-year senior notes (B1/B+) in a quick-to-market Thursday trade. Initial price talk had the deal coming with a yield in the 6½% area.

Brookfield ultimately had a deal at 6¾%, a trader said, but ended up declining that higher rate.

It's questionable, at best, as to whether time will improve the rate-scenario for these prospective issuers, the trader said.

Part of the problem is high-yield issuers coming to market with expectations informed by memories of the easy rates of 2016 and 2017, and dealers doing their level best to fulfill those expectations, the source added.

Take, for example, the Valeant Pharmaceuticals International, Inc. 9¼% senior unsecured notes due 2026, the trader said.

The most recent news on that bond, which priced at par on March 12 in a $1.5 billion issue, is positive. It was par bid, par ½ offered on Friday morning, up from as low as 99½ bid, 99 7/8 offered earlier in the week.

The deal came under pressure when investors who received small allocations flipped the deal, the trader said.

Once that was cleaned up it bounced back.

Nevertheless, even at its present levels the Valeant 9¼% bond due 2026 is nothing to write home about, the trader lamented, adding that it’s not a bond that was priced to trade particularly well.

It’s not a bond that you would expect to trade to 101 and stay there, the source said.

Secondary market

Elsewhere on Friday, the market seemed off a touch to a bond trader who added that the NCAA Men’s Basketball Tournament, a.k.a. “March Madness,” now underway, appears to be distracting participants.

Thursday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Thursday.

High-yield ETFS sustained $451 million of outflows on the day.

Actively managed funds saw $5 million of outflows on Thursday.

Those numbers follow a Thursday afternoon report that for the first time in nine weeks the dedicated junk funds saw modest positive flows – extremely modest: $11 million of inflows in the week to the Wednesday, March 14 close.

However, that inflow pales in comparison to the eight consecutive weekly outflows, totaling $16.5 billion, that preceded it, the trader pointed out.

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