Avolon leads primary steamroller, Delphi, iStar, Tronox also price; funds lose $96 million

By Paul Deckelman and Paul A. Harris

New York, Sept. 14 – The junk bond juggernaut rolled unstoppably on during Thursday’s session, with four issuers pricing some $3.3 billion of new U.S. dollar-denominated and fully high yield-rated paper in six tranches in what is shaping up to be one of the biggest primary arena weeks of the year.

International aviation leasing company Avolon Holdings Ltd. brought the biggest deal of the day to market, an upsized $1.25 billion two-part quick-to-market issue which had been restructured from what was originally planned as a single-tranche transaction.

Financial services concern iStar Inc. also drove by with a two-part offering that totaled $800 million of three- and five-year paper.

Automotive components manufacturer Delphi Powertrain priced $800 million in a single, regularly scheduled eight-year tranche.

Chemicals maker Tronox Ltd. also priced off the forward calendar following a roadshow, with $450 million of eight-year notes.

All of the new issues were heard to have traded actively in the secondary market, with Delphi, Tronox and the shorter iStar issues all jumping more than a point when they hit the aftermarket.

Traders also saw some gains in Wednesday’s new issue from passenger ship operator Viking Cruises Ltd.

Away from the new issues, energy names such as California Resources Corp. and EP Energy Corp. stayed hot as crude oil prices rose for a fourth straight session.

Tenet Healthcare Corp. bonds – which had risen on Wednesday on speculation the underperforming hospital operator might be sold – gave up some of those gains on Thursday, even though the company’s shares jumped on sale speculation.

Statistical market performance measures turned mixed on Thursday, after being unchanged to higher on Wednesday.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – was on the downside this week, with $96 million leaving those weekly reporting-only domestic funds during the week ended Wednesday. The flows thus failed to maintain the positive momentum established last week, when they had improved by $641 million after three consecutive weeks of losses totaling $3.47 billion before that (see related story elsewhere in this issue).

Avolon drives by

In a busy Thursday primary market session, Avolon Holdings priced an upsized $1.25 billion of senior bullet notes (Ba3/BB-/BB).

The deal included $300 million of 3.5-year notes which priced at par to yield 3 5/8%. The tranche, which was added subsequent to the deal being announced, was increased from $250 million. The yield printed on top of talk.

In addition, Avolon priced a downsized $950 million of 5.5-year notes at par to yield 4½%. The tranche was cut from $1 billion, with proceeds shifted to the 3.5-year notes. The yield printed at the tight end of the 4½% to 4 5/8% yield talk.

Morgan Stanley & Co. was the lead bookrunner. Barclays, Credit Agricole CIB and UBS Investment Bank were the joint bookrunners.

The aircraft leasing and lease management services provider plans to use proceeds for general corporate purposes and to repay secured debt.

Delphi Powertrain upsized

In a deal that priced at the conclusion of a roadshow, Delphi Powertrain priced an upsized $800 million issue of non-callable 5% eight-year senior notes (B1/BB/BB) at 99.5 to yield 5.077%.

The amount was increased from $750 million.

The yield printed toward the tight end of the 5% to 5¼% yield talk.

Joint global coordinator and joint bookrunner Barclays was the left lead for the deal. Goldman Sachs & Co. was also a joint global coordinator and joint bookrunner. BofA Merrill Lynch, Citigroup Global Markets, Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC were also joint bookrunners.

Proceeds, together with a $750 million term loan, will be used to fund operating cash, pay taxes, fees and expenses related to Delphi Automotive plc’s spinoff of its Powertrain Systems segment, and distribute a dividend to Delphi Automotive.

iStar two-part bullet deal

iStar priced $800 million of senior notes in two quick-to-market tranches.

The deal included $400 million of three-year bullet notes which priced at par to yield 4 5/8%.

The company also sold $400 million of five-year notes at par to yield 5¼%.

JP Morgan Securities LLC, BofA Merrill Lynch, Barclays and Morgan Stanley & Co. are the joint bookrunners.

In addition to the off-the-shelf senior notes offer, iStar was in the market with $250 million of senior convertible notes via Rule 144A.

Proceeds from the sale of the senior notes and convertibles, along with cash on hand, will be used to repay all $550 million of the New York-based company’s 4% senior notes due November 2017, $300 million of 7 1/8% senior notes due February 2018, $300 million of 4 7/8% senior notes due July 2018, $140 million of 7.88% series E preferred stock and $100 million of 7.8% series F preferred stock.

Tronox prices tight

Tronox Finance plc priced a $450 million issue of eight-year senior notes (B3/B-) at par to yield 5¾%.

The yield printed at the tight end of yield talk that was set in the 5 7/8% area.

At the 5 7/8% talk, and with a quasi-investment grade covenant package, the deal, which had been marketed by means of a roadshow, was three-times oversubscribed, sources said.

Citigroup Global Markets Inc. was the lead bookrunner. BofA Merrill Lynch, Goldman Sachs & Co., Wells Fargo Securities LLC, Credit Suisse Securities (USA) LLC, RBC Capital Markets and Barclays were the joint bookrunners.

The Stamford, Conn.-based mining and inorganic chemical company plans to use the proceeds to refinance debt and to support its acquisition of titanium dioxide operations from Saudi Arabian chemical and mining concern Cristal.

TTM sets talk at 5¾% to 6%

Friday’s session in the dollar-denominated primary market also figures to be a busy one.

TTM Technologies, Inc. talked its $375 million offering of eight-year senior notes (B2/BB) to yield 5¾% to 6%.

Books close Friday morning and the deal, which is being led by JP Morgan, is set to price later on Friday.

Wabash talked at 5 5/8% area

Wabash National Corp. talked its $325 million offering of eight-year senior notes (B1/B+) to yield in the 5 5/8% area.

The deal is also set to price on Friday.

Morgan Stanley & Co. LLC and Wells Fargo Securities LLC are the joint bookrunners.

SemGroup talk is 7½% area

SemGroup Corp. talked its $300 million offering of 8.5-year senior notes (B3/B+) to yield in the 7½% area.

Books close at noon ET Friday and the offer is set to price subsequently.

Credit Suisse Securities (USA) LLC, Scotia Capital, Wells Fargo Securities LLC, ABN Amro, Barclays, BBVA, BMO Securities and BNP Paribas are the joint bookrunners.

MCS prices inside talk

In the European session Promontoria MCS Holding, the parent of MCS Groupe, priced a €270 million issue of seven-year senior secured notes (S&P: BB-) at par to yield 4¼%.

The yield printed 12.5 basis points beneath the tight end of yield talk that was announced in the 4½% area.

Global coordinator Credit Suisse will bill and deliver. KKR and SG CIB were the joint bookrunners.

Proceeds will be used to help fund the acquisition of MCS, a France-based debt collector, by BC Partners LLP and to repay MCS debt.

Wednesday inflows

Daily cash flows for dedicated high-yield funds were positive on Wednesday, the most recent session for which data was available at press time, an investor said.

High-yield ETFs saw $203 million of inflows on the day.

Asset managers saw $60 million of inflows.

The news surfaced a few hours ahead of a weekly report from Lipper US Fund Flows that dedicated high-yield bond funds sustained a negative $96 million of outflows in the week to Wednesday’s close.

A huge week shapes up

Secondary market traders noted the cascade of new paper which has priced so far this week, already topping $13.5 billion in 19 tranches with one more day to go – making this week one of the biggest primary weeks of this or any other year.

Besides Thursday’s more than $3 billion of new issuance, the market saw $1 billion get done in three tranches on Wednesday, which followed the $7.22 billion which priced in seven tranches on Tuesday, the biggest single-session issuance of this year so far.

And more than $2 billion priced in four tranches on Monday.

According to data compiled by Prospect News, this week’s new-issuance volume so far is within striking distance of the $17.54 billion which priced in 26 tranches during the week ended March 10 – the biggest week of this year and heaviest one-week junk market volume ever.

Tronox trades up

The new 5¾% notes due 2025 from Tronox, via its financing subsidiary, were the most actively traded purely junk-rated bonds of the session, a market source said, estimating volume at more than $100 million by the close.

He pegged the chemical maker’s new paper up 1¼ points from its par issue price.

A second trader saw the bonds in a 101¼ to 101¾ bid range, while at another desk a trader saw the bonds get as good as a 101 5/8 to 102 1/8 bid context during the day.

Day’s deals firmer

Thursday’s other new issues were doing just as well.

A market source said that the new 5% notes due 2025 from Delphi Powertrain’s Delphi Jersey Holding plc subsidiary had moved up to 101 3/8 bid after pricing at par.

More than $73 million of the Gillingham, England-based automotive powertrain components provider’s new notes changed hands.

The company is a spinoff from familiar domestic automotive systems manufacturer Delphi Automotive plc of Troy, Mich.

New York-based financial services concern iStar’s new 4 5/8% notes due 2020 were being quoted at 101½ bid after pricing at par, with around $30 million traded.

Its 5¼% notes due 2022 were seen ½ point better on the day after their par pricing, with $18 million traded.

And Avolon Holdings’ new 4½% notes due March 2023 were also seen up ½ point, with about $25 million of turnover.

A trader said he had not seen any sizable initial aftermarket dealings in the Dublin and Hong Kong-based aircraft leasing and lease management services provider’s new 3 5/8% notes due March 2021.

Viking cruises higher

A trader said that the new Viking Cruises 5 7/8% notes due 2027 were trading at bid levels between 100¾ and 101¼, up from the par level at which the Los Angeles-based cruise line had priced its $550 million forward calendar offering on Wednesday.

Another market source located the bonds in a 100 5/8 to 100 7/8 bid range.

Energy continues improvement

Away from the new deals, traders noted a continued upturn in energy-related issues, spurred on by a fourth straight session of rising crude oil prices.

The 8% notes due 2022 of sector bellwether California Resources moved up to 58½ bid, a 1½ point gain on the day.

More than $42 million of the Los Angeles-based oil and natural gas exploration and production company’s bonds changed hands.

Houston-based oiler EP Energy’s 8% notes due 2025 did even better, seen up by more than 2¾ points on the day, closing at 72¾ bid on $19 million of volume.

And Plano, Texas-based Denbury Resources Inc.’s 5½% notes due 2022 zoomed by more than 5 points on the day, closing just below 49 bid as over $32 million traded.

Crude prices gained for a fourth consecutive session, with October-delivery West Texas Intermediate up 59 cents per barrel on the Nymex, settling at $49.89.

Tenet trades off

One of the few names on the downside was Tenet Healthcare, whose bonds had risen on Wednesday on speculation that the Dallas-based hospital operator, or some of its assets, could be sold.

On Thursday, its 8 1/8% notes due 2022 lost 2 3/16 points, ending at 103 5/16 bid.

And its 7% notes due 2025 dropped by more than 2½ points to 96¼ bid.

Indicators turn mixed

Statistical market performance measures turned mixed on Thursday, after being unchanged-to-higher on Wednesday. The indicators had also been mixed on Tuesday and were higher across the board on Monday.

The KDP Daily High Yield Index rose by 8 basis points Thursday to close at 72.34 after being unchanged on Wednesday and easing by 1 basis point on Tuesday to end at 72.26.

Its yield came in by 2 bps to 5.13% after being likewise steady on Wednesday at 5.15%. It had also narrowed by 1 bp on Tuesday – after being unchanged for an additional four sessions in a row between last Wednesday and Monday.

But the Markit CDX Series 28 High Yield Index lost nearly 7/32 point Thursday to finish at 107 3/16 bid, 107¼ offered, after edging up by almost 1/16 point Wednesday, its third straight gain.

The Merrill Lynch North American High Yield Index made it four advances in a row on Thursday, firming by 0.07% on top of Wednesday’s 0.014% improvement.

The latest upturn raised the index’s year-to-date return to 6.49% from 6.415% on Wednesday, establishing a fourth straight new 2017 year-to-date peak level.

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