TransDigm dives by with $2.65 billion; recent notes diverge; PG&E improves; Grubhub declines

By James McCandless and Paul A. Harris

San Antonio, Oct. 28 – The high-yield drive-through window opened wide on Tuesday, as TransDigm Inc. priced an upsized, quick-to-market $2.65 billion issue of eight-year notes, and secondary trading was awash with names reporting earnings and other newsmakers.

Meanwhile London-based BBA Aviation plc priced a $650 million issue of 8.25-year senior notes at par to yield 4%.

In the secondary, recent notes from FXI Holdings, Inc. and American Builders & Contractors Supply Co., Inc. were active, but diverged in direction, with the former rising and the latter falling.

In utilities, PG&E Corp.’s issues bounced back from recent lows stemming from negative press surrounding power outages and wildfires.

Food delivery company Grubhub Inc.’s paper declined in reaction to its earnings report.

Telecom name Intelsat SA’s notes varied after the company released its uneven third-quarter earnings.

Oversubscribed deals

TransDigm Inc. priced an upsized, quick-to-market $2.65 billion issue of eight-year senior subordinated notes (B3/B-) at par to yield 5½%.

The issue size increased from $2.15 billion.

The yield printed in the middle of yield talk in the 5½% area.

The order book was heard to have built to more than $3 billion by the middle of Tuesday morning, according to a bond trader.

Meanwhile London-based BBA Aviation priced a $650 million issue of 8.25-year senior notes (Ba2/BB) at par to yield 4%.

The yield printed 12.5 basis points inside of yield talk in the 4¼% area. Initial guidance was in the mid-4% area.

The deal, which was announced to the market early on Monday, was heard to have generated more than $1.5 billion of orders by early Tuesday morning, the trader said.

Thin calendar

In the wake of Tuesday's pair of transactions the active forward calendar appeared thin, heading into the final two sessions of October.

One reason for the thin calendar is an earnings blackout, as prospective issuers must freshen financial numbers before making a pass at the junk-bond market.

Notwithstanding that blackout, the signals up the track are green for the moment, sources say.

However a central bank that is anything less than accommodative, or volatility churned by too much financial or political headline noise could change things quickly, they add.

One big deal has been plying the high-yield road.

Wesco Aircraft Holdings, Inc. is in the market with $1,575,000,000 of high-yield notes.

The deal includes $1 billion of seven-year senior secured notes (B3/B), with early guidance high 7% area, and $575 million of eight-year senior unsecured notes (Caa2/CCC+), with early guidance in the 350 bps area behind secured notes.

However talk on the Wesco deal could be headed north, according to a trader who heard high 7% to low 8% area on the secured notes, which were said to be less than 50% spoken for on Tuesday.

Also there remains quite a lot of work to do on the $600 million bank loan, the trader said.

The roadshow is set to run into the Friday session.

And Blackboard Inc. continues to market $243 million of second lien notes (Caa2/CCC) and a $500 million bank loan, sources say.

Most recent talk has the bonds coming with an 11%-handle yield, a trader said.

The Blackboard 9¾% notes due 2021, which are to be called at 102.5, have lately traded at par ½, a trader said on Tuesday, adding that there is deal risk implied by that trading price, as investors weigh two points of upside, should the new second-lien notes price and the 2021 notes are taken out at their call price, against perhaps 20 points of downside on the 9¾% notes if Blackboard fails to get across the finish line with its refinancing.

Monday inflows

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

High-yield ETFs saw $121 million of inflows on the day.

Actively managed funds saw $25 million of inflows on Monday, the source said.

The combined funds are tracking $892 million of net inflows in the week that will conclude with Wednesday's close, the source added.

Recent notes diverge

Two recent notes were active, taking different paths by the close, traders said.

Media, Pa.-based polyurethane foam producer FXI’s recent 12¼% senior secured notes due 2026 rose 1 point to close at 101 bid.

The $775 million deal came to market last Thursday at 98.279.

Beloit, Wis.-based roofing name ABC Supply’s recent 4% senior secured notes due 2028 fell ½ point to close at 100 bid.

The $700 million issue priced last Wednesday in a quick-to-market trade at par.

PG&E bounces

PG&E’s paper bounced off of recent declines, market sources said.

The 6.05% paper due 2034 jumped up 5½ points to close at 95¾ bid. The 3½% senior paper due 2020 garnered 4¼ points to close at 90½ bid.

The two tranches combined to see about $150 million on the tape by the close.

After two trading days of declines, the San Francisco-based bankrupt electric utility’s notes were rising off of recent lows sparked by the company’s latest round of customer blackouts.

Combined with worries that a malfunctioning transformer could have ignited the latest wildfire plaguing Northern California, the name has seen nothing but negative headlines.

“This is a correction,” a trader said. “But I don’t know how quickly it will recover, especially if it’s proven that they started the fire.”

Grubhub drops

Meanwhile, Grubhub’s notes saw a drop, traders said.

The 5½% senior notes due 2027 ended 3½ points weaker to 94½ bid.

After the close on Monday, the Chicago-based food delivery name reported third-quarter results.

The company showed a 27 cents per share profit, matching analyst estimates.

Revenues just missed expectations at $322 million.

What dragged the structure down was the company’s revised guidance where it expects growth for the current quarter to be not as strong as anticipated.

Intelsat varies

In the telecom space, Intelsat’s issues varied, market sources said.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 gained ½ point to close at 95 bid. Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 fell 2 points to close at 84¼ bid.

By the end of the afternoon, about $39 million of the notes traded.

Early Tuesday, the Luxembourg-based satellite operator also released its earnings results for the third quarter.

The company reported an earnings loss of $1.05 per share, wider than the $1 loss per share that was expected by analysts.

On the other hand, it also reported revenues at $506.66 million, better than what was predicted.

Also on Tuesday, the company joined with other members of the C-Band Alliance to propose clearing 300 MHz of midband spectrum for reuse in the 5G network.

Indexes trend down

Three high-yield indexes combined to show a negative trend.

The KDP High Yield Daily index tacked on 2 bps on Tuesday, ending at 71.37 with the yield declining to 5.43%.

The index picked up 3 bps on Monday, hopped up 7 bps on Friday and went unchanged on Thursday.

The ICE BofAML US High Yield index shed 1.2 bps with the year-to-date return now at 12.123%.

The index improved by 4.8 bps on Monday, gained 9.5 bps on Friday and rose 6.5 bps on Thursday.

The CDX High Yield 30 index dropped 33.23 bps to 107.4287.

The index garnered 33.02 bps on Monday, improved by 33.18 bps on Friday and dipped 33.39 bps on Thursday.

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