Netflix upsizes; Heartland prices wide; Alliance One drops; ArcelorMittal active

By Abigail W. Adams

Portland, Me., April 23 – The domestic high-yield primary market started the week off by pricing $2.21 billion in new paper on Monday with the forward calendar growing.

Netflix, Inc. priced an upsized $1.9 billion issue of non-callable 10.5-year senior notes (Ba3/B+) at par to yield 5 7/8% in a quick-to-market Monday trade.

The notes had a lackluster reception in the secondary market, as the internet television network’s 5 7/8% senior notes due 2028 traded down.

Heartland Dental, LLC priced a $310 million issue of eight-year senior notes (Caa2/CCC) at par to yield 8½%.

Also in primary news Monday, Neptune Energy Group Midco Ltd. began a roadshow for a $500 million offering of seven-year senior notes (B2) and Jagged Peak Energy Inc. announced plans to sell $400 million of eight-year senior notes during the April 23 week.

The European high-yield primary market was also active with Wienerberger AG pricing a €250 million issue and La Financiere Atalian SAS and Darling Ingredients Inc. launching roadshows.

As the primary market brought new paper into junkbondland, the secondary space was “a little sloppy,” with the market down about ¼-point, market sources said.

Recent deals from BBA Aviation and Lycra Co. were seen unchanged on Monday after breaking for trade on Friday. New paper from LSB Industries, Inc. and Apergy Corp. weakened on Monday.

Among existing bonds, Alliance One International, Inc.’s 9 7/8% senior secured second-lien notes due 2021 dropped 2 points during Monday’s session.

ArcelorMittal SA’s junk bonds were active although with little change on Monday. The Luxemburg-based steel and mining company may be allowed to submit a fresh bid for Essar Steel, India’s leading flat steel manufacturer.

Big upsize for Netflix

Netflix priced an upsized $1.9 billion issue of non-callable 10.5-year senior notes (Ba3/B+) at par to yield 5 7/8% in a quick-to-market Monday trade.

The amount was increased from an originally announced $1.5 billion.

The yield printed in the middle with the 5¾% to 6% price talk, which came in line with initial talk in the 5¾% to 6% area.

There was $700 million of reverse inquiry said to help drive the deal into the market, a trader said.

Morgan Stanley, JP Morgan Securities, Deutsche Bank and Wells Fargo were the joint bookrunners for the general corporate purposes deal.

Heartland sells eight-years

Heartland Dental priced a $310 million issue of eight-year senior notes (Caa2/CCC) at par to yield 8½%.

The yield printed at the wide end of the 8¼% to 8½% yield talk.

Jefferies was the left bookrunner. KKR, TD, BMO and Macquarie were the joint bookrunners.

Proceeds will be used to help fund the leveraged buyout of the Effingham, Ill.-based dental support organization by KKR.

Neptune Energy’s roadshow

There was a substantial buildup of the forward calendar as the April 23 week got underway.

Neptune Energy Group Midco and Neptune Energy Bondco plc began a roadshow on Monday for a $500 million offering of seven-year senior notes (B2).

Initial price talk has the deal coming to yield in the high 6% to 7% area.

JP Morgan is leading the offer.

Jagged Peak to price

Jagged Peak Energy plans to sell $400 million of eight-year senior notes during the April 23 week.

Initial price talk is in the 6% to 6¼% area.

JP Morgan Securities LLC is leading the debt refinancing deal.

Wienerberger sells euro deal

In the European market, Wienerberger priced a €250 million issue of 2% six-year bonds (Ba1) at 99.303.

The deal was talked in the low-to-mid 2% range.

Commerzbank, Danske Bank and Erste Group managed the sale.

The deal, which was three-times oversubscribed, saw big demand from Austrian and international investors, the release stated.

The Vienna-based building supplies company plans to use the proceeds to refinance

existing liabilities and for general corporate purposes.

Atalian roadshow

La Financiere Atalian began a roadshow on Monday for a €610 million two-part offering of seven-year senior notes (B2/B+).

The deal is coming in tranches of euro-denominated notes and sterling-denominated notes. Tranche sizes remain to be determined.

Joint global coordinator Credit Suisse will bill and deliver. BNP Paribas is also a joint global coordinator. Citigroup is a joint bookrunner.

The roadshow wraps up on Thursday, and the deal is set to price subsequently.

The Paris-based facilities management services provider plans to use the proceeds to fund the acquisition of Servest UK, as well as to refinance substantially all of Servest UK debt’s and for general corporate purposes including acquisitions.

Darling starts roadshow

Darling Ingredients started a roadshow on Monday for a €515 million offering of eight-year senior notes (expected ratings Ba3/BB+).

Joint bookrunner BNP Paribas will bill and deliver. BofA Merrill Lynch, Citigroup, JP Morgan and Goldman Sachs are also joint bookrunners.

The roadshow wraps up on Wednesday and the deal is set to price thereafter.

The Irving, Texas-based company plans to use the proceeds, together with a draw on its revolver, to refinance all of its 4¾% senior notes due 2022 by means of a concurrent tender offer and/or redemption.

New Netflix at par

Netflix’s new 5 7/8% senior notes (Ba3/B+) due 2028 had a lackluster reception in the secondary market after breaking for trade late Monday afternoon. The notes were seen at 99 7/8 bid, par 1/8 offered with most trades at par, a market source said.

The large upsize was seen as partly responsible for the subdued trading levels of the notes. With the market starved for new issuance, most recent deals have traded above their issue price.

While Netflix prepared new paper, the company’s 4 3/8% senior notes due 2026 (Ba3/B+) dropped about 1½ points in active trading on Monday. The notes closed Monday at 95¼ after closing Friday at 96½, according to Trace data.

Recent deals

As new paper entered the secondary market, recent deals were seen unchanged or slightly lower.

Lycra’s 7½% senior secured notes due 2025 were seen at 102 bid, 102½ offered on Monday, relatively unchanged from Friday, according to a market source.

Lycra priced an upsized $1 billion equivalent of senior secured notes (B1/B) in two tranches on Friday, which included an upsized $690 million of seven-year notes at par to yield 7½%.

While BBA Aviation’s 5 3/8% notes due 2026 (Ba2/BB) were not as strong in the secondary market as Lycra’s new paper, the notes were nonetheless seen above their issue price.

The 5 3/8% notes were quoted at 100 1/8 bid, 100 5/8 offered on Monday, a market source said. BBA Aviation priced a $500 million issue of eight-year senior notes (Ba2/BB) on Friday at par to yield 5 3/8%.

LSB Industries’ discounted 9 5/8% senior secured notes due 2023 (Caa1/CCC) were down slightly on Monday. The 9 5/8% notes were seen at 99 7/8 bid, 100 5/8 offered on Monday.

The notes were seen at 100 ¼ bid, 101 offered on Friday.

LSB Industries priced a $400 million issue of 9 5/8% five-year senior secured notes (Caa1/CCC) at 99.509 to yield 9¾% on Thursday.

Apergy’s 6 3/8% senior notes due 2026 (B1/B) also lost some ground in the secondary market on Monday. The notes were seen at 101 3/8 bid, 101 7/8 offered on Monday.

That was down from levels seen Friday of 101 5/8 bid, 102 1/8.

Apergy priced a $300 million issue of the eight-year senior notes at par to yield 6 3/8% late Thursday.

Alliance One drops

Away from the new and recent deals, Alliance One’s 9 7/8% senior secured second-lien notes due 2021 dropped 2 points on Monday. The notes were seen at 95¼ bid, 96¼ offered on Monday.

“There wasn’t any news that caused it,” a market source said. “The market was just sloppy.”

The Morrisville, N.C.-based tobacco producer’s 9 7/8% notes priced at 98 in July 2013.

ArcelorMittal active

ArcelorMittal’s 5½% senior notes due 2021 and 6 1/8% senior notes due 2025 were active on Monday although with little change, market sources said.

The 6 1/8% notes were down about ¼ point in active trading on Monday. The notes were seen at 108 1/8 bid, 108 5/8 offered. They were at 108½ bid, 109 offered on Friday, a market source said.

The 5½% notes were unchanged, the source said, and were seen trading at 105.5.

The Luxembourg-based steel and mining company may have another opportunity to bid on Essar Steel, one of India’s leading steel manufacturers.

ArcelorMittal’s bid on the company was previously disqualified due to its investment in two companies that had defaulted on loan repayments.

There is a clause that prevents a defaulting company from bidding on stressed assets in the auction process, the Economic Times reported.

ArcelorMittal will be able to submit a fresh bid on Essar Steel if it can repay the outstanding debt of Uttam Galva and KSS Petron, the investments that defaulted on their loan repayments.

Indexes’ losses continue

Indexes continued to lose ground on Monday, their third consecutive trading day of losses.

The KDP High Yield index was down 15 basis points on Monday to 70.86 with the yield rising to 5.7%.

The index was down 8 bps last Friday and 14 bps last Thursday. Prior to Thursday, the index saw 10 consecutive trading days of gains.

The Merrill Lynch High Yield index returned to negative territory on Monday after briefly turning positive. The index was down 16.8 bps on Monday with the year-to-date return now negative 0.065%.

The index had had a positive year-to-date return since April 12.

The CDX high yield 30 index was down 24 basis points on Monday to close the day at 106.64. The CDX has posted losses since April 17.

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