TI Automotive prices; Endo megadeal adds to gains; Valeant off on M&A; funds up $621 million

By Paul A. Harris and Paul Deckelman

New York, June 25 – TI Group Automotive Systems LLC brought a downsized $450 million offering of eight-year notes to market on Thursday, high-yield syndicate sources said. The automotive systems manufacturer’s new bonds traded around their issue price.

The syndicate sources also said that cement, concrete and asphalt maker Summit Materials LLC, which had just visited the primary side on Tuesday with an upsized issue of eight-year notes, came back for seconds on Thursday, pricing a $25 million add-on to the “old” new bonds.

The day’s $475 million two-tranche tally of new junk-rated, dollar-denominated paper from domestic or industrialized-country borrowers was well down from the $2.14 billion that had come to market on Wednesday in three tranches, according to data compiled by Prospect News.

The big deal from Wednesday’s session, drugmaker Endo International plc’s eight-year issue, was seen by traders having continued to move up in active aftermarket dealings on Thursday after having posted strong gains in initial secondary activity after their pricing.

Wednesday’s other major offering, from specialty chemicals manufacturer Univar Inc., was also actively traded on Thursday along with AerCap Holdings NV’s deal.

Away from the primary arena, Valeant Pharmaceuticals International Inc.’s bonds eased against a backdrop of the Canadian drug manufacturer’s having reportedly offered to buy Zoetis Inc., a maker of animal health products.

Statistical indicators of junk market performance turned lower on Thursday after having been mixed on Wednesday.

But high-yield mutual funds and exchange-traded funds, considered key barometers of overall market liquidity trends, gained $621 million in the latest reporting week, their first upturn in three weeks.

TI Automotive prices

A quiet day in the high-yield new issue market saw a pair of issuers raise a total of $475 million, each one bringing a single-tranche deal.

One of the two deals came as a drive-by.

One was downsized.

One priced on top of talk while the other priced at the wide end of talk.

TI Group Automotive Systems priced a downsized $450 million issue of eight-year senior notes (Caa1/B) at par to yield 8¾% on Thursday, according to a syndicate source.

The company downsized the bond deal from $550 million as it shifted $100 million of proceeds to its term loan.

The yield printed at the wide end of the 8½% to 8¾% yield talk.

Official talk came well wide of the 7¾% to 8% early guidance, according to a trader.

The downsized $450 million deal was said to be playing to a $650 million order book, a portfolio manager said on Thursday morning.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Barclays, Mizuho Securities, Goldman Sachs & Co., Nomura, RBC Capital Markets and UBS Securities LLC were the joint bookrunners for the acquisition financing.

Summit taps 6 1/8% notes

In quick-to-market action, Summit Materials priced a $25 million add-on to its 6 1/8% senior notes due July 15, 2023 (Caa2/B) at par to yield 6 1/8%.

The reoffer price came on top of price talk.

The quick-to-market add-on came just two days after the company priced the upsized $325 million (from $275 million) original issue, also at par.

As with the original issue BofA Merrill Lynch was the left bookrunner for the debt refinancing deal. Deutsche Bank Securities Inc., Goldman Sachs, Citigroup, RBC and Barclays were the joint bookrunners.

Douglas for Friday

Douglas AG downsized its two-part offering of high-yield notes by €200 million, shifting those proceeds to its bank loan.

The bond offer, now sized at €855 million, down from €1,055,000,000, features a downsized €435 million amount of senior secured notes due 2022 (B1) talked to yield 6¼% to 6½%. The tranche, in the market via special-purpose vehicle Kirk Beauty Zero GmbH, was downsized from €635 million.

Meanwhile, special-purpose vehicle Kirk Beauty One GmbH is offering €420 million of senior unsecured notes due 2023 (Caa1) talked to yield 8½% to 8¾%. The size of the unsecured tranche is unchanged.

Books close at 5 a.m. ET on Friday, and the deal is set to price thereafter.

Joint bookrunner Deutsche Bank will bill and deliver. Goldman Sachs, JPMorgan and UniCredit are also joint bookrunners.

In addition to Douglas, the active forward calendar contained at least four other smaller deals that are believed to be possible Friday business.

Georgia Renewable Power, Inc. is in the market with $225 million of first-lien senior secured notes due 2022 (expected rating Ba) via bookrunner Seaport Global.

My Alarm Center, Inc. has been on the road with $265 million of senior secured notes due 2020 (B3) via Imperial Capital.

Globo plc is in the market with $180 million of five-year senior secured notes (anticipated ratings B2/B3), also via Imperial.

And Intrepid Aviation Group Holdings, LLC is shopping $125 million of non-rated two-year senior notes via Jefferies.

No information on any of those deals surfaced during the Thursday session, sources said.

There was also a buzz in the market that SS&C Technologies Holdings Inc., which was scheduled to begin a roadshow for its $500 million offering of eight-year senior notes (B3/B+) on Thursday, might move up timing on the deal and price it Friday, even though it was announced with a schedule that had it pricing early in the week ahead. However, there was no official word from the dealers.

TI Automotive trades around

In the secondary market, a trader said that TI Group Automotive Systems’ 8¾% notes due 2023 were trading in a 99¾-to-100¼ bid context in initial aftermarket dealings after the Auburn Hills, Mich.-based provider of fluid storage, carry and delivery systems to the automotive industry priced its downsized issue at par.

A second market source saw the bonds “right around the par level.

“I don’t think [volume] was huge, but there was some trading right out of the gate.”

Endo adds to gains

As had been the case on Wednesday, Endo International’s new 6% notes due 2023 were trading actively on Thursday and moving higher.

A trader saw the bonds opening during the morning in a 102 1/8-to-102 3/8 bid context, up from the 101½-to-102 area in which the bonds had traded after pricing at par on Monday.

Later on, a trader at another shop pegged the new Endo bonds at 102¼ bid, 102½ offered, calling them up 5/8 point.

A market source said the bonds had moved up to 102 3/8 bid, a 3/8 point rise. He saw over $57 million of the notes changing hands, topping the high-yield Most Actives list, although that was well under the more than $190 million of the notes that had traded on Wednesday after pricing.

The Dublin-based pharmaceuticals manufacturer priced its $1.64 billion regularly scheduled forward calendar offering via its Endo Ltd., Endo Finance LLC and Endo Finco Inc. subsidiaries after the deal was upsized from an originally announced $1.44 billion. The bonds firmed smartly in very heavy dealings.

Univar moves up

Wednesday’s other sizable deal, from Downers Grove, Ill.-based specialty chemical company Univar, was finally seen trading around on Thursday, with a trader locating the bonds at 101, up from the par level at which the $400 million regularly scheduled calendar deal had priced.

The issue had come to market too late in the day on Wednesday for any real aftermarket dealings at that time.

A second trader also saw the notes at 101, with over $27 million having changed hands.

AerCap active

Among other recently priced issues, a trader said that AerCap’s 4¼% notes due 2020 had firmed to 100 7/8 bid, up by 5/16 point on the day. More than $11 million had moved around.

The Amsterdam-based aircraft leasing company had priced $500 million of those notes at par on Monday in a quick-to-market transaction that also included a $500 million tranche of 4 5/8% notes due 2022, which also priced at par.

The two-part issue was upsized to $1 billion total from an originally announced $800 million.

Valeant off on deal news

Away from the new issues, a trader said that Canadian pharmaceuticals manufacturer Valeant’s bonds were down anywhere from ½ to ¾ point, apparently pushed lower by news reports indicating that Valeant was offering to acquire Zoetis, the world’s largest manufacturer of medicines for pets and livestock.

Neither company immediately confirmed or denied the reports.

Valeant’s 6 1/8% notes due 2025 were seen down ¼ point at 102¾ bid, with over $35 million of the notes traded.

Its 5 7/8% notes due 2023 lost 3/16 point, closing at just under 103 bid, with over $14 million changing hands.

But its 6 3/8% notes due 2020 were seen having firmed slightly to 105½ bid, on volume of over $12 million.

Indicators head lower

Statistical indicators of junk market performance turned lower on Thursday after having been mixed on Wednesday. It was the second lower session in the last three trading days.

For a second straight session, the KDP High Yield Daily index fell by 8 basis points, to end at 70.61, after having been unchanged on Tuesday; before that, it had risen over four consecutive sessions.

Its yield, meanwhile, widened by 2 bps to close at 5.62% after having been unchanged at 5.60% for two sessions before that.

The Markit Series 24 CDX North American High Yield index was unchanged at 106 31/32 bid, 107 offered after having risen by 9/16 point on Wednesday – part of a recently choppy pattern of alternating gains and losses.

The Merrill Lynch North American Master II High Yield index was down for a third straight session on Thursday, losing 0.086%. That followed Wednesday’s 0.055% downturn and Tuesday’s 0.059% retreat.

The loss lowered its year-to-date return to 3.093% from 3.182% on Wednesday. It also moved further down from the 4.062% reading recorded on May 29, the index’s peak level for the year so far.

Fund flows gain

High-yield mutual funds and ETFs, considered a reliable barometer of overall junk market liquidity trends, turned higher this week, posting their first inflow after two straight outflows totaling nearly $5.5 billion.

Sources familiar with the fund-flow statistics said Thursday that $621 million more had come into those weekly-reporting-only funds than had left them during the week ended Wednesday, in sharp contrast to the negative pattern seen last week, when a $2.89 billion cash loss was reported for the seven-day period ended June 17. (See related story elsewhere in this issue.)

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