Bristow prices upsized deal at a discount, mixed performances continue among recent deals

By Paul A. Harris

Portland, Ore., Feb. 23 – In Friday’s high-yield market, Bristow Group Inc. priced an upsized $350 million issue of 8¾% five-year secured notes at a discount.

Meanwhile, among a flurry of deals that came earlier in the week, the recently issued bonds tended to be lagging, straddling or hovering slightly above their new issue prices at week’s end.

Sprint Corp.’s new 7 5/8% senior bullet notes due March 2026 (B3//B+) were at 99 1/8 bid, 99 5/8 offered, down ¼ point on the day, after having lagged their new issue price throughout the week.

The upsized $1.5 billion issue priced at par to yield 7 5/8% in a quick-to-market trade on Tuesday, according to market sources.

The amount was increased from $1 billion.

The deal came with initial guidance of 8%, a level that fell a full 25 basis points to the 7¾% area before the deal ultimately came 12.5 bps tight to that talk at 7 5/8%. As a result, investors were squeezed to the tune of 37.5 bps.

Nevertheless, the Sprint book was heard to contain $3.5 billion of orders at 7¾%, a trader said.

Weatherford International plc’s $600 million issue of seven-year bullet notes (Caa1/B-) was above new issue price on Friday afternoon, at 99¾ bid, par offered.

The $600 million issue priced at 99.34 to yield 10% in a quick-to-market trade on Wednesday.

The yield printed in the middle of yield talk set in the 10% area. Initial guidance was in the 10¼% area.

Lack of follow-through

Sources gave various reasons why recent issues have turned in generally underwhelming secondary market performances.

Deals tended to be “priced on the screws,” i.e. so rich that little room was left for the bonds to trade up significantly in the secondary market.

Rates, as expressed by the yield on the 10-year Treasury, have moved dramatically, causing the bond market to reprice.

Cash flows of dedicated high-yield funds have been negative for a sustained period, although outflows appeared to be abating somewhat late in the Feb. 19 week.

And follow-through in the market just isn’t there, according to a portfolio manager who added that rates are the main culprit in this lack of follow-through.

Nevertheless, the manager added, among asset classes, high-yield continues to be a big outperformer on a year-to-date basis.

Bristow upsizes

Bristow Group priced an upsized $350 million issue of 8¾% five-year senior secured notes (B2/B+) at 99.016 to yield 9% on Friday.

The deal was increased from $300 million.

The notes priced in line with final talk that set out a coupon of 8¾%, a reoffer price of approximately 99 and a 9% yield.

Earlier yield talk was 9% to 9¼%.

Initial guidance was 9% to 9½%.

Along with the upsize there was also a covenant change.

Credit Suisse Securities (USA) LLC was the lead left bookrunner. Barclays was the joint bookrunner.

New Enterprise sets roadshow

At Friday’s close, only one deal was situated on the active forward calendar.

New Enterprise Stone & Lime Co., Inc. plans to start a roadshow on Monday in New York and New Jersey for a $450 million offering of eight-year senior secured notes.

The roadshow wraps up Wednesday in Boston and the debt refinancing deal is set to price thereafter.

Goldman Sachs is the lead bookrunner.

The New Enterprise, Pa.-based heavy construction materials supplier and contractor plans to use the proceeds, together with cash on hand and borrowings under its asset-based revolving credit facility, to pay off its existing term loan and make the required prepayment premium.

The week ahead could see three to four deals, all market-dependent, a trader said.

The market anticipated that the Feb. 19 week might see $10 billion of issuance, the source added, noting that less than half that amount materialized.

Expectations for the February-March crossover week ahead have been adjusted accordingly, the trader said.

Thursday outflows

Cash flows for dedicated high-yield bond funds were negative on Thursday, the most recent session for which data was available at press time.

High-yield ETFs sustained $532 million of outflows on the day.

Asset managers saw $45 million of outflows on Thursday.

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