Downsized Harland Clarke, Unifrax drive-by add-ons price amid generally dull day for the market

By Paul Deckelman and Paul A. Harris

New York, July 28 – The new week opened in Junkbondland on a generally quiet note, traders said, with only two dollar-denominated deals heard by high-yield syndicate sources to have come to market – both of them smallish drive-by add-on transactions, downsized even further before pricing.

Harland Clarke Holdings Corp., a San Antonio, Texas-based producer of checks, ATM, debit and credit cards, came to market with a $175 million add-on to its existing 2021 notes.

Unifrax I LLC, a Niagara Falls, N.Y.-based supplier of high-temperature insulation products to the construction industry, priced a $45 million of its existing 2019 bonds.

Both deals came to market fairly late in the session and were not seen in the aftermarket, although one trader noted that the transactions’ small sizes made them unlikely secondary trading candidates.

The day’s $223 million in two tranches was down from Friday’s $300 million of issuance, all of which came from just one deal, Hamilton, Bermuda-based oil and gas exploration and production operator Kosmos Energy Ltd. Nobody saw any dealings in that issue either.

In fact, activity was generally muted, even in such recent junk deals as Alliance Data Systems Corp. and Clearwater Paper Corp.

But there was some activity in a few recent issues, such as those from Micron Technology, Inc. and Regency Energy Partners, LP.

Statistical market performance indicators were down across the board for a second consecutive session Monday.

Harland Clarke taps 9¼% notes

Both Monday deals priced significantly cheap relative to price talk.

Harland Clarke priced a downsized $175 million tack-on to its 9¼% senior notes due March 1, 2021 (Caa1/B-) at 101 to yield 9.014%.

The deal was downsized from $200 million.

The reoffer price came 1.50 cheap to the cheap end of the 102.5 to 103.5 price talk.

Credit Suisse and BofA Merrill Lynch were the joint bookrunners for the dividend deal.

Unifrax taps 7½% notes

Unifrax priced a downsized $45 million add-on to its 7½% senior notes Feb. 15, 2019 (Caa1/B-) at 102 to yield 6.976%.

The deal was downsized from $50 million.

The reoffer price came a dollar cheap to the cheap end of the 103 to 103.5 price talk.

Goldman Sachs ran the books for the acquisition financing.

Jupiter Resources starts roadshow

The Monday session also saw massive buildups on both the dollar- and euro-denominated active calendars.

Syndicate officials gave two main reasons for the big build.

New deal activity tends to diminish somewhat in August, especially in Europe, they said.

Also, some potential issuers are facing blackout deadlines after which they will have to present fresh earnings numbers before hitting the market. Some of them want to get in before their respective issuing windows close.

Jupiter Resources Ltd. began a roadshow for its $1,125,000,000 offering of eight-year senior notes. A deal is set to price later this week, as is true of all the dollar-denominated offerings announced Monday.

Credit Suisse, TD, RBC, Barclays, Goldman Sachs, UBS, Deutsche Bank and Nomura are joint bookrunners for the acquisition financing.

Mallinckrodt brings $900 million

Mallinckrodt International Finance SA and Mallinckrodt CB LLC began a roadshow for a $900 million offering of eight-year senior notes (expected ratings B2/B).

Joint bookrunner Barclays will bill and deliver for the acquisition financing. Deutsche Bank, Citigroup and Wells Fargo are also joint bookrunners.

NRG Yield 10-year deal

NRG Yield, Inc. plans to price a $400 million offering of 10-year senior notes late this week.

BofA Merrill Lynch, Citigroup, Goldman Sachs and RBC are the joint bookrunners for the acquisition financing.

NCSG Crane starts roadshow

NCSG Crane & Heavy Haul Corp. began a roadshow for a $310 million offering of five-year senior secured second-lien notes (expected ratings B3/B-).

Goldman Sachs is the left bookrunner for the acquisition financing. RBC is the joint bookrunner.

PaperWorks secured notes

PaperWorks Industries, Inc. plans to price a $250 million offering of five-year senior secured notes (B3/B-) on Wednesday.

Jefferies and Macquarie are the joint bookrunners.

The Philadelphia-based integrated coated-recycled board and folding carton company plans to use the proceeds to refinance debt and fund a small equity distribution.

Lindorff $1.45 billion starts Tuesday

Norway’s Lindorff Group plans to start a roadshow on Tuesday for a €1.45 billion equivalent four-part offering of notes.

The roadshow wraps up on Aug. 4, and the deal is set to price thereafter.

The LBO deal features the following tranches:

• €550 million of seven-year senior secured fixed-rate notes (expected ratings B2/BB-), which are non-callable for three years;

• NOK 200 million of six-year senior secured floating-rate notes (expected ratings B2/BB-), which are non-callable for three years;

• €250 million of six-year senior secured floating-rate notes (expected ratings B2/BB-), which are non-callable for one year; and

• €450 million of eight-year senior unsecured fixed-rate notes (expected ratings Caa1/B-), which are non-callable for four years.

Goldman Sachs is the global coordinator and physical bookrunner. Nordea is a physical bookrunner on krone-denominated notes and a joint bookrunner. Deutsche Bank is a joint bookrunner.

Domus Vi starts roadshow

France-based elderly care services provider Domus Vi began a roadshow on Monday for its €355 million offering of seven-year senior secured notes.

Joint bookrunner Goldman Sachs International will bill and deliver. Deutsche Bank and Natixis are also joint bookrunners.

Upon release from escrow, proceeds, along with proceeds from the equity contribution, will be used to finance the acquisition of the company by PAI Partner, as well as to repay bank debt and pay interest on the existing convertible bonds.

Quiet start to the week

Although Highland Clarke and Unifrax managed to bring their already smallish and further downsized add-on deals to market during the session, several traders said they saw nothing doing in either credit.

They likewise did not see anything going on with recently priced offerings from last week, such as Kosmos Energy’s $300 million of 7 7/8% senior secured notes due 2021, which had priced at par on Friday after an investor roadshow.

Likewise, there was no activity in either Alliance Data or Clearwater Paper’s new deals.

A trader quoted Alliance Paper’s $600 million of 5 3/8% notes due 2022 at 100 1/8 bid, 100 3/8 offered, unchanged from the levels that the Plano, Texas-based direct marketing services provider’s quickly-shopped deal had hit on Friday, after having priced on Thursday at par.

And he also saw Spokane, Wash.-based cardboard packaging manufacturer Clearwater Paper’s 5 3/8% notes due 2025 at 100 1/8 bid, 100 3/8 offered, the same territory they had reached on Friday after having priced at par as a drive-by offering on Thursday.

Another trader quipped that given the slow pace of the session – typical for a summertime Monday – “I was pleased that I was able to stay upright for the whole eight-hour session.”

Micron, Regency notes trade

A market source at another desk said that about the only activity he saw in recently priced issues came from last week’s new deals from Micron Technology, Inc. and Regency Energy Partners, LP.

Boise, Idaho-based semiconductor manufacturer Micron’s 5½% notes due in February of 2025 were quoted unchanged at 100 3/8 bid, with about $9 million of the bonds having traded by the close.

The company had priced $1.15 billion of those bonds at par on Wednesday in a quick-to-market deal, after having sharply upsized the offering from an originally planned $750 million.

Dallas-based midstream natural gas and liquids master limited partnership Regency Energy’s 5% notes due 2022 lost ¼ of a point on Monday to finish at 100 3/8 bid, on volume of over $10 million.

That same-day deal, co-issued with affiliate Regency Energy Finance Corp., had priced at 99.198 to yield 5 1/8% after the deal was upsized to $700 million from $500 million originally.

Market indicators keep easing

Statistical indicators of junk market performance were lower for a second consecutive session on Monday. They turned lower across the board on Friday, after having been mixed on Thursday and higher on Wednesday.

The KDP High Yield Daily index lost 6 basis points on Monday to close at 73.99 – its weakest level of the year so far. This is the first time this year under the 74 mark and lowest level, period, since Oct. 17, 2013, when it closed at 73.83. It was the second straight loss for the index, having also declined by 4 bps on Friday.

The yield rose by 2 bps to 5.24%, after having unusually come down by 4 bps on Friday, even though the index reading itself was lower. The yield typically moves inversely to the index and thus normally rises when the index level declines.

The Markit CDX Series 22 index posted its third straight loss, falling by 3/32 of a point on Monday to 107 9/16 bid, 107 11/16 offered. It had retreated by 5/16 of a point on Friday and had eased 1/16 of a point on Thursday.

The widely followed Merrill Lynch High Yield Master II index was off for a second straight session on Monday, having also turned lower on Friday after three gains in a row through Thursday. It lost 0.009% on Monday, on top of Friday’s 0.038% dip.

Monday’s loss dropped the index’s year-to-date return to 5.166%, down from Friday’s 5.176%, And it still remained well down from the 5.751% return recorded on July 7, the peak level so far for 2014.

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