Univar, Maxar, Prestige price; Centene plans $7 billion; Hertz, Restaurant Brands up

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 15 – The domestic high-yield primary market rounded out the truncated post-Veterans Day week with three issuers pricing $1.9 billion, making the week the second biggest for new deal activity year to date.

Prestige Brands, Inc. priced a $400 million issue of eight-year senior notes (B3/B+).

Univar Solutions Inc. priced an upsized $500 million issue of eight-year senior notes (B2/BB-).

And SSL Robotics LLC (escrow issuer), a wholly owned subsidiary of Maxar Technologies Inc., priced a downsized $1 billion issue of four-year senior secured notes (B2/B).

The forward calendar continued to grow with Enviva Partners, LP and Enviva Partners Finance Corp. announcing plans to conduct a roadshow for a $450 million offering.

However, all eyes were on Centene Corp.’s planned $7 billion three-part offering of senior notes (Ba1/BBB-/BB+) which will price late next week.

Meanwhile, new paper continued to be the main driver of trading activity in the secondary space.

Hertz Corp.’s newly priced 6% senior notes due Jan. 15, 2028 (B3/B-) were among the most actively traded in the secondary space with the notes changing hands at a slight premium to their issue price.

Restaurant Brands International, Inc.’s 4 3/8% senior notes due Jan. 15, 2028 (B2/B+) were also performing well in the secondary, despite their tight pricing.

ASGN Inc.’s 4 5/8% senior notes due May 15, 2028 (Ba3/BB-) held onto their premium in active trading on Friday.

Outside of the new issues, Intelsat SA’s junk bonds continued to see heavy volume with the notes rebounding from their sell-off.

Centene brings $7 billion

Although Friday's session in the new issue bourse was an active one, Centene Corp. commanded an outsized share of the market's attention, much as an aircraft carrier will when it cruises among a fleet of trawlers.

Centene disclosed plans to start a roadshow on Monday for a $7 billion three-part offering of senior notes (Ba1/BBB-/BB+).

The deal includes an add-on to the Centene Escrow I Corp. 5 3/8% senior notes due June 1, 2026, with initial talk in the 104 area.

In addition, Centene plans to sell eight-year non-call-three notes, in the market with initial talk in the 4¾% area, and 10-year non-call-five notes, with initial talk in the 5% area.

Pricing is set for Thursday.

Friday deals

High-yield syndicates remained busy on Friday, clearing or attempting to clear business that had been expected to price before the end of what turned out to be the second biggest week for issuance in 2019 to date.

Prestige Brands priced a $400 million issue of eight-year senior notes at par to yield 5 1/8% in a quick-to-market Friday trade.

The yield printed at the tight end of yield talk in the 5¼% area. Initial guidance had the deal coming to yield 5½%.

The company came to market with an existing Caa1 unsecured rating from Moody's. The ratings agency conferred an upgrade to B3 while the deal was on the block, helping the company to drive tighter pricing, a trader said.

Following a brief roadshow, Univar Solutions priced an upsized $500 million issue of eight-year senior notes at par to yield 5 1/8%.

The issue size increased from $400 million.

The deal priced 12.5 basis points beneath the tight end of the 5¼% to 5½% price talk, and 50 bps beneath the tight end of initial guidance in the 5¾% area, sources say.

SSL Robotics (escrow issuer), a wholly owned subsidiary of Maxar Technologies, priced a downsized $1 billion issue of 9¾% four-year senior secured notes at 98 to yield 10.363%.

The issue size decreased from $1.25 billion.

The issue price came on top of price talk.

The coupon printed at the wide end of the 9½% to 9¾% coupon talk.

The yield came near the wide end of the 10.11% to 10.37% yield talk. Earlier talk was in the 9% area.

The week ahead

Should nothing besides the above-mentioned Centene $7 billion deal price during the Nov. 18 week, it would still be a big one.

As it happens, however, Centene is not alone on the active calendar for the week ahead.

On Friday, Enviva Partners announced plans to conduct a roadshow and price a $450 million offering of six-year senior notes (existing unsecured ratings B1/B+/BB-) during the Nov. 18 week.

Initial guidance has the deal coming to yield in the mid-to-high 6% area, a bond trader said.

Elsewhere, Teva Pharmaceutical Industries Ltd. is in the market with $1.5 billion equivalent of notes in two tranches of five-year senior notes (Ba2/BB).

The deal features dollar-denominated notes with early guidance in the mid-to-high 7% area, and euro-denominated notes with early guidance in the mid-to-high 6% area.

As of Friday morning, there were $750 million of orders in the dollar-denominated book, according to a trader who added that the deal may upsize to $2 billion equivalent.

However, demand for both the dollar and euro tranches was below expectations as of Friday morning, the trader said.

The roadshow is scheduled to wrap up Monday.

Hertz active

In the secondary, Hertz’s new 6% senior notes due 2028 were in focus on Friday with the notes trading at a premium to their issue price.

The 6% notes were changing hands between par ¼ and par ½, according to a market source.

With more than $102 million of the bonds on the tape by the late afternoon, the notes were among the top volume movers in the secondary space on Friday.

Hertz priced an upsized $900 million issue of 6% notes at par in a Thursday drive-by.

The issue size increased from $750 million.

The yield printed at the wide end of the 5¾% to 6% yield talk and in line with initial talk in the 6% area.

Proceeds will be used to redeem $900 million of the $1.25 billion outstanding of the rental car company’s 7 5/8% senior secured second priority notes due 2022.

The 7 5/8% notes will be redeemed at 103.813 plus accrued interest. (See related article in this issue.)

The 7 5/8% notes were changing hands at 104 1/8 on Friday, according to Trace data.

Restaurant Brands trades up

Restaurant Brands’ newly priced 4 3/8% senior notes due 2028 were trading with a slight premium to their issue price in the secondary space, despite their tight pricing.

The notes were changing hands in a range of par 1/8 to par ½ with the notes gaining strength into the afternoon, sources said.

They stood poised to close the day at par ½. The notes saw more than $20 million in reported volume.

While the notes were performing well in the secondary, the pricing seemed tight for a company that was so heavily leveraged, a market source said.

The deal from the holding company for fast food chains such as Burger King and Popeyes was the first unsecured debt offered beyond the company’s other junk first lien notes.

“They’re coming at the bottom of the stack and you’re not getting that much more yield,” a source said.

Restaurant Brands priced a downsized $750 million issue of the 4 3/8% notes at par in a Thursday drive-by.

The issue was downsized from $1 billion.

The yield printed at the tight end of yield talk in the 4½% area and tight to initial talk in the mid 4% area.

ASGN holds

ASGN’s 4 5/8% senior notes due 2028 held onto their premium in active trading on Friday.

The notes continued to change hands between par ½ and par ¾ and stood poised to close the day at par 5/8, sources said.

More than $37 million of the bonds were on the tape by the late afternoon.

The notes traded up to their current level soon after breaking for trade on Thursday, closing on the day they broke at par ½.

ASGN priced an upsized $550 million issue of the 4 5/8% notes at par on Thursday.

The issue size increased from $500 million

The yield printed on top of final yield talk which had tightened from earlier official talk of 4¾% to 5%.

Initial guidance was in the 5% area.

Intelsat rebounds

Intelsat’s junk bonds continued to see heavy volume on Friday with the notes rebounding after a sell-off on Wednesday and Thursday drove the capital structure down.

Intelsat’s 8 1/8% senior notes due 2023 pared their losses from Thursday with the notes changing hands as high as 70 before closing the day at 68½ ,a 3-point gain.

The notes saw almost $100 million in reported volume by the late afternoon.

The 8 1/8% notes traded as low as 65 on Thursday. They were in the mid- to high 80s the previous week.

Intelsat’s capital structure was lifted on Friday after the C-Band Alliance filed a proposal with the Federal Communications Commission to contribute to the U.S. Treasury.

The alliance would contribute a portion of the proceeds from a private auction of the C-band spectrum to the U.S. Treasury, which could result in billions of dollars, according to a press release from the C-Band Alliance.

Intelsat’s junk bonds saw an intense sell-off over Wednesday and Thursday over concern that calls for a public auction of the C-Band spectrum was gaining congressional support.

The C-Band Alliance had been advocating for a private auction.

The heavy volume in the notes may have been the result of traders trying to ‘catch a falling knife,’ or buy the bonds at their lowest point.

If there was concern the bonds had much more of a downside, most would steer clear of them, a market source said.

Flat Thursday flows

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

High-yield ETFs sustained $8 million of outflows on the day.

Actively managed high-yield funds ended the session with both feet in the green, seeing $10 million of inflows on Thursday, the source said.

News of Thursday's flows follows a late Thursday afternoon report that the combined high-yield funds sustained $254 million of net outflows during the week to Wednesday's close, according to information reported by Lipper US Fund Flows.

It was the second consecutive weekly outflow.

However, in six of the past 10 weeks the combined funds saw positive weekly flows for a total of $6.7 billion of net inflows during that period, according to the source.

Indexes

Indexes closed the week with minor gains although all posted cumulative losses on the week.

The KDP High Yield Daily index rose 2 bps to 71.09 with the yield now 5.22%.

The index dipped 3 bps on Thursday, was down 1 bp on Wednesday and dropped 14 bps on Tuesday for a cumulative loss of 16 bps on the week.

The ICE BofAML US High Yield index rose 2.4 bps with the year-to-date return now 11.866%.

The index slid 4 bps on Thursday and dropped 10.3 bps on Wednesday after a 4.3 bps gain on Tuesday for a cumulative loss of 7.6 bps on the week.

The index dropped below 12% returns last Friday.

The CDX High Yield 30 index rose 16 bps to close Friday at 107.4. The index dipped 6 bps on Thursday, was down 20 bps on Wednesday and 14 bps on Tuesday for a cumulative loss of 24 bps on the week.

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