Colfax prices; D&B on tap; TransDigm, Greif active; Tesla, Charter gain; funds add $73 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 31 – The high-yield primary market continued to roll out new deals with $1 billion pricing on Thursday and $1.35 billion slated to price on Friday.

Colfax Corp. priced $1 billion of senior notes (Ba2/BB+) in two tranches during Thursday’s session.

Dun & Bradstreet Corp. plans to price its $1.35 billion two-part offering on Friday.

Meanwhile, the secondary space continued to rip on Thursday with credit spreads tightening and names across multiple sectors riding the wave higher, sources said.

Recent deals remained in focus with TransDigm Inc.’s 6¼% notes due 2026 (Ba3/B+) and Greif Inc.’s 6½% notes due 2027 (B1/BB-) slightly improved in active trading.

Tesla Inc.’s 5.3% senior notes due 2025 were also on the rise in active trading following the company’s fourth-quarter earnings report and news that it would be able to cover the upcoming maturity of one of its convertible notes.

Charter Communications, Inc.’s split-rated notes saw large gains in active trading following its fourth-quarter earnings report.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw a modest inflow of $73 million for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

After a record-setting year of outflows in 2018, funds have seen a cumulative net inflow of $3.513 billion in the five weeks of 2019.

Colfax sees big demand

Colfax Corp. priced $1 billion of senior notes (Ba2/BB+) in two tranches at the conclusion of a roadshow on Thursday.

The deal included $600 million of five-year notes that priced at par to yield 6%.

The yield printed at the tight end of the 6% to 6¼% yield talk. Initial guidance was in the 6½% area.

In addition, Colfax priced $400 million of seven-year notes at par to yield 6 3/8%.

The yield printed 12.5 basis points beneath the tight end of the 6½% to 6¾% yield talk. Initial guidance was in the 7% area.

The $1 billion acquisition deal was said to be playing to $4 billion of orders on Thursday morning, a trader said.

J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Barclays, BNP Paribas Securities Corp., Citigroup Global Markets Inc., Citizens Bank, Goldman Sachs & Co. LLC and HSBC Securities (USA) Inc. were the joint bookrunners.

Dun & Bradstreet for Friday

Looking to Friday’s session, Dun & Bradstreet plans to price its $1.35 billion two-part offering of senior notes.

The buyout deal includes $500 million of 7.5-year senior secured notes (B2/B/BB) talked in the 7¼% area, tight to initial guidance in the mid 7% area.

BofA Merrill Lynch is the lead bookrunner for the secured notes tranche.

As of Wednesday afternoon, the secured tranche was said to be playing to $700 million of demand.

The unsecured tranche features $850 million of eight-year senior notes (Caa2/CCC/B-) talked to yield 10% to 10¼%, tight to initial guidance in the 10¼% to 10½% area.

Citigroup Global Markets Inc. is the lead bookrunner for the unsecured notes tranche.

Slightly improved

New paper remained in focus in the secondary space with the deals that priced during Wednesday’s session seeing slight improvement in high-volume activity.

TransDigm’s 6¼% senior notes due 2026 continued to dominate trading activity. The notes were up another ¼ point after shooting up after breaking for trade on Wednesday.

They were quoted at 101½ bid, 101 7/8 offered on Thursday and traded up to 101¾, sources said. More than $76.5 million of the bonds were on the tape by the late afternoon.

The notes were quoted at 101¼ bid, 101½ offered on Wednesday.

TransDigm priced an upsized $3.8 billion issue of the 6¼% notes at par on Wednesday.

The deal priced tight to yield talk in the 6 3/8% area.

The issue size was increased from $3.7 billion, which was previously increased from $2.7 billion. A proposed $1 billion tranche of subordinated notes was withdrawn from the market with the proceeds shifted to the secured tranche.

Greif’s 6½% senior notes due 2027 also continued to improve in active trading on Thursday after trading up after breaking for trade on Wednesday.

The 6½% notes were up about 1/8 point, according to a market source.

The notes were quoted at par 5/8 bid, par 7/8 offered on Thursday and were seen changing hands at par 5/8 in the late afternoon.

Greif priced a $500 million issue of the 6½% notes (B1/BB-) at par on Wednesday.

The yield printed at the tight end of the 6½% to 6¾% yield talk and tighter than initial guidance in the 6¾% to 7% area.

Tesla’s earnings

Tesla’s 5.3% senior notes due 2025 were on the rise in high-volume activity on Thursday following the company’s fourth-quarter earnings report.

The 5.3% notes rose 1¾ points to close Thursday at 88¾. More than $35 million of the bonds changed hands during Thursday’s session.

While Tesla’s earnings were mixed, the notes were gaining strength on news the company would be able to meet the upcoming maturity of its 0.25% convertible notes due March 1.

While Tesla missed on the bottom line with non-GAAP earnings per share of $1.93 versus analyst expectations of $2.08, the electric car manufacturer beat on the top line with revenue of $7.2 billion versus analyst expectations of revenue of $7.1 billion.

Cash and cash equivalents were $3.69 billion as of Dec. 31, 2018.

Tesla announced that it would be able to comfortably cover the $920 million principal amount outstanding of the 0.25% convertible notes in cash upon their maturity.

Charter jumps

Charter’s split-rated notes jumped in active trading on Thursday following its fourth-quarter earnings report.

The company’s 5¾% senior notes due 2048 (Ba1/BBB-/BBB-) traded as high as par during Thursday’s session but closed the day at 99¾, an increase of a little more than 2 points, a market source said.

The notes were the most active in Charter’s capital structure with more than $52 million of the bonds changing hands.

The levels marked the highest the notes have seen since October 2018.

Charter’s 6.384% senior notes due 2035 (Ba1/BBB-) rose more than 2 points to 107.3 with about $5 million of the bonds on the tape, according to a market source.

Charter’s capital structure was on the rise despite a mixed fourth-quarter earnings report.

Charter reported earnings per share of $1.29 which missed analyst expectations for earnings of $1.43.

However, Charter beat on the top line with revenue of $11.23 billion versus analyst expectations for revenue of $11.14 billion.

The company also announced that it is within its target leverage range of 4x to 4.5x and its capital structure will continue to improve following the repayment of $3.25 billion in senior notes maturing in February and April, Prospect News reported. (See related article in this issue.)

Wednesday inflows

The daily cash flows of the dedicated high yield bond funds were positive on Wednesday, the most recent session for which data was available at press time, a trader said.

High yield ETFs saw a hefty $543 million of inflows on the day.

Actively managed high-yield funds saw $30 million of inflows on Wednesday, the trader said.

Later Thursday, the market heard that the combined high-yield funds saw a relatively meager $73 million of net inflows for the week to Wednesday's close, according to Lipper US Fund Flows.

Indexes gain

Indexes again posted strong gains on Thursday after a strong day on Wednesday.

The KDP High Yield Daily index rose 13 basis points on Thursday to 69.13 with the yield now 6.37%.

The index was up 21 bps on Wednesday and 2 bps on Tuesday after a 3 bps drop on Monday.

The CDX High Yield 30 index rose 33 bps on Thursday to close the day at 106.05. The index jumped 72 bps on Wednesday and 8 bps on Tuesday after a 22 bps drop on Monday.

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