Hertz, Restaurant Brands, ASGN price; Targa, Wesco flat; Cascades up; Murphy Oil lags

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 14 – The high-yield primary market remained active on Thursday with the truncated post-Veterans Day week shaping up to be the second-biggest week for dollar-denominated issuance to date in 2019.

Hertz Corp. priced an upsized $900 million issue of 6% senior notes due Jan. 15, 2028 (B3/B-).

Restaurant Brands International, Inc. priced a downsized $750 million issue of second lien senior secured notes due Jan. 15, 2028 (B2/B+).

ASGN Inc. priced an upsized $550 million issue of 8.5-year senior notes (Ba3/BB-).

Friday also promises to be active with Maxar Technologies Inc. slated to price its $1.25 billion offering, Univar Solutions Inc. expected to price a $400 million issue and Houghton Mifflin Harcourt Publishers Inc. in the market with a $350 million offering.

Meanwhile, the secondary space was again largely flat as it has been for much of the week.

Focus remained on the new issues with the deals to price during Wednesday’s session mixed in secondary trading.

Wesco PattonAir’s three tranches were hovering around their issue price in active trading.

Targa Resources Partners LP and Targa Resources Partners Finance Corp.’s 5½% senior notes due 2030 were also wrapped around par.

The lack of movement of recent issues in the secondary has been a recent trend.

Many of the deals to clear the primary have been priced to perfection, leaving little room for movement in the secondary, a market source said.

However, Cascades Inc. and Cascades USA Inc.’s dollar-denominated tranches were performing well and seen well above their issue prices.

Murphy Oil Corp.’s 5 7/8% senior notes due 2027 (expected ratings Ba2/BB+/BB+), on the other hand, were lagging in secondary activity.

Outside of the new paper, the sell-off in Intelsat SA’s junk bonds continued on Thursday with concern mounting about the ability of the company to repay its debt if the C-band spectrum goes to a public auction.

Thursday drive-by deals

The news flow remained strong and steady on Thursday, as the market pushes toward what is nearly certain to be the second-biggest week for dollar-denominated issuance year to date.

Hertz priced an upsized $900 million issue of 6% senior notes due Jan. 15, 2028 at par to yield 5.998% in a quick-to-market trade.

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.

Restaurant Brands International priced a downsized $750 million issue of second lien senior secured notes due Jan. 15, 2028 at par to yield 4 3/8%, also in a 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 prices

In the sole Thursday deal to have been in the market overnight or longer, ASGN Inc. priced an upsized $550 million issue of 8.5-year senior notes at par to yield 4 5/8%.

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.

The new 4 5/8% senior notes were trading well in the secondary and were seen at par ½ bid, par ¾ offered, a market source said.

An investor, pressed for color on the various order books for Thursday's deals, professed to have nothing specific.

“They appeared to go well,” the source said, but added, “You didn't get the feeling that they were screamingly oversubscribed.”

A big week

With one session left to play out, the holiday-abbreviated post-Veterans Day week is already the third-biggest week of the year, at $11.31 billion of issuance, all of which cleared Tuesday, Wednesday and Thursday.

And it's almost certain to overtake the second-biggest, the June 24 week, which saw $11.5 billion.

Why the big burst of early-mid November issuance?

Three reasons, an investor said:

• First, most prospective issuers have now cleared their requirements to post fresh financial numbers;

• Second, Thanksgiving, set for Nov. 28, is late this year, whereas last year the holiday took place on Nov. 22. So, when the Thanksgiving table clears this year it will already be December and things could quickly become quiet; and

• Third, Treasuries have made a big move, with 10-year government paper lately yielding as high as 1.95%, a huge move when considering that in the late-September period it was seen below 1½%. Hence, higher quality issuers with double B ratings – issuers with the most exposure to Treasuries – are coming to understand that with rates moving dramatically higher, now is the time to raise capital.

Incidentally, there is little chance that – Friday's pending business notwithstanding – the Nov. 11 week will become the biggest week of 2019 to date. In order to do that it would have to clear the $15.5 billion seen during the Sept. 9 week.

Friday’s session

Looking to Friday’s session, Maxar Technologies is on deck with $1.25 billion of four-year senior secured notes (B2).

Talk in the 9% area surfaced Thursday.

Maxar joins Univar Solutions, expected to price $400 million of eight-year senior notes (B2/BB-). The most recent guidance on that deal is 5¼% to 5½%, a source said, well inside of initial talk in the 5¾% area.

And Houghton Mifflin Harcourt Publishers is in the market with a $350 million offering of secured notes due February 2025 (current ratings B3/B). That deal could also clear ahead of the weekend, a trader said, adding that guidance has the bonds coming to yield 8¼% to 8½%.

Wesco hovers at issue

In the secondary, Wesco PattonAir’s recently priced tranches of junk bonds were hovering around their issue price in active trading on Thursday.

The 8½% senior secured notes due 2024 and 9% senior secured notes due 2026 were each ¼ point higher, while the Wesco unsecured paper was up 1/8 point, sources said.

The 8½% notes were changing hands in a range of 99 to 99¼, according to a market source. The 9% notes were trading in a range of 98¾ bid, 99¼ offered.

The 13 1/8% unsecured senior notes due 2027 (Caa2/CCC+) were marked at 96¾ bid, 97¼ offered.

However, volume in the 13 1/8% notes was light.

“No one’s dying to own these,” a market source said.

In a long-delayed acquisition/merger financing deal that struggled to clear the primary market, Wesco PattonAir priced a $650 million tranche of the 8½% notes and a $900 million tranche of the 9% notes at 99 on Wednesday.

The company priced a $525 million issue of the 13 1/8% notes at 97.

The deal was initially marketed in mid-October and underwent covenant changes with guidance widened before pricing on Wednesday.

One more word on Wesco

As the dust at the finish line cleared for the hard-traveling Wesco PattonAir deal, what of the $100 million tranche of 8.25-year PIK holdco notes, announced shortly before the Wesco acquisition/merger financing was priced on Wednesday, talked at 13¾% (PIK only) at par?

Terms on the tranche were not circulated, and the deal was not seen trading, as of Thursday morning, sources said.

Word is that the dealers took down the PIK holdco notes, a buyside source said on Thursday afternoon.

Targa flat

Targa Resources’ recently priced 5½% senior notes due 2030 were also hovering around their issue price in secondary trading.

The notes were seen changing hands at par ¼ in the midafternoon, one source said. Another source marked them as par bid, par ½ offered.

With the deal oversubscribed, the notes were priced tight, leaving them nowhere to go in the secondary, a market source said.

Targa priced an upsized $1 billion issue of the 5½% notes at par in a Wednesday drive-by.

The issue size increased from $750 million.

The yield printed at the tight end of the 5½% to 5¾% yield talk.

Cascades trades up

Cascades’ dollar-denominated tranches bucked the trend of recent issues to climb above their issue price.

The 5 1/8% notes due 2026 and 5 3/8% notes due 2028 were both seen at par ¾ bid, 101¼ offered.

The notes were preforming well for a smaller deal, a source said.

Cascades priced a $350 million issue of the 5 1/8% notes and a $300 million issue of the 5 3/8% notes at par on Wednesday.

The 5 1/8% notes priced at the tight end of yield talk in the 5¼% area. Initial talk was in the low 5% area.

The 5 3/8% notes priced at the tight end of yield talk in the 5½% area. Initial talk was in the mid 5% area.

The dual-currency deal also included a C$175 million tranche of 5 1/8% notes that priced at par.

Murphy Oil lags

While most of the deals to price during Wednesday’s session were either hovering at their issue price or trading at a premium, Murphy Oil Corp.’s 5 7/8% notes due 2027 were lagging.

The 5 7/8% notes were seen at 99½ bid, par offered on Thursday with more than $32 million in reported volume, sources said.

The petroleum and natural gas company priced a $550 million issue of the 5 7/8% notes at par in a Wednesday drive-by.

Initial talk was in the 6% to 6¼% area.

Intelsat sell-off continues

The sell-off in Intelsat’s junk bonds continued on Thursday as investors feared growing traction for legislative calls for a public auction of the C-band spectrum.

Intelsat’s 8 1/8% senior notes due 2023 were among the hardest hit in the capital structure.

The notes dropped another 5 points to close Thursday at 65 5/8 after a 6-point drop on Wednesday, sources said.

With more than $155 million in reported volume, the bonds were again the most actively traded during Thursday’s session.

They were trading in the mid- to high 80s last week.

The 8 1/8% notes have a subordinated position in the capital structure, a source said.

The sell-off in Intelsat’s junk bonds was sparked on Wednesday when the call for a public auction that has long been advocated for by Senator John Kennedy (R-La) appeared to be gaining traction.

Bondholders had expected the satellite broadcaster to use proceeds from the private sale of the C-band spectrum to pay off debt, a source said.

Indexes

Indexes were again down on Thursday, although only slightly.

The KDP High Yield Daily index dipped 3 basis points to 71.07 with the yield now 5.24%.

The index was down 1 bp on Wednesday and dropped 14 bps on Tuesday.

The ICE BofAML US High Yield index slid 4 bps with year-to-date returns now 11.842%. The index dropped 10.3 bps on Wednesday after a 4.3 bps gain on Tuesday.

The index dropped below 12% returns last Friday.

The CDX High Yield 30 index dipped 6 bps to close Thursday at 107.24. The index was down 20 bps on Wednesday and 14 bps on Tuesday.

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