Three-part ZF Friedrichshafen, Horizon Pharma cap $11.5 billion week, new bonds better

By Paul A. Harris and Paul Deckelman

New York, April 24 – The high-yield primary arena closed out a busy week with a bang on Friday, recording one of the biggest new-issue days seen so far this year.

But the action was hardly broad-based, with most of the day’s paper coming from just one giant-sized deal, as German auto parts manufacturer ZF Friedrichshafen AG priced $3.5 billion in five-, seven- and 10-year tranches as a regularly scheduled forward calendar offering. Traders saw all of those new bonds moving up in heavy initial aftermarket dealings.

Another European issuer visiting the dollar market was Irish drugmaker Horizon Pharma Inc., with a financing subsidiary doing a regularly scheduled, upsized $475 million of eight-year paper. Those bonds firmed smartly in secondary dealings.

Electric and electronic cable and fasteners producer Optimas OE Solutions, LLC priced a $225 million six-year secured offering off the forward calendar, with the new bonds quoted higher afterward.

The day’s lone quick-to-market transaction involved plastics manufacturer Techniplas, LLC, whose $175 million issue of five-year secured paper saw good gains when those notes were freed for trading.

All told, some $4.31 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers had come to market by closing time. It was the heaviest new-issue volume seen since the $8.90 billion that got done in 11 tranches back on April 9, according to data compiled by Prospect News, and was still one of the biggest-volume days seen so far this year.

It raised the week’s issuance total to $11.5 billion in 15 tranches, according to the data, although that still trailed the $12.74 billion that had come to market in 17 tranches last week, ended April 17.

This week’s robust tally of new issuance, in turn, raised year-to-date new issue volume so far to $128.19 billion in 190 tranches, according to the data, running 22% ahead of the pace seen last year, when $105.11 billion had come to market in 196 tranches by this point on the calendar.

Statistical measures of secondary market performance turned higher on Friday after having been mixed over the previous two sessions.

Those indicators were meantime mixed versus where they had finished out the previous week for a second consecutive Friday. Those two mixed weeks followed three straight weeks when the market measures had been higher across the board week over week.

ZF Friedrichshafen’s dollar deal

Amid heavy news volume in the Friday primary market four issuers brought a total of six dollar-denominated tranches to raise a combined total of $4.31 billion.

Only one of the four issuers came with a drive by. And only one upsized its deal.

However executions were notably tight, with five of Friday’s six tranches pricing at the tight end of yield talk, while the sixth priced on top of talk.

ZF Friedrichshafen priced $3.5 billion of non-callable senior notes (Ba2/BB) in three discounted tranches.

A $1 billion tranche of 4% five-year notes priced at 99.44 to yield 4 1/8%. The yield printed at the tight end of yield talk that had been set in the 4¼% area. Early guidance was in low-to-mid 4s.

A $1 billion tranche of 4½% seven-year notes priced at 99.26 to yield 4 5/8%. The yield printed at the tight end of yield talk set in the 4¾% area. Early guidance was in the high 4s.

And a $1.5 billion tranche of 4¾% 10-year notes priced at 99.02 to yield 4 7/8%. The yield printed at the tight end of yield talk set in the 5% area. Early guidance was in the low 5s.

Citigroup will bill and deliver.

The dollar-denominated three-part deal, to fund a merger, comes on the heels of ZF Friedrichshafen’s sale of €2.25 billion of non-callable senior notes (Ba2/BB) in two tranches on April 20.

Horizon, upsized and tight

Horizon Pharma priced an upsized $475 million issue of eight-year senior notes (B2/B-) at par to yield 6 5/8%.

The deal was increased from an originally announced $300 million.

The yield printed at the tight end of talk for a yield in the 6¾% area.

Citigroup and Jefferies were the joint bookrunners.

Proceeds will be used to help fund the acquisition of Brisbane, Calif.-based commercial-stage biopharmaceutical company Hyperion Therapeutics, Inc. The $175 million of additional proceeds from the upsizing will be used to replace $100 million of bank loan borrowings, decreasing the concurrent loan financing to $400 million from $500 million. The remaining $75 million of additional proceeds will be used for general corporate purposes.

Optimas prices tight

Optimas OE Solutions, LLC and Optimas OE Solutions, Inc. priced a $225 million issue of senior secured notes due June 1, 2021 (B3/B-) at par to yield 8 5/8%.

The yield printed at the tight end of yield talk that had been fixed in the 8¾% area.

Morgan Stanley and SunTrust were the joint bookrunners for the acquisition financing.

Techniplas drive-by

In a quick-to-market deal, Techniplas priced a $175 million issue of five-year senior secured notes (preliminary ratings Caa1/B) at par to yield 10%.

The yield printed on top of yield talk.

Jefferies was the bookrunner.

The Nashotah, Wis.-based plastics manufacturer plans to use the proceeds to refinance debt and fund a small acquisition.

21st Century sets talk

21st Century Oncology, Inc. talked a $400 million offering of eight-year senior notes (Caa2) to yield in the 10½% area on Friday.

Books close at 3 p.m. ET on Monday and the deal is set to price subsequently.

In addition to the release of price talk there were also covenant changes.

Morgan Stanley, Deutsche Bank, KeyBanc and HSBC Bank are the joint bookrunners.

Quicken to start marketing

The active calendar saw a substantial build-up during Friday’s session.

Quicken Loans Inc. plans to start a roadshow on Monday for a $1.25 billion offering of senior notes.

Further details on the deal’s structure are expected to be announced on Monday.

Credit Suisse is the lead left bookrunner.

The San Diego-based online lender plans to use the proceeds to fund distribution to Rock Holdings, its parent, and for general corporate purposes.

Ahern Rentals guides notes

Ahern Rentals, Inc. gave preliminary guidance in the mid-7% area for its $500 million offering of eight-year senior secured second-lien notes (expected ratings B3/B), according to a market source.

The deal is expected to price late in the week ahead, following an investor roadshow.

BofA Merrill Lynch and J.P. Morgan are managing the sale.

The Eugene, Ore.-based heavy construction rental equipment company plans to use the proceeds to redeem its 9% notes due 2018, pay down a portion of its outstanding ABL facility and to repay a shareholder contribution.

Petra Diamonds roadshow

Petra Diamonds Ltd. plans to start a roadshow on Monday for a $300 million offering of five-year senior secured second-lien notes (B2/B+).

The offer is set to price during the week of May 4.

Joint global coordinator and active bookrunner RBC will bill and deliver. Barclays is also a joint global coordinator and active bookrunner. Rand Merchant Bank is a passive bookrunner.

The Jersey, Channel Islands-based diamond mining group plans to use the proceeds to repay bank debt and for general corporate purposes, including funding a new plant at its Cullinan mine.

PrimeSource to begin roadshow

PriSo Acquisition Corp., which does business as PrimeSource Building Products, plans to start a roadshow on Monday for a $230 million offering of eight-year senior notes (Caa1/CCC+).

Deutsche Bank, BMO, Credit Suisse, Goldman Sachs and Nomura are the bookrunners.

Proceeds will be used to help fund the LBO of PrimeSource by Platinum Equity.

The financing also includes a $300 million ABL revolver and a $325 million term loan

The bonds are set to price by the end of the April 27 week, in conjunction with the term loan.

Senvion prices green deal

In the European market Senvion priced a €400 million issue of five-year senior secured green bonds (B2/B+) at par to yield 6 5/8%.

The yield printed at the tight end of yield talk that had been set in the 6¾% area.

Joint physical bookrunners Deutsche Bank will bill and deliver. JPMorgan was also a joint physical bookrunner.

Banca IMI, BayernLB, Credit Agricole, RBC, SEB, CaixaBank, Citigroup, Raiffeisen Bank and Santander were also joint bookrunners.

Proceeds will be used to help fund the acquisition of the Hamburg, Germany-based wind turbine company by Centerbridge Partners from Suzlon Energy Ltd.

New bonds trade up

In the secondary realm, a trader said that he was seeing “more bounce” than he had seen over the previous several sessions, although he called the overall aftermarket about unchanged to perhaps down 1/8 point.

“Flows were pretty light today” outside of dealings in the new issues – fairly typical for a nice Friday afternoon in the springtime.

“The new deals were the dominant factor,” a second trader agreed. “The calendar dominated customer interest, that’s for sure.”

He said that the day’s new issues “all traded well” when they hit the aftermarket.

Easily the busiest name was the day’s big deal from ZF Friedrichshafen.

One of the traders saw the auto parts manufacture’s 4% notes due 2020 in a 100 3/8 to 100¾ bid context, with its 4½% notes due 2022 at 100½ bid, without an offering seen, and its 4¾% notes due 2025 trading at levels between 100¾ and 101¼. All were up from their respective par issue prices.

At another desk, a trader said that the five-year notes had firmed slightly to 100 1/8 bid, with over $43 million of the notes having changed hands.

He saw the seven-year paper busier, with over $57 million having traded and the bonds up 1 point on the day.

And the 10-year notes were busier still, racking up volume of over $68 million, and going home up ½ point on the day.

Away from that one big deal, a trader said that “the Horizon Pharma bonds were doing really well” – he saw those 6 5/8% notes due 2023 having jumped to 102 3/8 bid, 102½ offered from their par issue price.

A second trader saw the drugmaker’s bonds in a 102 to 102¾ bid context, while a third pegged the notes between 102¼ and 102 5/8 bid.

A trader said that he “had not seen much” of the new Techniplas 10% senior secured notes due 2020, chalking that up to the fact that “it was a pretty small deal” by the usual standards of Junkbondland, weighing in at only $175 million.

However, another market source quoted the bonds as having firmed to 101¼ bid, 102¼ offered, up from their par issue price.

And that market source also saw Glenview, Ill.-based cable and fastener manufacturer Optimas OE Solutions’ 8 5/8% senior secured notes due 2021 having pushed to a 101 to 102 bid context, up from their par issue price.

DJO bonds move up

Among Thursday’s deals, a trader said that DJO Global Inc.’s 8 1/8% senior secured notes due 2021 “definitely traded up a touch,” seeing the bonds at 101 bid, 102 offered in the morning, although he had not seen them after that.

The San Diego-based medical devices manufacturer had priced $1,015,000,000 of those notes at par late in the session on Thursday, after the regularly scheduled forward calendar deal had been downsized from an originally planned $1,045,000,000.

Indicators turn better

Statistical indicators of junk market performance were mostly better on Friday, after having been mixed for a second consecutive session on Thursday.

They meantime ended the week mixed versus where they had been the previous Friday, their second consecutive mixed week after three straight weeks of higher readings across the board before that.

The KDP High Yield Daily Index was unchanged on Friday, holding at the same 71.79 level at which it had ended Thursday, when it was down by 4 basis points, its second straight fall.

Its yield was likewise unchanged at 5.14%, its second consecutive unchanged session, after having risen by 1 bp on Wednesday, its third widening in the previous four sessions.

Those levels, however, compared unfavorably with the 71.85 index reading and 5.13% yield recorded the previous Friday, April 17.

The Markit Series 24 CDX North American High Yield Index gained 1/16 point on Friday to finish at 107½ bid, 107 17/32 offered, its first gain after having eased by 1/32 point on Thursday. But Friday’s advance was its fourth upturn in the last five sessions.

The index was also well up from 107 3/16 bid, 107¼ offered the previous Friday.

The Merrill Lynch U.S. High Yield Master II Index advanced by 0.090% on Friday, its second straight gain and fourth such improvement in the last five sessions. It had also been up by 0.010% on Thursday.

The latest rise lifted the index’s year-to-date return to 3.897% from Thursday’s 3.804% finish, and set a new peak level for the year so far, surpassing the old mark of 3.817%, set this past Tuesday.

For the week, the index was up by 0.243%, its sixth consecutive weekly gain and 13th weekly gain seen so far this year, against just three weekly losses.

Last week, the index had been up by 0.227% on the week, for a year-to-date return last Friday of 3.645%.

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