Harland Clarke, Global Ship deals slate in quiet session, closing $961 million week

By Paul Deckelman and Paul A. Harris

New York, Oct 20 – The high-yield primary market saw a second consecutive session on Friday in which no dollar-denominated and fully junk-rated bonds had priced.

But syndicate sources said that there was activity going on behind the scenes, with several upcoming new deals emerging on the radar screens.

Harland Clarke Holdings Corp., a San Antonio, Texas-based check printer and advertising services company, was heard by the sources to be readying a $500 million add-on to its existing 2022 senior secured notes.

And British containership charter company Global Ship Lease Inc. is expected to price a tranche of five-year-secured notes, possibly as early as Monday.

Meanwhile, Italian telecommunications operator Wind Tre SpA, which has been shopping its huge €7.3 billion equivalent five-tranche senior secured deal around to investors in Europe, is scheduled to hit the road this week in the United States to market that euro- and dollar-denominated offering to investors there as well.

The lack of any new dollar deals pricing on either Thursday or Friday left the week’s tally of new paper right where it had been at midweek, with $961 million having gotten done in four tranches, the lowest weekly issuance total since early September, according to data compiled by Prospect News.

Traders again saw only limited activity in recently priced offerings such as this week’s eight-year secured notes from restaurant company Nathan’s Famous, Inc.

But last month’s big new issue from gaming giant Caesars Entertainment Corp., which has been rebounding all this week from recent lows, was again seen on the upside, on decent volume.

For a second straight day, Canadian aircraft manufacturer Bombardier Inc.’s paper – which had firmed smartly earlier in the week on the news that global aerospace giant Airbus will partner with Bombardier in developing the latter’s next generation of passenger jetliners – was seen having come off those hefty gains.

Statistical market performance measures were mixed on Friday, after having been higher across the board for three consecutive sessions.

The indicators meantime finished stronger all around versus the levels they had held last Friday, Oct. 13, when they had been mixed versus the previous week.

Harland Clarke tack-on

The primary market news flow remained thin on Friday.

Harland Clarke plans to shop a $500 million tack-on to its 8 3/8% senior secured notes due Aug. 15, 2022 on a Tuesday investor call.

The debt refinancing deal is set to price on Tuesday, Oct. 31.

Credit Suisse, BofA Merrill Lynch, Citigroup, Deutsche Bank, Jefferies, Macquarie and Wells Fargo are the joint bookrunners.

Global Ship returns

Global Ship Lease plans to price $360 million of five-year senior secured notes (expected ratings B3/B) on Monday.

The London-based containership charter company is returning in an effort to refinance its 10% first-priority secured notes due April 2019 after halting a $400 million offering of five-year secured notes in July, with proceeds from the pulled deal also earmarked to take out the 10% notes.

The new deal, which was scheduled to be shopped on a Friday morning conference call with investors, is talked to yield in the 10% area at an original issue discount of 99.

Citigroup is the left bookrunner. Clarksons Platou Securities – the lead in the previous effort – is the joint bookrunner.

Don’t look for a dramatic pick-up in dollar-denominated new issue activity in the week ahead, sources say.

The reason is an earnings blackout, which may keep issuance muted into early November, an investment banker said.

Look for a sizable drive-by offer from the technology, media and telecommunications sector on Monday and a deal from a first-time issuer early in the week ahead.

Shop Direct shops £700 million

Shop Direct Funding plc plans to start a roadshow on Monday in London city for a £700 million two-part offering of five-year senior secured notes.

The deal includes fixed-rate notes and floating-rate notes, with tranche sizes to be determined.

Global coordinator and lead left bookrunner Barclays will bill and deliver. Mediobanca is also a global coordinator. Lloyds and HSBC are joint bookrunners.

The Liverpool-based digital retailer and online credit provider plans to use the proceeds to refinance debt, fund a dividend and provide a cash overfunding.

Meanwhile the massive €7.3 billion equivalent five-part offering of senior secured notes (B1/BB-/BB) from Wind Tre is going well, according to an investor who tracks both the dollar- and euro-denominated markets.

There are already orders in the billions for both the euro and dollar tranches, the investor said.

The deal is coming in five benchmark sized tranches that are whispered as follows:

• Euro-denominated five-year fixed-rate notes whispered in the 3% area;

• Euro-denominated seven-year fixed-rate notes whispered in the 3 ½% area;

• Dollar-denominated eight-year fixed-rate notes whispered in the low-to-mid 5% area;

• Euro-denominated six-year floating-rate notes whispered at Euribor plus 300 to 325 bps at par; and

• Dollar-denominated five-year floating-rate notes whispered at Libor plus 300 to 325 bps at 99.5.

The European roadshow was scheduled to wrap up on Friday.

A roadshow in the United States is set to begin on Monday and run through Wednesday.

Joint global coordinator Deutsche Bank will bill and deliver for the euro-denominated notes.

Joint global coordinator BofA Merrill Lynch will bill and deliver for the dollar-denominated notes.

HSBC is also a joint global coordinator.

Mixed Thursday flows

Cash flows for dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time, an investor said.

High-yield ETFs saw $135 million of inflows on the day.

However actively managed funds sustained $15 million of outflows on Thursday.

The news follows a report on Thursday afternoon that high-yield funds sustained $450 million of outflows in the week to Wednesday’s close, according to Lipper US Fund Flows.

END

Issuance pace continues to slow

With no new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers pricing during either Thursday’s or Friday’s sessions, the week’s new-issuance total stayed at its mid-week mark of just $961 million in four tranches.

According to data compiled by Prospect News, it was the lowest weekly new-deal total since the weeks ended Aug. 25 and Sept. 1, when no new issues were priced either week.

The week’s total was down from $6.27 billion in 11 tranches the week before, ended Oct. 13, and well down from the $10.1 billion of new paper generated in 15 tranches the week before that, ended Oct. 6.

As meager as they were, the week’s new deals raised year-to-date issuance for 2017 to $224.93 billion in 415 tranches, running 21.6% ahead of the $184.95 billion which had priced in 286 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Recent deals trade quietly

Traders said Friday that there was only restrained activity in recently priced new offerings.

“New issues were not the market’s focus today,” one said.

He saw only quiet dealings in the new Nathan’s Famous 6 5/8% senior secured notes due 2025. The Jericho, N.Y.-based fast-food restaurant and consumer food products company’s paper was still “wrapped around 102,” about where it has been since that $150 million regularly scheduled forward calendar offering priced at par on Wednesday.

He also saw just a few trades in the new Beacon Roofing Supply Inc. 4 7/8% notes due 2025, while noting that the notes “have done well” since their pricing, having settled in around a 101¼ to 101 3/8 bid context.

The Herndon, Va.-based manufacturer of roofing products for the residential and commercial building industries priced its $1.3 billion regularly scheduled deal at par on Oct. 11.

Caesars moves up

Going back a little further, though, a trader said that Caesars Entertainment’s recently priced 5¼% notes due 2025 “keep inching back up” after recent losses.

He saw them gain about ½ point Friday to end at 100¾ bid, with around $12 million changing hands.

The Las Vegas-based casino giant priced that regularly scheduled $1.7 billion forward calendar deal at par on Sept. 29 via its related entities CRC Escrow Issuer, LLC and CRC Finco, Inc.

But the new bonds gradually weakened, finally bottoming out a week ago at around 99¼ bid.

However, they began coming back on Monday, climbing steadily through the week to reach Friday’s closing levels.

Bombardier bonds lose altitude

For a second straight session, traders saw Bombardier’s various bonds retreating from their recent highs.

“It’s a name that’s been active,” one of the traders observed, “but they were a little weaker today.”

He saw the company’s 6% notes due 2022 ending around 100½ bid, which he called down ¼ to ½ point on the session, “as they gave back a little of their recent gains.”

“There were a bunch of trades in that,” said a second market source, who saw the notes down 1/8 point at 100 5/8 bid, with more than $16 million of those notes traded on Friday.

On Tuesday, those bonds – along with the rest of the Montreal-based aircraft manufacturing company’s capital structure – had shot up some 6 points in active trading. The 6% notes went out that day north of 101½ bid.

Bombardier’s bonds had pretty much held those gains on Wednesday but they started eroding on Thursday and continued to weaken on Friday.

The bonds had shot up on the news that the company had reached an agreement with pan-European aerospace giant Airbus on production of Bombardier’s next-generation product line, the C-Series 100- to 150-seat passenger jetliners.

Airbus will take a slightly more than 50% stake in the Bombardier unit that is making those planes, which is now owned 62% by Bombardier and 38% by the Canadian province of Quebec, which invested $1 billion in the project two years ago. Bombardier will cut its stake to around 38% and Quebec to about 19% to accommodate the Airbus participation.

Financial terms of the arrangement were not disclosed. But Bombardier hopes that Airbus’ deep pockets and its established track record with major airlines around the world will benefit sales of its new plane.

And with Airbus now a part of its team, the C-Series planes to be sold to United States-based carriers such as Delta Air Lines will have their final assembly work done at the Airbus factory in Mobile, Ala. rather than at Bombardier’s plants in Canada – this presumably getting around the threatened imposition by the U.S. Commerce Department of a tariff of as much as 300% on the planes, essentially quadrupling their cost to the buyer. Commerce recently announced imposition of the tariff in response to complaints by Bombardier rival Boeing Co. that the Canadian company’s bailout by Quebec and additional direct aid it gets from the British government for its U.K. manufacturing facilities is an improper subsidy, constituting an unfair trade practice.

Windstream gives up some gains

Another name seen giving up some of the hefty gains it had recorded earlier in the week was Windstream Holdings Inc., whose 2020, 2021 and 2022 notes had climbed between 3 and 4 points across the board on Thursday after the Little Rock, Ark.-based telecommunications company announced an exchange offer for those bonds.

But after that initial enthusiasm, a trader said, “people are digesting news of that exchange transaction, wondering whether it will work.”

He saw its 7¾% notes due 2021 falling to around 77 bid from a 78-79 bid context on Thursday, “so some things are down a point or so.”

At another desk, a trader said that those bonds were a point lower at 76¾ bid. But he said there were “only a handful” of large-sized trades on the session versus the more than $19 million of turnover recorded on Thursday.

Indicators mixed, up on week

Statistical market performance measures were mixed on Friday after being higher across the board for three consecutive sessions. The indicators had firmed on Tuesday and had stayed strong on Wednesday and again on Thursday. Tuesday’s upturn had been the first in a week, improving after being mixed last Friday and again on Monday and lower before that.

The indicators meantime finished stronger all around versus the levels they had held last Friday, Oct. 13, when they had been mixed versus the previous week. It was the third higher week in the last four.

The KDP High Yield Daily Index eased by 1 basis point on Friday, ending at 72.46. That loss snapped a string of three straight gains, including Thursday’s 1 bp firming. The index had also gained 4 bps on Wednesday and had risen by a robust 8 bps on Tuesday after losses of 4 bps last Friday and 1 bp on Monday.

Its yield was unchanged at 5.15% after coming in by 1 bp on Thursday. The yield was also unchanged on Wednesday after narrowing by 3 bps on Tuesday – the first tightening after six straight sessions of widening out, including by 2 bps on Monday.

Friday’s levels compared favorably with the 72.35 index reading and 5.17% yield recorded last Friday.

The Markit CDX Series 29 High Yield Index posted its sixth successive gain on Friday, when it finished up 7/32 point at 108 ½ bid, 108 9/16 offered. It had edged up by around 1/16 point on both Wednesday and then again on Thursday.

The index finished the week up from last Friday’s 108 bid, 108 1/16 offered reading.

And the Merrill Lynch North American High Yield Index improved by 0.038% on Friday, its fifth consecutive advance. The index had also firmed by 0.006% on Thursday, following gains of 0.076% on Wednesday, of 0.086% on Tuesday and 0.075% on Monday. Before that, it had posted losses last Thursday and Friday.

The latest gain lifted its year-to-date return to 7.517% from 7.477% on Thursday, establishing a fourth straight new 2017 year-to-date peak level.

For the week, the index was up by 0.282%, its 10th straight weekly rise after 1 weekly loss and four straight weekly gains before that. The previous week, the index had risen by 0.019%.

With 42 weeks in the books so far this year, the Merrill Lynch index has finished higher than the preceding week 34 times and lower the remaining eight weeks.

© 2015 Prospect News.
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