Upsized First Quantum leads $4 billion day; new Gartner bonds jump; funds plunge $5.7 billion

By Paul Deckelman and Paul A. Harris

New York, March 16 – The high-yield primary market sharply ramped up activity on Thursday, posting the kind of volumes it had generated over several sessions last week.

Syndicate sources said that $4 billion of new dollar-denominated and junk-rated paper from domestic or industrialized-country borrowers had priced in seven tranches brought by six issuers – well up from the $375 million which had gotten done in one lone tranche on Wednesday, the shutout seen on Tuesday and even Monday’s nearly $2 billion in four tranches.

Canadian precious and industrial metals mining concern First Quantum Minerals Ltd. had the big deal of the day, with an upsized $2.2 billion deal consisting of equally sized tranches of six- and eight-year notes.

Information technology company Gartner, Inc. also did an upsized deal, bringing $800 million of eight-year notes to market.

Secondary market traders said that the new Gartner bonds were the standout performer of the day when they hit the aftermarket, surging by more than 1 full point in heavy trading.

Coal miner Foresight Energy LLC did a downsized and restructured $425 million of six-year secured paper.

Those three issues were regularly scheduled transactions off the forward calendar

AK Steel Holding Co. priced a quickly shopped $400 million of 10-year notes.

There were also two quickly-shopped add-on deals – power transmission equipment maker Gates Global LLC’s $150 million addition to its existing 2022 notes and pulp producer Mercer International’s $25 million tap of its recently issued 2024 notes.

Traders said that besides the Gartner deal, the new AK Steel and First Quantum notes traded actively, but did not stray far from their respective issue prices.

They said the overall market tone was better for a second straight session, following Wednesday’s rate boost announcement from the federal reserve.

Wednesday’s new deal from gaming operator Eldorado Resorts Inc. continued to firm smartly in active trading.

Statistical market performance measures turned higher on Thursday – their first across the board gains since March 1. Those indicators had been mixed on Wednesday after being lower across the board on Monday and again on Tuesday, resuming a recent negative trend which included four straight downside sessions last week, interrupted by a mixed session last Friday.

However, another numerical gauge – flows of funds into and out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – saw its biggest cash loss of the year so far and the second-largest outflow on record in the most recent reporting week, according to data released on Thursday. Some $5.683 billion more left those weekly reporting domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, March 15 – the funds’ third straight setback after four consecutive weeks of gains (see related story elsewhere in this issue).

First Quantum oversubscribed

Six issuers brought a combined seven tranches of dollar-denominated junk, raising a combined total of $4 billion during a busy Thursday primary market session.

Three of the six issuers came with drive-by deals.

Two of the six upsized their offers.

Executions generally appeared solid. Of the six tranches for which official talk was widely circulated, one priced tighter than talk, three priced at the tight end and two priced on top of final talk.

First Quantum Minerals priced $2.2 billion of senior notes (B3/B-/B) in a two-part deal that was upsized from $1.6 billion.

The debt refinancing deal included $1.1 billion of 7¼% six-year notes which priced at par to yield 7.249%, at the tight end of the 7¼% to 7½% yield talk.

The long tranche featured $1.1 billion of 7½% eight-year notes which priced at par to yield 7.499%, at the tight end of the 7½% to 7¾% yield talk.

The order book was said to stand at $2.9 billion on Thursday morning, an investor said.

Global coordinator J.P. Morgan will bill and deliver. Barclays and BNP Paribas were also global coordinators.

Citigroup, Credit Agricole, Credit Suisse, ING, RBC, Scotia and SG were the joint bookrunners.

Gartner upsized and tight

Gartner priced an upsized $800 million issue of eight-year senior notes (B1/BB-) at par to yield 5 1/8%.

The amount was increased from $600 million.

The yield printed at the tight end of yield talk set in the 5¼% area.

Goldman Sachs was the left bookrunner for the acquisition financing.

Foresight downsized, restructured

Foresight Energy LLC and Foresight Energy Finance Corp. priced a downsized, restructured $425 million issue of 11½% six-year second lien senior secured notes (Caa2/CCC/CCC) at 99.25 to yield 11.68%.

The size was reduced from $500 million and Foresight cut the tenor of the bonds to six years from seven years.

There were also covenant changes.

The coupon, price and yield came on top of revised talk. Earlier talk had the deal coming with a yield in the 11¼% area.

Goldman Sachs was the left bookrunner for the debt refinancing.

AK Steel drives by

AK Steel Holding priced a $400 million issue of 10-year senior notes (B3/B-) at par to yield 7%.

The yield printed on top of both yield talk and initial guidance in the 7% area.

BofA Merrill Lynch was the left bookrunner for the debt refinancing.

Gates beats talk

Gates Global priced a $150 million add-on to its 6% senior notes due July 15, 2022 (existing ratings Caa2/B) at 99.875 to yield 6.025%.

The reoffer price came richer than the 99.5 to 99.75 price talk.

Citigroup was the left bookrunner for the debt refinancing.

Mercer taps 6½% notes

Mercer International priced a $25 million tack-on to its 6½% senior notes due 2024 (B1/BB-) at par to yield 6.497%.

Credit Suisse was the sole bookrunner for the acquisition financing.

Rain downsized, restructured

Looking ahead, Rain Carbon Inc. circulated documents on a downsized, restructured $550 million offering of eight-year senior secured second lien notes on Thursday.

The deal is reduced from $1.05 billion.

The new structure brings second lien security to bear upon the notes, whereas the previous deal was unsecured.

The downsized, revamped offer, via left bookrunner Citigroup, is expected to price on Friday.

High Ridge talk in 9% area

High Ridge Brands Co. talked a $250 million offering of eight-year senior notes (Caa1/CCC+) to yield in the 9% area.

The deal, via left bookrunner BMO, is set to price Friday.

Elsewhere Kraton Corp. is expected to price $400 million of eight-year senior notes on Friday.

Early guidance has the notes coming with a yield in the 7% to 7½% area, a trader said.

However talk tightened into the low 7% area later in the day, a portfolio manager said.

Deutsche Bank, Credit Suisse, JP Morgan and Nomura are managing debt refinancing deal.

Paprec at the rich end

During the European primary market session France-based recycling firm Paprec Holding priced a €225 million add-on to its 5¼% green senior secured notes due April 1, 2022 (B1/expected B+) at 104.5.

The reoffer price came at the rich end of the 104 to 104.5 price talk.

Global coordinator Credit Suisse will bill and deliver for the deal supporting an acquisition and repaying related debt. Credit Agricole was also a global coordinator.

Mixed Wednesday flows

Amid news of a massive $5.68 billion outflow from dedicated high-yield bond funds for the week to Wednesday’s close, the daily fund flows picture suggests that the negative flows were stemmed, somewhat, late in the reporting period, at least for high-yield ETFs.

The ETFs saw $597 million of inflows on Wednesday, the most recent session for which data was available at press time, according to a buyside source. That inflow follows $240 million of outflows on Tuesday and $293 million of outflows on Monday.

However asset managers continued to sustain large daily outflows, $650 million, on Wednesday, the buysider said.

Wednesday’s outflow follows Tuesday’s eye-popping $1.05 billion of daily outflows on Tuesday, and $550 million of daily outflows on Monday.

Investors have been taking money off the table, the buysider said, and added that high-yield ETF JNK, which peaked at $37.22 per share on Feb. 28, had fallen to $36.25 per share by March 14.

However in the wake of Wednesday’s Fed decision, JNK appeared to be staging something of a recovery, the buysider said.

The fund closed at $36.64 per share on Thursday, down 0.3%, or 11 cents, on the day.

New Gartner bonds gain

In the aftermarket, a trader marveled at the strength shown by the new Gartner 5 1/8% notes due 2025, noting that the bonds had gotten as good at 101¾ bid from their par issue price, although most of the final trades were in a 101¼ to 101½ bid context.

Another trader pegged the Stamford, Conn.-based information technology company’s bonds up by 1¼ points on the day, with over $78 million traded, easily topping the day’s Most Actives list.

New AK, First Quantum active

A trader said that AK Steel’s new 7% notes due 2027 were busy on Thursday – but declared that “they traded like crap.”

He said that the bonds traded between par and 100¼ bid – but most trades were perhaps 1/16 point higher than issue.

And a second trader located the West Chester, Ohio-based steelmaker’s new deal at 99¾ bid late in the session, on volume of over $32 million.

Toronto-based copper, nickel, gold and zinc miner First Quantum’s new 7½% notes due 2025 gained ¼ point after pricing at par, a market source said, with more than $47 million of turnover.

But he saw the company’s existing 7¼% notes due 2022 down ¼ point at 101½ bid, with over $11 million traded.

Eldorado continues to glitter

A trader said that Eldorado Resorts’ new 6% notes due 2025 continued to push higher, gaining 7/8 point to end at 102½ bid, on brisk volume of more than $18 million.

On Wednesday, the Reno, Nev.-based gaming and hospitality company’s new $375 million issue had traded up to around 101½ bid in the aftermarket, with almost $50 million having changed hands.

Indicators turn higher

Statistical market performance measures turned higher on Thursday – their first across the board gains since March 1. Those indicators had been mixed on Wednesday after being lower across the board on Monday and again on Tuesday, resuming a recent negative trend which included four straight downside sessions last week, interrupted by a mixed session last Friday.

The KDP High Yield Daily Index jumped by 26 basis points on Thursday to end at 71.64 – its first gain after nine straight losses and 10 such downturns in the previous 12 sessions, including Wednesday’s 5 bps downturn.

Its yield came in by 8 bps to 5.29% on Thursday after widening out over the previous nine sessions, including a 2 bps rise on Wednesday.

The Markit CDX Series 27 High Yield Index posted its second straight gain on Thursday, firming by a little more than 1/32 point to 107¼ bid, 107 9/32 offered. On Wednesday it had zoomed by 25/32 point, breaking a seven-session losing streak.

And the Merrill Lynch High Yield Index also rose for a second straight session, improving by 0.47%, on top of Wednesday’s 0.402% advance, its first gain after posting two straight losses.

Thursday’s gain raised its year-to-date return to 1.983% from Wednesday’s 1.506% close – although the cumulative return still remains well down from the index’s 2017 peak level of 3.19%, which was hit on March 1.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.