Morning Commentary: AkzoNobel kicks off €1.39 billion offering; ETFs see big outflows

By Paul A. Harris

Portland, Ore., Sept. 7 – Equities were mixed in the early going on Friday, but junk looked OK, an investor said.

High-yield ETF share prices were flat at mid-morning.

In the primary market just one deal was announced, but it was a big one.

AkzoNobel NV plans to start a roadshow on Monday in Europe for €1,385,000,000 equivalent of eight-year senior notes in two tranches.

Meanwhile in the Wednesday-Thursday period high-yield ETFs sustained their biggest back-to-back daily outflows since early June, sources said.

The ETFs were negative $959 million over that two-day period.

AkzoNobel roadshow

AkzoNobel plans to start a roadshow on Monday in Europe for €1,385,000,000 equivalent of eight-year senior notes in two tranches.

The European roadshow wraps up on Thursday. A roadshow in the United States is scheduled to begin on Sept. 17 and wrap up on Sept. 20, and the deal is set to price thereafter.

The offer includes €900 million equivalent of Starfruit US Holdco LLC dollar-denominated notes with initial price talk in the 9% area. Sole physical bookrunner Barclays will bill and deliver for the dollar-denominated notes.

In addition, the deal includes €485 million of Starfruit Finco BV euro-denominated notes with initial price talk in the high 6% area to 7%. Joint physical bookrunner HSBC will bill and deliver for the euro-denominated notes. Barclays and JPMorgan are also joint physical bookrunners for the euro-denominated notes.

Proceeds will be used to fund the acquisition of AkzoNobel's specialty chemicals business by the Carlyle Group.

Intelsat lags issue price

Among recent issues, the new Intelsat Jackson Holdings SA 8½% senior notes due October 2024 (Caa1/CCC+) were lagging new issue price at 99 5/8 bid, 99 7/8 offered Friday morning, according to an investor.

A trader had them at par bid, par 1/16 offered on Thursday.

The upsized $2.25 billion issue (from $2 billion) priced at par on Wednesday and was said to have been driven to market by reverse inquiry, playing to a book that was around two-times oversubscribed.

So why aren't secondary prices reflecting that level of demand?

“It was a big deal that priced at the right level,” the investor said, adding that its lagging secondary market prices may be reflective of secondaries being repriced by events in the primary market.

Elsewhere, notes printed Thursday by Eldorado Resorts Inc. were faring better in the secondary.

The Eldorado Resorts 6% senior notes due September 2026 (B3/B) were par Ύ bid, 101Ό offered on Friday morning.

The $600 million issue priced at par amid a $2.7 billion burst of Thursday issuance.

Big ETF outflows

High-yield ETFs sustained $405 million of outflows on Thursday, according to market sources tracking data from Lipper US Fund Flows.

Combined with the $554 million of outflows sustained by the junk ETFs on Wednesday, the two-day total, $959 million, is the largest back-to-back two-day total of outflows from the ETFs since early June, sources said.

Actively managed high-yield funds were positive on Thursday, with $110 million of inflows on the day.

The news of Thursday's daily fund flows arrives on the heels of a Thursday afternoon report that the dedicated high-yield bond funds sustained $639 million of outflows in the week to the Sept. 5 close, according to Lipper.

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