AkzoNobel sets roadshow; Eldorado trades up; Cheniere, Avolon unchanged; Tesla’s new low

By Abigail W. Adams

Portland, Me., Sept. 7 – After a burst of activity that saw $4.95 billion pricing in four deals over the past week, the domestic primary market was quiet on Friday. However, the weeks ahead promise to be active ones.

AkzoNobel NV joined the forward calendar with plans to launch a roadshow for €1,385,000,000 equivalent of eight-year senior notes that will run into the Sept. 17 week.

Pacific Drilling SA is planning a roadshow for a $700 million offering of five-year senior secured first lien notes that will run through Sept. 13 with pricing expected thereafter.

Meanwhile, the new paper priced over the past week was active in the secondary space, although with mixed results.

Eldorado Resorts Inc.’s 6% senior notes due 2026 (B3/B) saw the strongest performance with the notes trading up to 1 point above their issue price.

However, Cheniere Energy Partners, LP’s 5 5/8% senior notes due 2026 (Ba2/BB) and Avolon Holdings Ltd.’s 5 1/8% senior notes due 2023 (Ba3/BB) continued to trade just above par.

Intelsat Jackson Holdings SA’s newly priced 8½% senior notes due 2024 (Caa1/CCC+) remained below par on Friday.

While the new paper was in focus, Tesla Inc.’s 5.3% senior notes due 2025 topped the charts for trading volume with the notes dropping to their lowest level since pricing in response to the latest batch of headlines.

AkzoNobel on the road

While only one deal was announced on Friday, it was a large one.

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 Sept. 13.

A roadshow in the United States is scheduled to begin on Sept. 17 and wrap up on Sept. 20.

The deal is set to price thereafter.

The offer includes €900 million equivalent of dollar-denominated notes to be issued by Starfruit US Holdco LLC 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 euro-denominated notes via Starfruit Finco BV 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 help fund the acquisition of AkzoNobel’s specialty chemicals business by Carlyle Group.

The week ahead

There is one deal on the forward calendar that is expected to price during the Sept. 10 week.

Pacific Drilling’s roadshow for a $700 million offering of five-year senior secured first-lien notes is scheduled to run through Sept. 13 with pricing to follow.

Credit Suisse is the sole bookrunner.

The Luxembourg-based drillship operator plans to use the proceeds to refinance or repay a portion of its pre-bankruptcy petition debt and for the general corporate purposes of the reorganized company.

Pacific Drilling filed for bankruptcy on Nov. 12, 2017 under Chapter 11.

Eldorado trades up

Eldorado Resort’s 6% senior notes due 2026 outperformed the other deals to price over the past week in the secondary space.

The notes were seen at par ¾ bid, 101¼ offered and were wrapped around 101 1/8 in active trading, sources said.

More than $48 million of the bonds had traded by the late afternoon.

Eldorado priced a $600 million issue of eight-year senior notes (B3/B) at par on Thursday.

The yield printed at the tight end of the 6% to 6¼% yield talk.

Unchanged

New paper from Cheniere Energy and Avolon was largely unchanged in the secondary space on Friday.

Cheniere Energy’s 5 5/8% senior notes due 2026 were seen at par ¼ bid, par ½ offered.

However, the notes never traded higher than par 3/8, a market source said.

They were stuck in the par 1/8 to par ¼ range after breaking for trade on Thursday.

The notes remained active on Friday with more than $44.5 million of the bonds on the tape by late afternoon.

Cheniere Energy Partners priced a $1.1 billion issue of the notes at par on Thursday.

The yield printed in the middle of the 5½% to 5¾% yield talk and tighter than initial talk in the 5¾% area.

Avolon’s 5 1/8% senior notes due 2023 also continued to hover around their issue price on Friday.

They were seen at par bid, par ¼ offered and were trading around par 1/8. The notes were also trading around par 1/8 on Thursday.

The 5 1/8% notes remained active on Friday with more than $42 million of the bonds on the tape by late afternoon.

Avolon priced an upsized $1 billion issue of the notes at par on Thursday. The deal was increased from $750 million.

The yield printed in the middle of yield talk set in the 5 1/8% area and at the tight end of initial guidance that was announced in the 5¼% area.

Sources attributed the lackluster performance of the notes to their low coupon.

Below par

Intelsat’s newly priced 8½% notes due 2024 continued to trade below par on Friday.

The notes were seen at 99¾ bid, 99 7/8 offered with most trades around 99¾, sources said.

The notes hovered at par after breaking for trade on Wednesday but dropped below par in active trading on Thursday.

While trading activity paled in comparison to Thursday, the notes remained active with $25 million on the tape by the late afternoon.

Intelsat priced an upsized $2.25 billion issue of the notes at par in a Wednesday drive-by. The offering was increased from $2 billion.

The yield printed in the middle of yield talk set in the 8½% area and at the tight end of the 8½% to 8¾% initial guidance.

The deal was a large one, a market source said. Supply and demand dynamics may have contributed to its weak performance in the secondary space.

Proceeds will be used to refinance Intelsat Jackson’s 7¼% senior notes due 2020 through a concurrent tender offer and/or redemption.

Tesla drops

Tesla’s 5.3% senior notes due 2025 dropped on Friday to their lowest level since pricing as investors responded to the latest batch of headlines swirling around the embattled electric car manufacturer.

The 5.3% notes were seen at 82 bid, 83 offered on Friday. By comparison, they closed Thursday at 85½ bid, 86½ offered.

“That’s pretty bad,” a market source said.

Trading outpaced even the new paper in the secondary space with more than $50 million of Tesla bonds on the tape by the late afternoon.

The 5.3% notes have been on a wild ride since CEO Elon Musk’s twitter proclamation about taking the company private at $420 a share with funding secured.

The notes initially rose then fell with the take-private initiative abandoned a short time after the announcement. Funding had apparently not been secured.

Investor confidence in the company was again shaken on Friday after news broke that Tesla’s chief accounting officer and head of human resources resigned.

The recently appointed and now former chief accounting officer Dave Morton quit over concern about Musk’s handling of accounting details surrounding the move to take the company private, CNBC reported.

The high-profile resignations hit the headlines as news stories also swirled around Musk for smoking marijuana during a podcast interview.

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 outflows from the ETFs over two sessions 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.

Indexes down

Three benchmarks for the high-yield secondary market closed out the week with losses after a mixed week.

The KDP High Yield Daily index was down 7 basis points to close Friday at 70.30 with the yield now 5.86%.

The index was down 5 bps on Thursday, 4 bps on Wednesday and was flat on Tuesday for a 16 bps drop on the week.

The Merrill Lynch High Yield index posted losses for the third consecutive trading day.

The index was down 6.1 bps with the year-to-date return now 1.791%.

The index was down 1.3 bps on Thursday and 8.9 bps on Wednesday after a 2.7 bps gain on Tuesday.

The index was down 13.6 bps on the week.

The CDX High Yield 30 index was down 3 bps to close Friday at 106.84. The index was up 8 bps on Thursday and 2 bps on Wednesday after a 9 bps drop on Tuesday. The index closed the week with a 2 bps loss.

© 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.