Uber oversubscribed; Nine Energy on tap; PHI in focus; Hexion ‘sloppy’; Albertson’s gains post-earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 15 – While the primary market saw no new paper price on Monday, there were inklings of new deal activity expected before the week’s end.

Nine Energy Service, Inc. started a roadshow for a $400 million offering of five-year senior notes (B3/B) with pricing expected Friday.

Uber Technologies Inc.’s $1.5 billion dual-tranche private placement was heard to be oversubscribed with pricing expected as early as Tuesday.

JBS SA was scheduled to begin marketing a dollar-denominated offering of senior notes (expected ratings BB-/BB-) on Monday.

United Rentals (North America) Inc. is also expected to launch a sizable senior notes offering (Ba3) in the coming week.

The forward calendar in the European primary market also grew with UGI International marketing €300 million of seven-year senior notes (expected ratings Ba1/BB+) and Tesco plc (Ba1/BB+/BBB-) mandating banks to arrange investor meetings for a benchmark offering of euro-denominated bearer bonds.

With no new paper pricing, the secondary space was “uneventful” on Monday, a market source said.

The market in general was down about ½ point week-over-week with spreads widening about 20 bps.

However, the market held in well amid the sell-off in equities last week, the source said.

PHI, Inc.’s 5¼% senior notes due March 15, 2019 were the focus of the secondary space on Monday with the notes rebounding from their lows after the company canceled its tender offer last Friday.

Hexion Inc.’s junk bonds were also sloppy in active trading on Monday, losing between 1 and 3 points, with the chemical sector under pressure.

While the market in general was down, Albertsons Cos., Inc.’s junk bonds were making gains in high-volume trading after reporting earnings.

Nine Energy roadshow

Nine Energy Service started a roadshow on Monday for a $400 million offering of five-year senior notes (B3/B).

The deal is set to price on Friday.

JP Morgan, Wells Fargo and Goldman Sachs are the joint bookrunners.

The Houston-based oilfield services company plans to use the proceeds, along with cash drawn from a new $200 million five-year senior secured revolving credit facility, to help fund the acquisition of Magnum Oil Tools International, Ltd. and pay off Magnum's term loan and revolving credit facility.

Uber oversubscribed

Beyond Nine Energy, news in the dollar-denominated primary market was sparse.

Uber Technologies’ $1.5 billion two-part deal, being conducted as a true private placement, is oversubscribed, according to a trader.

The book-size as of 12 p.m. ET on Monday was heard to be $2.5 billion.

The deal could price as early as Tuesday, the trader said.

Structure and talk remain unchanged.

The deal includes a $500 million tranche of five-year notes, which come with initial talk in the 7½% area, and a $1 billion tranche of eight-year notes with initial talk in the 8% area.

In part, Uber's novel execution is being chalked up to the San Francisco-based ridesharing company's unorthodox manner of doing business and its desire to limit circulation of its financial information, sources say.

On the horizon

Elsewhere, Brazil-based JBS SA was scheduled to begin marketing a dollar-denominated offering of senior notes (expected ratings BB-/BB-) on Monday.

Although the deal has a foot firmly planted in emerging markets, there will certainly be some real-money high yield accounts involved, a market source said.

United Rentals (North America) is also expected to show up this week with a sizable amount of new money senior notes (Ba3) to help finance its $2.1 billion acquisition of BlueLine Rental from Platinum Equity.

United Rentals' $1 billion term loan, which is also part of the debt financing, kicked off on Oct. 5.

Europe’s calendar

In the euro-denominated new issue market, UGI International, a subsidiary of UGI Corp., is marketing €300 million of seven-year senior notes (expected ratings Ba1/BB+) on a roadshow set to run through Thursday.

Joint global coordinator and physical bookrunner BNP Paribas will bill and deliver for the debt refinancing deal.

Joint bookrunner HSBC is also a joint global coordinator. Credit Agricole CIB, ING, Mediobanca, Natixis and SG CIB are also joint bookrunners.

Elsewhere, Tesco plc (Ba1/BB+/BBB-) mandated BNP Paribas, Citigroup, Goldman Sachs International and MUFG to arrange a series of investor meetings and conference calls on Monday and Tuesday.

A benchmark euro-denominated single-tranche offering of Regulation S five-year guaranteed senior unsecured bearer bonds will follow, pending market conditions.

PHI in focus

PHI’s 5¼% senior notes due 2019 were the focus of the secondary space on Monday with more than $53 million bonds on the tape on an otherwise quiet day, sources said.

The notes were rebounding from their lows, climbing almost 5 points to trade between 87¾ and 87 5/8, sources said.

The notes dropped about 8½ points to close Friday at 83½ after the company announced it was withdrawing its tender offer.

The helicopter aviation service provider’s months-long struggle to secure financing came to an unsuccessful end.

PHI initially launched the tender offer for the 5¼% notes in June with plans to finance it through a new senior notes offering.

The senior notes offering was downsized and later pulled from the market after reportedly struggling during bookbuilding.

The helicopter aviation service provider also pursued a term loan as part of a refinancing package, which was later dropped.

The $500 million issue matures in under 6 months.

However, PHI recently refinanced its senior secured revolving credit facility with a term loan provided through Thirty Two, LLC, a lender owned by PHI’s chairman of the board and chief executive officer.

There is speculation the company will launch an exchange for the notes, a market source said.

Hexion sloppy

Hexion’s junk bonds were sloppy on Monday with the notes down in high-volume activity as the chemical sector in general felt some pressure, a market source said.

Hexion’s 6 5/8% senior notes due 2020 dropped about 1 point to 89 bid, 90 offered. They were seen changing hands at 89 3/8 with about $30 million bonds on the tape by the late afternoon.

Hexion’s 9% senior notes due 2020 dropped about 3 points to 74 bid, 75 offered.

There was no headline news that spurred the trading activity, sources said.

However, the chemical sector in general has been under pressure. The sector is export heavy and the tariffs may impact their growth, a market source said.

Albertsons gains

Albertsons junk bonds were active and making gains on Monday after reporting second-quarter earnings.

Albertsons’ 5¾% senior notes due 2025 jumped 2¾ point to trade at 90, a market source said.

The notes were the most active in the structure with more than $29 million on the tape by the late afternoon.

Albertsons’ 6 5/8% senior notes due 2024 were up about 1 point to 96 bid, 97 offered. The notes were quoted at 94½ bid, 95½ offered prior to the grocery store operator’s earnings report.

Albertsons reported a 1.4% increase in sales and revenue quarter-over-quarter, adjusted EBITDA of $548.6 million in the second quarter and adjusted EBITDA of $1.36 billion year-to-date, according to a company press release.

Albertsons affirmed its expected EBITDA of about $2.7 billion for the 2018 fiscal year.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $75 million of inflows on the day.

However, actively managed high-yield funds sustained $605 million of outflows on Friday, the trader said.

In the week to date since Thursday's open – with data from three sessions still pending – the aggregate funds are tracking an estimated $445 million of outflows.

The most recent weekly fund flows for the dedicated junk funds was negative $4.928 billion for the week to the Wednesday, Oct. 10 close, the fourth-largest weekly outflow on record, sources say.

Indexes mixed

Benchmarks for the high-yield market were mixed on Monday after all experienced a drop last week.

The KDP High Yield Daily index was flat on Monday, closing the day at 69.95 with the yield remaining 5.99%.

The index down 43 basis points on the week last week.

The ICE BofAML US High Yield index gained 9.1 bps on Monday with the year-to-date return now 1.667%.

The CDX High Yield 30 index dropped 29 bps to close Monday at 105.92. The index closed Friday at 106.21.

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