Hunt Cos. caps $5.2 billion week, gains in busy trading; Staples, Bombardier surge

By Paul Deckelman and Paul A. Harris

New York, Jan. 26 – The high-yield primary market completed a slower week on Friday, with pricing activity down from the more active pace seen over the previous two weeks.

One new issue did price, as Hunt Cos., Inc. brought an upsized $600 million of eight-year secured notes to market.

Traders said that the new issue moved up when it hit the aftermarket, in very active trading.

The day’s sole deal topped off a week in which $5.18 billion of new dollar-denominated and fully junk-rated paper priced – down from the more than $8 billion which had gotten done the previous week, according to data compiled by Prospect News.

Year-to-date issuance was just modestly ahead of the primaryside’s year-ago pace.

There was also a considerable amount of activity for a second straight session in the new issue from Waste Pro USA, Inc. The bonds eased marginally from the strong levels they had posted on Thursday, but still held onto to most of their gains.

Algeco Scotsman’s existing bonds were active for a second straight session after the producer of large containers and modular structures announced plans to refinance its debt, including doing a big new bond deal and calling several of its nearest maturities.

Away from the new, recent or upcoming deals, traders saw Staples Inc.’s paper up smartly in heavy trading, even as the office products retailer announced a shuffle in its top management.

Bombardier Inc.’s bonds moved skyward after the Canadian aircraft manufacturer unexpectedly won an unfair trade practices case that pitted it against U.S. rival Boeing and the U.S. Commerce Department. Bombardier thus avoided having to pay duties of as much as nearly 300% on planes it will sell to American customers such as Delta Air Lines Inc.

Statistical market performance measures turned mixed on Friday after having been higher across the board on Thursday.

The indicators were meanwhile higher all around versus where they had finished out the previous week, ended Jan. 19, which had been lower than the week before that.

Hunt upsizes

In Friday’s primary market, Hunt Cos. priced an upsized $600 million issue of eight-year senior secured notes (B2/BB-) at par to yield 6¼%.

The amount was increased from $550 million.

The yield printed at the wide end of the 6 1/8% to 6¼% yield talk.

Jefferies was the left bookrunner.

The El Paso, Texas-based company plans to use the proceeds to refinance its 9 5/8% notes due 2021 and for general corporate purposes.

Berry Petroleum sets roadshow

Berry Petroleum Co., LLC plans to start a roadshow on Monday for a $350 million offering of eight-year senior notes.

Goldman Sachs is the left bookrunner. Wells Fargo, BMO, Morgan Stanley, UBS and KeyBanc are the joint bookrunners.

The Bakersfield, Calif.-based company plans to use the proceeds to pay down its revolver and for general corporate purposes.

JW Aluminum starts Monday

JW Aluminum Holding Corp. plans to start a roadshow on Monday in New York for a $300 million offering of eight-year senior secured notes.

Goldman Sachs is expected to be involved, although syndicate details were pending late Friday.

The Goose Creek, S.C.-based flat-rolled aluminum manufacturer plans to use the proceeds to refurbish and expand its capabilities at its manufacturing operations and repay its $151.4 million secured term loan.

New issue volumes have been somewhat thin, a syndicate banker conceded on Friday.

That’s mainly due to a sizable portion of the pool of potential issuers being presently in the throes of earnings blackouts, the source said.

A pick-up in new issue activity is expected by mid-February, the banker said.

Nordex prices green issue

In the European new issue market, Nordex SE priced €275 million issue of five-year green-eligible senior notes (B3/B) at par to yield 6½%.

The yield printed at the wide end of the 6¼% to 6½% yield talk.

Joint global coordinator JP Morgan will bill and deliver. BNP Paribas, HSBC and UniCredit were also joint global coordinators.

Bayeriche Landesbank and Commerzbank were joint bookrunners.

The Hamburg, Germany-based wind turbine manufacturer plans to use the proceeds to refinance debt maturing in 2019 and 2021.

Elsewhere Belgian software security firm SecureLink priced a €150 million issue of non-rated Euribor plus 550 basis points five-year floating-rate notes at par.

Pareto Securities managed the sale.

Fund flow picture

The daily retail cash flows for dedicated high-yield bond funds were flat to negative on Thursday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs were essentially flat, at negative $4 million on the day.

Asset managers sustained $40 million of outflows on Thursday, the trader added.

Junk funds saw $1.13 billion of outflows in the week to Wednesday’s close, an analyst said on Friday.

That follows the previous week’s $3.1 billion of outflows.

The dedicated junk funds have had negative flows in five of the past seven weeks, the analyst said.

Meanwhile cash flows for high-grade bond funds have been robust.

The investment-grade bond funds saw $3.48 billion of inflows in the week to last Wednesday’s close, which follows the previous week’s $3.9 billion of inflows, the analyst said.

Primary pace slackens off

Friday’s sole new deal from Hunt Cos. brought the amount of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers pricing during the week to $5.18 billion in eight tranches, according to data compiled by Prospect News.

The week’s activity was down from the $8.31 billion of new junk bonds which priced in 14 tranches the week before, ended Jan. 19.

That week’s brisk activity occurred even though it was one trading day shorter than usual, with fixed –income markets in the United States closed on Jan. 15 in observance of the Martin Luther King Day federal holiday.

This week’s issuance also lagged the $7.3 billion which got done in 11 tranches the week before that, ended Jan. 12 – the first week this year which saw any actual primaryside activity. During the previous two weeks, ended Jan. 5 and Dec. 29, no deals had priced during the traditional year-end market lull.

As of the close on Friday, year-to-date issuance had grown to $20.79 billion in 33 tranches – running 5.2% ahead of the primary pace seen at this time a year ago, when volume had totaled $19.76 billion in 35 tranches.

The gap between the two years closed notably since last week, when 2018 issuance was running around 29% ahead of a year earlier, due to a pick-up in issuance during the corresponding 2017 week.

For all of 2017, junk market issuance came to $281.57 billion in 524 tranches, running 24.1% ahead of the $226.78 billion which had priced in 359 tranches in 2016, the Prospect News data indicated.

Hunt Cos. issue busy, better

A trader said that the new Hunt Cos. 6¼% senior secured notes due 2026 “traded up on the break,” seeing the new bonds ending at 100¾ bid.

At another desk, a trader said he had seen trading in the 100 5/8 to 100 7/8 bid range, “so they were up a little bit” from the par level at which Hunt, a privately held company which invests in businesses focused on the real estate and infrastructure markets, had priced its regularly scheduled forward calendar offering.

A market source at another desk said that Hunt’s new deal generated “twice the volume of everyone else,” with over $78 million of that paper changing hands – over $40 million more than the next busiest issue.

And yet another market participant pegged the new bonds in a 100½ to 101 bid context.

Waste Pro stays busy

For a second straight session, Waste Pro USA’s 5½% notes due 2026 were actively traded, with more than $31 million of turnover – although that was well down from the astounding $120 million-plus that a trader saw during Thursday’s aftermarket in the issue.

The traders saw the bonds come down a little from the hefty gains notched on Thursday, with one locating them in a 101¾ to 102 bid range.

A second saw them going out at 101¾, calling that down ¼ point on the day.

The Longwood, Fla.-based solid-waste services company had priced its $500 million deal at par off the forward calendar after the offering was upsized from $450 million originally.

Those new bonds firmed smartly when they hit the aftermarket, jumping to a 102 to 102¼ bid context.

A trader, explaining the heavy volume seen late Thursday when the bonds were freed for secondary market dealings, said that the issue had been “10-times oversubscribed” and added that “there were a lot of flippers” on the deal.

Algeco continues to trade

For a second straight session, Algeco Scotsman’s bonds were active, in the wake of the news that the Baltimore-based container and modular structure manufacturer plans to call several issues of notes slated to mature this year and next, using the proceeds from a big new five-tranche dual-currency deal announced on Thursday to take them out.

One of those issues being called is the 10¾% notes due 2019, which had improved by 5/8 point on Thursday to end at 103 bid, with over $18 million traded.

On Friday, it eased slightly from that closing peak level, seen going home at 102 15/16 bid, with more than $23 million traded.

Existing bonds struggle a little

A trader said Friday that overall, “it’s kind of a weird market – the new issues have all done pretty well but the secondary market continues to grind a little wider and a little lower.”

He said nothing really stood out in that regard, instead characterizing it as “kind of broad-based, with the fund outflows.”

On Thursday, it was reported the flows of investor cash into or out of high-yield mutual funds and exchange-traded funds – which are considered a reliable barometer of overall junk market liquidity trends – remained in negative territory for a second straight week, after two weeks in a row before that on the plus side. Some $1.13 billion more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, Jan. 24, on top of the $3.08 billion cash loss reported the week before.

The trader meantime said that “at the same time, you get the new issues. That’s what everybody’s trying to buy.”

Bombardier flies on ruling

Away from the new deals, recently priced issues or bonds related to upcoming deals, traders said that Bombardier’s bonds bounced impressively on Friday after a surprise ruling by the United States International Trade Commission rejecting last month’s move by the Commerce Department to slap a nearly 300% tariff on the Montreal-based aircraft and railroad equipment manufacturer’s C-Series planes sold in the United States.

Its 7½% notes due 2025 zoomed by more than 2½ points to close at 105 5/16, with over $16 million traded.

Its 7½% notes due 2024 likewise firmed from recent levels to end at 106 bid, on about the same volume.

A market source said that Bombardier’s 6% notes due 2022 gained 1 3/8 points to end at 101 bid, with over $9 million traded.

The planemaker’s bonds headed skyward after the ITC rejected claims by domestic aerospace giant Boeing Co. that assistance to Bombardier’s Northern Ireland aircraft-wing manufacturing plant from the British government and to the company by the Canadian and Quebec provincial governments allowed Bombardier to sell its C Series 100-to-150 passenger jets to customers such as Delta Air Lines Inc. for unfairly low prices.

The Commerce Department had agreed with Boeing and proposed a 292% tariff on the planes, which would have nearly quadrupled their price.

Most analysts had expected the ITC to side with Commerce and Boeing and expressed surprise at the pro-Bombardier decision.

Staples up amid CEO change

Elsewhere, Staples’ 8½% notes due 2025 gained 3 1/8 points to end at 96 7/8, a market source said, on volume of over $39 million.

The gain comes against the backdrop of the Framingham, Mass.-based office supplies retailer’s announcement Friday that J. Alexander “Sandy” Douglas, a long-time Coca-Cola executive, would take over as chief executive officer on April 2, replacing current CEO Shira Goodman, who has led Staples since mid-2016.

The Wall Street Journal reported that Friday was Goodman’s last day at the helm of the company.

In the interim, John Lederer, currently the executive chairman of Staples Inc. and its separate U.S. and Canadian retail businesses, will lead the company on a day-to-day basis during the transition.

The cryptic company announcement, while effusively praising Douglas, barely mentioned Goodman, who had been with Staples in various capacities since 1992, according to her LinkedIn profile, and it offered no information as to why she is leaving the company.

The management shakeup comes only a few months after the formerly public Staples was bought out by New York-based private-equity company Sycamore Partners for $6.9 billion.

Indicators mixed on day

Statistical market performance measures turned mixed on Friday after being higher across the board on Thursday. It was the second mixed performance in the last three trading days and the fourth in the last six sessions.

The indicators were meanwhile higher all around versus where they had finished out the previous week, ended Jan. 19, which had been lower than the week before that.

The KDP High Yield Daily Index eased by 2 basis points on Friday to end at 71.97, its first loss after two straight gains. It had risen by 3 bps on Thursday and by 5 bps on Wednesday, after being unchanged on Tuesday – and having slid for five straight sessions before that.

Its yield held steady at 5.24%, unchanged for a second session in a row after narrowing by 3 bps on Wednesday.

Those levels compare favorably to the 71.894 index reading and 5.26% yield seen at the close last Friday.

The Markit CDX Series 29 index moved up by about 5/32 point on Friday to finish at 108 25/32 bid, 108 27/32 offered, its second straight improvement. It had also firmed by almost 1/16 point on Thursday after dropping by almost 5/32 point on Wednesday.

For the week, the index finished up from last Friday’s 108 15/32 bid, 108 17/32 close.

The Merrill Lynch High Yield Index put up its fifth straight gain on Friday, rising by 0.03%, on top of Thursday’s 0.021% advance.

That firming raised the index’s year-to-date return to 0.936% from 0.906% on Thursday, establishing a third consecutive new peak YTD level for the year so far.

For the week, the index rose by 0.032%, its first weekly gain after two consecutive losing weeks.

Last week, the index had fallen by 0.12% on the week, to a cumulative return of 0.614%.

© 2015 Prospect News.
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