Morning Commentary: TransDigm returns with $750 million, joins Dun & Bradstreet on deck

By Paul A. Harris

Portland, Ore., Feb. 1 – February got underway to an active high-yield primary market.

Two issuers, one of which just priced $3.8 billion on Wednesday, plan to place $2.2 billion of junk in a total of four tranches ahead of the weekend.

In a deal teed up to price at the conclusion of a roadshow, Dun & Bradstreet Corp. upsized its tranche of senior secured notes and tightened the talk, while downsizing its concurrent unsecured notes offering and bank loan.

Talk on an upsized $700 million tranche of 7.5-year senior secured notes (B2/B/BB) tightened to the 7% area from the 7¼% area; initial guidance in the was in the mid 7% area.

The tranche size was increased from $500 million.

The secured notes are playing to $3 billion of orders, a trader said.

A downsized $750 million tranche of eight-year senior unsecured notes (Caa2/CCC/B-) remains talked to yield 10% to 10¼%, tighter than initial guidance in the 10¼% to 10½% area.

The tranche size decreased from $850 million.

The deadline for recommitments for all of the notes was set at noon ET on Friday.

Overall the two-part bond offerings increased to $1.45 billion from $1.35 billion, while the bank loan decreased to $2.53 billion from $2.63 billion.

The bank loan was also heard to be playing to $3 billion of demand, the trader said.

Proceeds will be used to finance the acquisition of Dun & Bradstreet by an investor group led by CC Capital, Bilcar LLC, Cannae Holdings and Thomas H. Lee Partners.

TransDigm returns

Meanwhile, two days after it priced an upsized $1.38 billion secured bond deal and abandoned an effort to place subordinated notes, TransDigm, Inc. returned to the market on Friday with a $200 million tap of its new 6¼% senior secured notes due March 15, 2026 (B3/B+) and a $550 million offering of eight-year senior subordinated notes (B3/B-).

Both tranches are poised to price on Friday afternoon.

The add-on notes to the 6¼% notes due March 2026 are talked to price at 101, making a concession to their Friday morning trading levels of 101¼ bid, 101½ offered, a trader said. The notes priced at par in an upsized $3.8 billion (from $3.7 billion) tranche on Wednesday.

Proceeds will be used to fund a portion of the acquisition of Esterline Technologies Corp.

Also on Friday, TransDigm plans to price a portion of the senior subordinated notes it withdrew from the market earlier in the week.

The junior tranche features $550 million of eight-year senior subordinated notes (B3/B-), which are non-callable for three years and are talked to yield 7½%.

The Cleveland-based producer of highly engineered aircraft components plans to use the proceeds from the subordinated notes to redeem its 5½% senior subordinated notes due 2020.

On Wednesday TransDigm withdrew a $1 billion tranche of eight-year senior subordinated notes. Those proceeds were shifted to 6¼% secured notes.

Firm tone to market

The high-yield index was unchanged in the early going on Friday, but by mid-morning the market appeared to be firming, to a New York-based trader.

High-yield ETFs were better on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.3%, or 25 cents, at $84.58 per share.

In a trade that saw $16 million change hands, the on the run Intelsat (Luxembourg) SA (Intelsat SA) 7¾% senior notes due June 2021 printed at 96½, up half a point, the trader said.

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