Forgital prices; iHeart, Albertsons, Mattel at a premium; Freeport-McMoRan lags

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 2 – After another high-volume week for new deals in the domestic high-yield primary market, activity was light on Friday with one new deal pricing and another joining the forward calendar.

Forgital Group priced a $505 million issue of seven-year senior secured notes at par to yield 7 3/8%.

U.S. Farathane, LLC plans to start a roadshow on Monday for a $600 million offering of five-year senior secured notes.

Meanwhile, the secondary space closed the week on soft footing as renewed trade war tensions continued to rattle markets.

However, new paper dominated activity in the secondary space with the majority of new deals trading at premiums to their issue prices.

Forgital’s new 7 3/8% senior notes due 2026 jumped after breaking for trade.

iHeartCommunications, Inc.’s 5¼% senior notes due 2027 (B1/BB-) dominated activity in the secondary space with the notes trading at a slight premium to their issue price.

Albertsons’ 5 7/8% senior notes due 2028 (B3/BB-) and Mattel, Inc.’s 6% senior notes due 2027 were also trading at premiums to their issue prices.

However, Freeport-McMoRan Inc.’s 5% senior notes due 2027 and 5¼% senior notes due 2029 dipped further below their issue prices in active trading on Friday.

Forgital finishes tight

A quiet summer Friday in the new issue market saw Forgital price a $505 million issue of seven-year senior secured notes (B2/B) at par to yield 7 3/8% in a deal helmed by Credit Suisse.

The yield printed at the tight end of yield talk in the 7½% area.

The new paper skyrocketed after breaking for trade. The 7 3/8% notes traded up to 101¾ by the late afternoon with more than $57 million in reported volume.

U.S. Farathane joins calendar

Meanwhile, one new offer took a spot on an ultrathin active forward calendar.

U.S. Farathane plans to start a roadshow on Monday for a $600 million offering of five-year senior secured notes.

BofA Securities Inc. has the books for the automotive plastics manufacturer's debt refinancing deal.

The week ahead

As the global capital markets continued to be tumbled by a new wave of trade war apprehensions on Friday, the week ahead in the new issue market is something of a question mark, a debt capital markets banker said on Friday.

Given Thursday's decent or better executions, in deals from Albertsons, Freeport-McMoRan, Mattel and iHeartCommunications, the market appears open to good quality credits, the banker said.

Certainly, issuers coming with double B credit ratings should be able to get a deal done during the week ahead, the source added.

However, no one volunteered any issuer names on Friday.

Announcements emanating from the executive branch of the United States government have demonstrated the power to discourage investors, the banker commented, referring to President Trump's Thursday tweet disclosing his inclination to slap new tariffs on $300 billion of Chinese products, sparking a significant Thursday sell-off in stocks, which carried into the Friday session, and also weighed upon the high-yield market.

High-yield spreads widened by as much as 14 basis points on Thursday, as the yield on the 10-year Treasury dropped to levels not seen since late 2016, a market source said.

Apart from the U.S. Farathane deal, an offer that has been in the market since mid-to-late July blinked to life late in the past week.

Guidance in the 13½% area was heard Thursday on the Sirius Minerals plc/York Potash Intermediate Holdings plc $500 million offering of eight-year senior secured notes (B-/B).

Although initial price talk was in the 10% to 12% range, pricing discussions were heard to have gone as wide as 15% in the interim, market sources said.

Hence, a 13½% cost of capital, while certainly attention getting, may not be the worst-case scenario for the U.K.-based fertilizer company, a trader said.

The capital expenditures deal could price in the Aug. 5 week, the trader added.

iHeart dominates

iHeartCommunications’ 5¼% senior notes due 2027 dominated activity in the secondary space with the notes trading at a slight premium to their issue price.

The 5¼% notes were seen changing hands at par ¼ in the mid-afternoon with more than $112 million in reported volume, according to a market source.

iHeart priced an upsized $750 million issue of the 5¼% senior notes at par on Thursday. Price talk had been in the 5 3/8% area.

The notes were initially slated to price during Friday’s session but timing of the deal was accelerated with the notes pricing late Thursday.

Albertsons weakens

Albertsons’ 5 7/8% senior notes due 2028 were coming in from their highs during Friday’s session, although the notes continued to trade at a premium to their issue price.

The 5 7/8% notes were seen changing hands at par ¼ on Friday after closing out Thursday at par ½.

With more than $93 million in reported volume by the midafternoon, the notes were the second most actively traded issue in the secondary space.

Albertsons priced an upsized $750 million issue of the 5 7/8% notes at par in a Thursday drive-by.

Mattel at a premium

Mattel’s 6% senior notes due 2027 were also trading at a premium to their issue price on Friday.

The notes continued to change hands around par ½ in active trading, flush with their closing price on Thursday, according to a market source.

While the issue size was small, the notes were active with more than $44.5 million in reported volume by the late afternoon.

Mattel priced a $250 million issue of the 6% notes in a Thursday drive-by.

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

Freeport-McMoRan lags

Freeport-McMoRan’s 5% senior notes due 2027 and 5¼% senior notes due 2029 continued to sink below their issue prices in active trading on Friday after a lackluster start after breaking for trade.

The 5% senior notes were changing hands between 99¼ and 99½ during Friday’s session, according to a market source.

They were down about 3/8 point after closing Thursday at 99 7/8.

The notes saw about $60 million in reported volume by the midafternoon.

Freeport-McMoran’s 5¼% senior notes due 2029 were also weaker on Friday with the notes trading down 5/8 point to 99¼ by the midafternoon.

More than $52 million was on the tape by the late afternoon.

Sources attributed the lackluster performance of the notes to their tight pricing.

The mining company priced a $600 million issue of the 5% senior notes and a $600 million issue of the 5¼% senior notes at par in a Thursday drive-by.

The 5% notes priced at the wide end of the 4 7/8% to 5% yield talk, but lower than initial talk in the 5¼% area.

The 5¼% notes printed at the wide end of the 5 1/8% to 5¼% yield talk but at the tight end of the 5¼% to 5½% initial talk.

Solid Thursday inflows

The dedicated high-yield bond funds saw solid daily inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $520 million of inflows on the day.

Actively managed high-yield funds, the asset managers, saw $150 million of inflows on Thursday, the source said.

News of Thursday's daily flows follows a late Thursday afternoon report that the combined funds sustained $115 million of net outflows in the week to Wednesday's close, according to Lipper US Fund Flows.

Indexes down

Indexes were again down on Friday with all posting cumulative losses on the week.

The KDP High Yield Daily index dropped 9 basis points outright to close Friday at 71.54 with the yield 5.49%.

The index was down 13 bps on Thursday and gained 11 bps on Wednesday after shaving off 1 bp on Tuesday and 3 bps on Monday.

The index was down 15 bps on the week.

The CDX High Yield 30 index dropped 29 bps to close Friday at 106.75. The index was down 36 bps on Thursday, 38 bps on Wednesday, 9 bps on Tuesday and 17 bps on Monday.

The index saw a cumulative drop of 129 bps on the week.

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