Versum Materials prices, moves up; recent Landry, Sabine deals gain; market firm post-Fed

By Paul Deckelman and Paul A. Harris

New York, Sept. 21 – The high-yield market bade farewell to summer on its last full day on Wednesday with one dollar-denominated pricing. Versum Materials Inc. did a $425 million eight-year deal, syndicate sources said.

The industrial materials company’s new bonds were seen having firmed smartly when they hit the aftermarket, although not on any huge volume.

Traders saw continued upside activity in several recently priced offerings – Monday’s split-rated transaction from Sabine Pass Liquefaction LLC and the purely junk-rated issues from Landry’s, Inc. and Ziggo Group Holding BV.

Among the names that have not yet gotten done, primaryside sources were anticipating Thursday pricings from JDA Software Group Inc., which has been shopping a $400 million eight-year offering around, and LSC Communications Inc., doing a $400 million secured deal.

In the euro-denominated market, Avis Budget Finance plc priced an upsized eight-year deal.

Among existing issues, prices were seen generally firmer following the announcement that the Federal Reserve will leave interest rates where they are over the near term rather than raising them.

But even that bit of benign news failed to halt the recent slide in Community Health Systems, Inc. paper.

Statistical market performance measures turned firmer across the board on Wednesday after having been mixed on Tuesday.

Versum prices tight

Versum Materials priced Wednesday's sole dollar-denominated deal, a $425 million issue of eight-senior senior notes (Ba3/BB-) that came at par to yield 5½%.

The yield printed at the tight end of yield talk in the 5 5/8% area and went very well, according to a portfolio manager.

Deutsche Bank Securities Inc., Citigroup Global Markets Inc., HSBC and Wells Fargo Securities LLC were the joint bookrunners.

The Lehigh Valley, Pa.-based industrial materials company plans to use the proceeds to help fund a proposed pro rata distribution of Versum common stock to its stockholders and Versum’s expected distribution of cash to Air Products prior to the spinoff of Versum from Air Products.

Big book for JDA

JDA Software Group is on deck for Thursday with a $400 million offering of eight-year senior notes.

Official yield talk of 7½% to 7¾% circulated on Wednesday.

Official talk comes well inside of the 8% to 8¼% initial guidance.

Books close at 10 a.m. ET Thursday, and the deal, which is heard to be playing to orders totaling about $2 billion, is set price thereafter, the portfolio manager said.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. are leading the deal.

Elsewhere, some market watchers are looking for LSC Communications to price its $400 million offering of senior secured notes (Ba3) on Thursday.

However, that deal may be facing some headwinds, according to the portfolio manager, who said that there was $100 million in the order book as of 9:20 a.m. ET Wednesday and is looking for the deal to come wide of the 7% guidance.

inVentiv starts Monday

A roadshow starts on Monday for inVentiv Group Holdings, Inc.’s $720 million offering of eight-year senior notes (Caa2).

The offer is set to price during the week ahead.

Credit Suisse, Goldman Sachs, BofA Merrill Lynch, Morgan Stanley & Co. LLC, Barclays and Jefferies LLC are the joint bookrunners.

The Burlington, Mass.-based provider of clinical, consulting and commercial services to the health-care industry plans to use the proceeds to refinance debt and fund Advent International's partial acquisition of inVentiv.

Fnac tight to revised talk

The euro-denominated high-yield market ran in high gear on Wednesday.

Four issuers priced single-tranche deals totaling €1.59 billion face amount.

Two of the four deals were upsized.

Groupe Fnac priced a €650 million issue of seven-year senior notes (Ba2/BB) at par to yield 3¼%.

The yield printed at the tight end of revised yield talk in the 3 3/8% area. That talk tightened from earlier talk of 3½% to 3¾%, a source said.

Global coordinator and bookrunner Credit Agricole CIB will bill and deliver. Natixis and SG CIB were also global coordinators and bookrunners.

The Ivry-sur-Seine, France-based retail chain, which sells cultural and electronic products, plans to use the proceeds, together with cash, to refinance the bridge loan dated April 20 that it entered into in connection with its acquisition of Darty plc.

eDreams upsizes

Spain’s eDreams Odigeo SA priced an upsized €435 million issue of 8½% five-year senior secured notes (B3/B) at 98.098 to yield 9%.

The deal size was increased from €435 million.

Orders came from almost 80 investors from the United States, France, Germany, Spain, Italy, the United Kingdom and Sweden, according to a company press release.

Global coordinator Deutsche Bank will bill and deliver for the debt refinancing deal. Barclays, BBVA and SG CIB were the joint bookrunners.

Avis Budget oversubscribed

Avis Budget Finance priced an upsized €300 million issue of eight-year senior notes (B1/B+) at par to yield 4 1/8%.

The issue size was increased from €250 million.

The yield printed at the tight end of yield talk in the 4¼% area.

The deal played to orders in excess of €1 billion, the source said.

Barclays was the lead bookrunner.

Avis Budget Group, Inc., a Parsippany, N.J.-based provider of vehicle rental services, plans to use the proceeds to partially redeem its 6% senior notes due 2021 and for general corporate purposes.

MCS FRN

France-based MCS Groupe priced a €200 million issue of Euribor plus 575 basis points five-year senior secured floating-rate notes (BB-) at 99.

Global coordinator Morgan Stanley will bill and deliver. JPMorgan is also a global coordinator. SG CIB is the joint bookrunner.

The financial services company, which is based in Paris, plans to use the proceeds to repay debt, to fund a distribution to shareholders and for general corporate purposes.

Mixed Tuesday flows

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

High-yield exchange-traded funds saw $83 million of inflows on the day.

However, asset managers sustained $30 million of outflows on Tuesday.

Dedicated bank loan funds saw strong inflows of $125 million on Tuesday, the source added.

Post-Fed market firmer

The not-unexpected news that the Federal Reserve’s policy-setting Federal Open Market Committee opted to leave U.S. interest rates where they currently are rather than raising them at this time – while leaving the door open for a December rate boost – was seen as a modest overall positive in Junkbondland.

“Everything is up post-Fed,” a trader said, adding that “it seems like it’s better-bid.”

He noted the strong movement, for instance, in the widely followed Markit CDX index, which rebounded from its loss on Tuesday to end up by almost 1 point on the day.

Although the lack of a rate boost was pretty well what market players had been expecting, he said the announcement that the Fed would stand pat did not set off a surge of upside activity – or any kind of activity for that matter.

“I’m not seeing a lot of trading,” he reported, adding that “I think people are kind of waiting, post-Fed, to see how things were going to shake out.

He opined that “they got the ‘all clear,’ so I think you’re going to see cash come back in and the market rally. So we should see new issues begin to ramp up again.”

Versum up in aftermarket

Among specific issues, the day’s sole dollar-denominated pricing, Versum Materials’ 5½% notes due 2024, was seen by traders having improved solidly when the bonds were freed for aftermarket dealings, although volume was not especially active, a market source said.

He quoted the notes in a 102¼-to-102¾ bid context. He said that about 1/8 to ¼ point of that gain came after the Fed announcement on the lack of an interest rate hike.

A second trader saw those bonds in a 102-to-102½ bid neighborhood at the end of the day.

A third pegged them between 102 1/8 and 102 5/8 bid.

Recent deals stay strong

Among recently priced issues, traders saw bonds generally holding to the levels they’ve been at for the last few days or slightly firmer.

A trader said that Landry’s 6¾% notes due 2024 gained ¼ point on the day, closing at 102¼ bid, with over $17 million changing hands.

The Houston-based restaurant, gaming and lodging company had priced its regularly scheduled forward calendar issue at par on Tuesday, and the new bonds had jumped up to around the 102 bid area going home, with over $65 million having traded.

Also among the recently priced junk deals, Ziggo Group’s 5½% senior secured notes due 2027 were ¼ point better on the day at 99¾ bid, with over $16 million traded.

The Netherlands-based telecommunications and cable operator had priced $2 billion of those bonds at par on Friday, as part of a three-part deal that also included euro-denominated secured paper and dollar-denominated unsecured notes.

Monday’s new split-rated (Ba2/BBB-) offering from Cheniere Energy Partners LP, via its Sabine Pass Liquefaction unit, continued to roll up heavy volume, although much of this was thought to be attributable to high-grade players looking for yield rather than traditional junk accounts.

More than $100 million of the notes were traded, gaining 7/8 point to end at 101 3/8 bid, a market source said.

Community Health retreats

Away from the new or recently priced deals, Community Health Systems’ paper remained active on Wednesday, just as it had been on Monday and again on Tuesday on word the Franklin, Tenn.-based hospital operator is exploring its strategic options, possibly including the sale of part or all of the company.

Its notes continued to fall back, with the 6 7/8% notes due 2022 down for a third straight day at 83 5/8 bid, down 5/8 point on the day, on volume of $15 million.

Its 7 1/8% notes due 2020 fell for a second straight session, ending at 90 7/8 bid, down ½ point, also on $15 million of volume.

Indicators turn firmer

Statistical market performance measures turned firmer across the board on Wednesday after having been mixed on Tuesday. It was the second stronger session in the last three trading days.

The KDP High Yield index posted its third straight gain on Wednesday, edging up 1 basis point to close at 70.15, on top of its 6 bps rise Tuesday. The three gains follow six consecutive losses before that.

Its yield came in by 1 bp for a second day in a row, to 5.41%, after seven straight sessions on the rise, including Monday’s 1 bp increase.

The Markit Series 26 CDX index jumped by ¾ point on Wednesday to finish at 104 7/16 bid, 104 15/32 offered, in contrast to its 5/32 point loss on Tuesday.

And the Merrill Lynch High Yield index rose by 0.146% Wednesday, its second upturn in a row. On Tuesday, it had gained 0.049%. The index had posted losses most days of last week.

The latest advance lifted its year-to-date return to 14.186% from 14.02% on Tuesday, which had been its first time back above the 14% level since last Monday, when it stood at 14.306%. But those levels still remained well down from the 14.992% return set on Sept. 8, its peak cumulative mark for the year so far.

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