Pacific Drilling prices; Popular hovers at par; Nieman, Nielson gain; Alliance One drops

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 12 – The domestic and European high-yield primary market remained active on Wednesday with one dollar-denominated issue pricing and two euro- and one sterling-denominated deals on the forward calendar.

Pacific Drilling SA priced an upsized $1 billion two tranche offering of senior notes, which were said to be massively oversubscribed during bookbuilding.

Gamenet Group SpA set price talk for its €225 million offering of five-year senior secured floating-rate notes.

eDreams Odigeo’s a roadshow for a €425 million offering and Arqiva Broadcast Finance plc’s roadshow for a £625 million sale are both scheduled to wrap up on Thursday.

Meanwhile, Popular, Inc.’s newly priced 6 1/8% senior notes due 2023 (B2/BB-/BB-) had a lackluster performance in the secondary space with the notes hovering around par in light trading volume.

While volume was also light, the Puerto Rico-based banking company’s existing 7% senior notes due 2019 saw more activity than usual with the notes trading around their takeout price.

Neiman Marcus Group, Inc.’s 8% senior notes due 2021 made large gains in high-volume trading on Wednesday after competitor Saks Fifth Avenue reported a rise in sales.

Nielsen Holdings plc’s 5% senior notes due 2025 were again active and making gains on news the company is considering selling itself.

Alliance One International Inc.’s 9 7/8% senior notes due 2021 were moving down in active trading as the company, which is now known as Pyxus International Inc., hosted an investor and analyst day on Wednesday.

Pacific Drilling oversubscribed

In Wednesday’s primary market session, Pacific Drilling priced an upsized $1 billion of secured notes.

The deal included an upsized $750 million tranche of five-year senior secured first-lien notes (Caa1/B) which priced at par to yield 8 3/8%. The tranche was increased from $700 million.

The yield printed in the middle of the 8¼% to 8½% yield talk.

In a tranche announced subsequent to the start of the roadshow, Pacific Drilling also priced $250 million of second lien PIK toggle notes at par to yield 11%. The cash coupon is 11% while the PIK coupon steps up by 100 basis points to 12%. The PIK coupon came at the tight end of the 12% to 12½% PIK interest talk.

The overall deal was heard to play to $4 billion of orders, a trader said.

Timing was moved ahead to Wednesday. When the deal was announced the roadshow was scheduled to carry into Thursday’s session.

Credit Suisse was the bookrunner.

The Luxembourg-based drillship operator plans to use the proceeds, including the additional proceeds from the upsized, revised offer, to refinance or repay a portion of its pre-bankruptcy debt and for general corporate purposes.

Pacific Drilling filed for bankruptcy on Nov. 12, 2017 under Chapter 11.

Busy ahead in Europe

Thursday’s session is expected to be a busy one in the European primary market with three offerings expected to wrap up their roadshows.

Gamenet Group talked its €225 million offering of five-year senior secured floating-rate notes due 2023 (B1/B+) with a 525 basis points spread to Euribor and a 0% Euribor floor, a market source said on Wednesday.

Books close on Thursday.

UniCredit and Nomura are leading the acquisition deal.

A roadshow for eDreams Odigeo’s €425 million offering of five-year senior secured notes (B2/B) also concludes on Thursday.

Deutsche Bank, Barclays, BBVA, Caixa, JPMorgan, Morgan Stanley, Santander and SG CIB are leading the debt refinancing deal.

And Arqiva Broadcast Finance has been marketing £625 million of five-year senior notes (expected ratings B2//B-) on a roadshow scheduled to finish on Thursday.

Physical bookrunner BofA Merrill Lynch will bill and deliver for the debt refinancing deal. HSBC is also a physical bookrunner.

Popular at par

Popular’s 6 1/8% senior notes due 2023 were trading “like any other bad credit,” in the secondary space, a market source said.

The notes were seen at par bid, par ½ offered on Wednesday with most trades between par and par 3/8.

About $14 million of the bonds had traded by late in the afternoon.

The banking company is one of the largest in Puerto Rico and, while not in danger of bankruptcy, it does have bad assets, a market source said.

Popular priced a $300 million offering of the notes at par on Tuesday.

Proceeds from the new deal, in addition to cash, will be used to redeem the company’s $450 million of outstanding 7% senior notes due 2019.

The 7% notes saw more activity than usual in the secondary space with $6 million on the tape by late afternoon.

The notes were trading between 102 and 102½, a source said.

If the company plans to redeem the notes prior to their maturity, they would need to do a make-whole takeout with the price around 102½, a market source said.

Neiman Marcus gains

Neiman Marcus’ 8% senior notes due 2021 made large gains in high-volume trading on Wednesday.

The notes jumped more than 3 points to trade between 70½ and 71 with more than $22 million of the bonds on the tape.

The jump came after competitor Saks Fifth Avenue reported sales growth of 6.7%, a market source said.

Investors may have thought the sales figure from Saks Fifth Avenue was a positive indication for Neiman Marcus, which is also a high-end fashion retailer, a market source said.

Neiman Marcus is also preparing to open its first store in New York City in Hudson Yards.

Nielsen’s sale

Nielsen Holding’s 5% senior notes due 2022 were again on the rise in active trading on Wednesday after the company announced it would explore a sale.

The notes were up about 5/8 point to trade north of 98, a market source said. More than $18 million of the bonds were on the tape by late afternoon.

News broke late Tuesday that Nielsen was expanding its review of strategic alternatives to include the sale of the full company.

Previously, the TV ratings company was exploring selling portions of its operations.

However, Nielsen expanded its review to include the sale of the entire company under pressure from activist investor Elliott Management Corp.

Nielsen’s 5% senior notes were also on the rise in mid-August when news broke Elliott Management had increased its stake in the company with the intention of pressuring it to sell.

Prior to the August announcement, the 5% notes were trading in the 92 area. They have steadily been on the rise since.

Formerly known as

Alliance One’s 9 7/8% senior notes due 2021 were dropping on Wednesday as the company hosted an investor and analyst day to unveil its new brand.

The 9 7/8% notes were down about ½ point on Wednesday with most trades between 97 and 97½, a market source said. About $17 million of the bonds were on the tape by late afternoon.

The company formerly known as Alliance One began trading on the New York Stock Exchange under its new name Pyxus International on Wednesday.

The change in the company’s name coincided with an investor and analyst conference where the company unveiled a new strategy.

The tobacco producer plans to branch out into industrial hemp and recreational marijuana, a market source said.

However, the movement in the notes was more about supply and demand with a holder selling, the source said.

Tuesday outflows

Cash flows for dedicated high-yield bond funds were negative on Tuesday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $350 million of outflows on the day.

Actively managed funds saw $20 million of outflows, the trader said.

The dedicated high yield funds are tracking around $800 million of net outflows in the four sessions since last Wednesday’s close, the trader said.

Indexes gain

After a mixed week, three benchmarks for the high-yield secondary market all posted gains on Wednesday.

The KDP High Yield Daily index broke its five consecutive day losing streak on Wednesday. The index was up 6 basis points to close the day at 70.29, an increase of 5.87%.

The index was down 4 bps on Tuesday and 3 bps on Monday after posting losses for much of last week.

The Merrill Lynch High Yield index passed the 2% year-to-date return threshold on Wednesday after a choppy year that saw the index in the red for long periods of time.

The index was up 14.3 bps on Wednesday with the year-to-date return now 2.09%. The index was up 5.3 bps on Tuesday and 10.3 bps on Monday.

The CDX High Yield 30 index was up 5 bps to close Wednesday at 107.11. The index was up 5 bps on Tuesday and 17 bps on Monday after seeing a cumulative 2 bps drop last week.

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