Jefferies prices, new Jefferies, Waterworks, AMC active; funds jump $2.22 billion

By Paul Deckelman and Paul A. Harris

New York, July 20 – The junk primary sphere saw just one deal priced during Thursday’s session – a $400 million seven-year offering from investment bank Jefferies Finance LLC.

That was in contrast to Wednesday’s session, during which $1.3 billion of new junk-rated and dollar-denominated paper had gotten done – the first session to top the $1 billion mark since the end of June.

Traders meantime saw very active dealings in Wednesday’s new offerings from cable television network operator and content provider AMC Networks, Inc. and industrial product distributor HD Supply Waterworks Ltd, along with the new Jefferies bonds.

The traders also saw fairly brisk activity in recently priced offerings from the likes of Extraction Oil & Gas, Inc., Sirius XM Radio, Inc. and Hertz Corp. – with the latter seen definitely on the downside.

Rite Aid Corp. notes notched a third straight upside session, following the release of updated financial information related to the pending sale of nearly half of its drugstores to larger rival Walgreens Boots Alliance, Inc.

Statistical market performance measures were firmer across the board for a second straight session on Thursday. They had improved on Wednesday after turning mixed on Tuesday – though just barely so – which, in turn, followed four straight upside sessions before that.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, which are considered to be a reliable barometer of overall junk market liquidity trends – rebounded solidly this week after four straight weeks on the downside, according to numbers released on Thursday. Some $2.22 billion more came into those weekly reporting-only domestic funds than left them during the week ended Wednesday July 19, versus the $1.14 billion net outflow reported last Thursday for the seven days ended July 12 (see related story elsewhere in this issue).

Jefferies prices atop talk

Jefferies Finance priced Thursday’s sole dollar-denominated deal, a $400 million issue of seven-year senior notes (B1/B/BB-) that came at par to yield 7¼%.

The yield printed on top of yield talk that had been set in the 7¼% area.

Jefferies was the left bookrunner. Citigroup and HSBC were joint bookrunners.

Proceeds, along with funds from a concurrent $250 million term loan, will be used to repay an existing term loan and for general corporate purposes.

DAE upsizes, sets talk

DAE Funding LLC upsized its offering of senior notes (Ba3/BB) to $2.3 billion from $1.9 billion, and changed the structure by adding a tranche of three-year notes, thus changing the offer into a three-part deal from a two-part deal.

In addition price talk was set.

The new $500 million minimum tranche of three-year notes is talked to yield in the 4% area.

A benchmark tranche of five-year notes is talked to yield 4½% to 4¾%. Talk comes rich to initial guidance of 4¾% to 5%.

A benchmark tranche of seven-year notes is talked to yield 5% to 5¼%. Talk on the seven-year notes comes rich to the 5 1/8% to 5 3/8% initial guidance.

Final tranche sizes remain to be determined.

Books were scheduled to close at the end of business on Thursday.

The acquisition financing deal, via sole bookrunner Morgan Stanley, is the only offer on the calendar scheduled to price on Friday.

However look for deal volume to ramp up in the week ahead, an investor said, adding that 10 deals are expected to launch during the July 24 week, and Goldman Sachs is expected have at least a hand in all 10 of them.

InfoPro’s two-part deal

In the European primary market, France-based InfoPro Digital priced €500 million of five-year senior secured notes (B2/B) in two tranches on Thursday.

The debt refinancing deal included €325 million of fixed-rate notes which priced at par to yield 4½%. The yield below initial guidance of 4¾% to 5%.

In addition InfoPro Digital priced €175 million of floating-rate notes at par to yield three-month Euribor plus 450 basis points. The spread came tighter than initial guidance of Euribor plus 475 to 500 bps.

Global coordinator JPMorgan will bill and deliver. BNP Paribas was also a global coordinator. SG was a bookrunner.

Looking beyond InfoPro Digital, Diversey Care remains in the market with a €545 million offering of eight-year senior notes (expected ratings Caa2/B).

A roadshow was scheduled to get underway on Thursday for the buyout deal, in the market via bookrunners Goldman Sachs, Credit Suisse, Barclays, Citigroup, BofA Merrill Lynch, RBC, HSBC, SunTrust and Jefferies.

The offer is expected to price in the week ahead.

New Jefferies busy, better

In the secondary market, traders said the new Jefferies Finance 7¼% notes due 2024 were among the day’s busiest issues, with one estimating that more than $43 million of total volume on the notes.

A second market source said that at least $38 million changed hands in round-lot dealings of $1 million or more.

The New York-based commercial finance company’s forward calendar offering was seen by one of the traders moving around in a par to 101 bid context – but he said that most of the notes traded in a considerably narrower par to 100¼ bid range.

The second market source pegged the bonds at 100¼ bid.

A third quoted them at par bid, 100½ offered.

HD Waterworks tops actives

A trader said that Wednesday’s issue of 6 1/8% notes due 2025 from HD Supply Waterworks was the most heavily traded issue of the day, seeing more than $89 million changing hands during the session.

He said that the bonds traded between 100¾ and 103 bid, but mostly settled into a somewhat narrower 102 to 102¾ bid range.

The last transaction of the day that he saw was offered at 101 7/8.

Another trader pegged the bonds going out at 101¾ bid, which he called down ¾ point from the day’s high point.

The St. Louis-based distributor of water, sewer, storm and fire protection products priced $500 million of those notes at par Wednesday via in a regularly scheduled calendar offering, after the deal was upsized from $475 million originally.

AMC Networks busy

Wednesday’s other new deal, New York-based cable television network operator and content provider AMC Networks’ 4¾% notes due 2025, also ended the session high up on the day’s Most Actives list with over $44 million traded, according to a market source. He said that those bonds moved around between 100 5/8 and 101 bid.

At another desk, the notes were seen ending unchanged around 101 bid.

The quickly shopped offering priced at par after having been drastically upsized to $800 million from an originally announced $500 million.

Extraction holds gains

Traders said that Tuesday’s new deal from Extraction Oil & Gas remained busy on Thursday, holding on to the impressive aftermarket gains it had notched when it was first freed for secondary dealings.

A market source said that more than $10 million of the 7 3/8% notes due 2024 traded, although that was down considerably from the more than $30 million of turnover seen on Wednesday.

The source said that those bonds were unchanged on the day at 102 3/8 bid.

The Denver-based oil and natural gas exploration and production company priced $400 million of those notes at par in a quick-to-market transaction on Tuesday that was upsized from an originally announced $350 million.

The new issue firmed by more than 1¼ points when it first hit the aftermarket, then gained another ¾ to 1 point.

Sirius, Hertz trade around

Going back a little further, a trader said that Sirius XM Radio’s 5% notes due 2027 were ¼ point better on the day at 101¾ bid on volume of around $10 million.

The New York-based satellite radio broadcaster had priced $1.25 billion of those notes at par back on June 26 as part of a two-part, $2 billion offering that also included $750 million of 3 7/8% notes due 2022, which likewise came at par.

That quickly shopped offering was upsized from an originally announced $1.5 billion as each tranche was enlarged by $250 million from the originally announced $500 million of five-year notes and $1 billion 10-year piece.

Hertz’s 7 5/8% senior secured notes due 2022 were seen retreating by 1½ points on the session, ending at 101½ bid, with over $25 million having traded.

A trader said that he had not seen any fresh news out on the Estero, Fla.-based car rental giant that might explain the decline.

Hertz priced that $1.25 billion forward calendar offering at par on May 31 after the deal was upsized from $1 billion.

Rite Aid rise continues

Away from the new deals, Rite Aid’s bonds made it three upside sessions in a row on Thursday, continuing their recent firming trend, which began after the Camp Hill, Pa.-based Number-Three U.S. drugstore chain operator released pro forma financial expectations resulting from its pending sale of 2,186 of its 4,600 stores to Walgreens for $5.175 billion in cash.

Rite Aid’s 6 1/8% notes due 2023 improved by 1/8 point, ending at 100½ bid. Over $28 million traded.

Rite Aid projects spending $4.92 billion of the anticipated net proceeds from the store sale for repayment of most of its more than $7 billion of net debt, dropping its leverage ratio of 6.8 times EBITDA down to the low 3 times range.

Indicators extend gains

Statistical market performance measures were firmer across the board for a second straight session on Thursday. They had improved on Wednesday after turning mixed on Tuesday – though just barely – which, in turn, followed four upside sessions before that.

The KDP High Yield Daily Index jumped by 9 basis points on Thursday, ending at 72.58, its third consecutive day of double-digit gains, coming on the heels of Tuesday’s 13 bps climb and Wednesday’s 11 bps pickup, and its seventh straight move upward overall, after five successive losses before that.

Its yield came in by 4 bps, closing at 4.94%, its third narrowing in a row. The yield tightened by 6 bps on Wednesday and by 4 bps on Tuesday, after widening out by 6 bps on Monday. Before that, the yield had fallen over three straight sessions.

The Markit CDX Series 28 High Yield Index edged up by 1/32 point on Thursday to end at 107 21/32 bid, 107 23/32 offered, its second straight gain. It had rebounded on Wednesday after easing marginally on Tuesday. Tuesday had been the index’s first downturn, however small, after four straight upside sessions.

And the Merrill Lynch North American High Yield Index saw its ninth straight gain on Thursday, firming by 0.124% on top of Wednesday’s 0.158% advance. Those nine consecutive better sessions follow three sessions before that on the downside.

Thursday’s rise lifted the index’s year-to-date return to 5.905%, establishing a fifth consecutive new year-to-date peak level by topping the old mark of 5.773%, which had been set on Wednesday.

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