United Rentals prices; six deals on tap; Netflix weakens; Hi-Crush losses mount; Tesla jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 24 – The primary market saw another highly anticipated deal price on Wednesday with one more joining the forward calendar and five set to price before the close of the week.

United Rentals (North America) Inc. priced a $1.1 billion issue of eight-year senior notes (Ba3/BB) at par to yield 6½% in a Wednesday drive-by.

Vector Group Ltd. started a roadshow on Wednesday for a $325 million offering of eight-year senior notes with pricing expected in the Oct. 29 week.

Five deals are on the forward calendar with pricing expected before the close of the week.

The forward calendar includes offerings from INTL FCStone Inc., GFL Environmental Inc., KLX Energy Services Holdings, Inc., GEP Haynesville LLC and Bluewater Holding BV.

Meanwhile, the secondary space saw another soft day as the sell-off in equities continued.

Netflix, Inc.’s newly priced 6 3/8% senior notes due 2029 (Ba3/BB-) dropped slightly in active trading on Wednesday while still holding above their issue price.

Hi-Crush Partners LP’s 9½% senior notes due 2026 continued to see their losses mount in high-volume activity with the paper sinking 4 points.

Pacific Drilling SA’s 8 3/8% senior secured first lien notes due 2023 weakened slightly in active trading on Wednesday after the company secured a contract for drilling operations in Nigeria.

While volume was light during the day, Tesla Inc.’s 5.3% senior notes due 2025 shot up almost 2 points in high-volume activity after the company reported a large earnings beat.

United Rentals drives by

United Rentals priced a $1.1 billion issue of eight-year senior notes (Ba3/BB) at par to yield 6½% in a quick-to-market – although widely expected – trade on Wednesday.

The yield printed in the middle of yield talk that was set in the 6½% area. Initial guidance was also announced in the 6½% area.

Wells Fargo was the left bookrunner.

The Stamford, Conn.-based equipment rental company plans to use the proceeds to help fund its acquisition of heavy equipment rental firm BlueLine Rentals from Platinum Equity for about $2.1 billion in cash.

Vector starts roadshow

Vector Group joined the active deal calendar as it started a roadshow on Wednesday for a $325 million offering of eight-year senior notes via Jefferies.

The deal is set to price early in the Oct. 29 week.

The Miami-based holding company plans to use the proceeds to repay its convertible notes due 2019 and for general corporate purposes.

Back-loaded week

As for the Oct. 22 week, as many as five deals are expected to price ahead of the coming weekend.

INTL FCStone is slated to price its $350 million offering of five-year senior secured notes (Ba3/expected BB-) late in the week, in a deal helmed by BMO, BofA Merrill Lynch, Jefferies and Capital One.

Initial guidance is in the mid to high 8% area.

GFL Environmental is in the market with a $400 million offering of eight-year senior notes (Caa2/CCC+) via left bookrunner Barclays.

The deal, which comes with initial talk in the low-to-mid 8% area, is set to price on Thursday.

KLX Energy Services has been roadshowing a $250 million offering of seven-year senior secured notes (B3/B) via JP Morgan.

Initial talk is in the mid-to-high 9% area. The deal is expected to price on Friday.

GEP Haynesville has been marketing a $600 million offering of five-year senior notes (B3/B).

Initial talk has this JP Morgan-led deal coming to yield 8½% to 8¾%.

And Netherlands-based Bluewater Holding BV, with operations in the United Kingdom, Angola, Nigeria, China and Brazil, intends to sell $225 million to $250 million of five-year senior notes.

DNB Markets and Pareto Securities are leading the deal, which kicked off with investor meetings earlier in the week.

While the calendar is full, it’s not the robust late-October calendar the market has become accustomed to over the past half-decade, a period during which a feverish run-up to the Thanksgiving holiday has been the norm, a market source said.

Year-to-date high yield issuance is the lowest it has been since 2009, a market source said.

As with equities, junk is taking a beating, the source said.

The Bloomberg Barclays High Yield Index yield to worst closed at a new two-year high of 6.74% on Tuesday, besting the previous high of 6.63%, the source said.

Netflix holds

Netflix’s newly priced 6 3/8% senior notes due 2029 were holding above their issue price in active trading on Wednesday.

While above issue, the notes weakened as the session progressed. The 6 3/8% notes were seen at par ½ bid, par 7/8 offered early in the session.

They were trading between par ¼ and par 3/8 later in the afternoon, sources said.

More than $34 million of the bonds were on the tape during Wednesday’s session.

The notes closed Tuesday at par 5/8.

Netflix priced a $2.06 billion equivalent two-tranche, dual-currency offering on Tuesday.

The deal included an $800 million tranche that priced at par to yield 6 3/8%.

The yield printed at the wide end of yield talk that was set in the 6¼% area and in the middle of initial talk in the 6 3/8% area.

The tranche was playing to $1.8 billion in orders, a market source said.

Netflix also priced a €1.1 billion tranche at par to yield 4 5/8%.

The yield printed at the wide end of yield talk announced in the 4½% area and in the middle of initial guidance of 6 3/8%.

The 4 5/8% notes were seen at par 1/8 bid, par ¼ offered on Wednesday.

Hi-Crush loses more

Hi-Crush Partner’s 9½% senior notes due 2026 remained in focus during Wednesday’s session with the notes seeing steep losses in active trading.

The 9½% notes dropped 4 more points to close the day at 86, a market source said.

More than $34.5 million bonds were on the tape during Wednesday’s session.

The 9½% notes have been on the radar of distressed debt players with the notes struggling since pricing at par in late July.

While initially firming after the company reported earnings on Monday, the notes dropped 2 points to close Tuesday at 90, sources said.

The company reported a large earnings miss and slashed its dividend by 50 cents on Monday.

The proppant and logistics service provider fell far short of the EBITDA expected by analysts.

The credit has “some hair on it,” a market source said. Distressed debt players have been eyeing the name with the sentiment the credit will crack.

Pacific Drilling active

Pacific Drilling’s 8 3/8% senior secured first-lien notes due 2023 weakened slightly in active trading on Wednesday after the company secured a drilling contract in Nigeria.

The 8 3/8% senior notes were down about ½ point to close the day at 102 after trading as low as 101 1/8 during the session, a market source said.

The notes were active with more than $19 million of the bonds in play during Wednesday’s session.

Pacific Drilling announced Tuesday it had secured a contract for a drilling operation in Nigeria.

While the deal is expected to generate revenue for the company, which entered into Chapter 11 bankruptcy proceedings in 2017, the notes have trended downward since the announcement.

Pacific Drilling requested court approval for a letter of credit of $32 million from Credit Agricole last week to support the contract.

Pacific Drilling priced a $1 billion issue of the 8 3/8% notes at par in an oversubscribed deal in September with proceeds to be used to refinance its pre-bankruptcy debt.

Tesla jumps

Tesla’s 5.3% senior notes due 2025 jumped in high-volume activity after the electric car manufacturer reported a large earnings beat Wednesday afternoon.

The notes jumped 1¾ points to 88¼ on Wednesday.

While trading volume was light in the run up to Tesla’s earnings announcement, sources saw high-volume activity after reporting.

More than $39 million bonds were on the tape by the late afternoon.

Tesla surpassed expectations in its third-quarter earnings report, reporting non-GAAP earnings per share of $2.90 versus analyst expectations of a loss per share of 19 cents.

Tesla turned a profit of $516 million during the third-quarter.

Indexes mixed

Indexes were mixed on Wednesday after posting five consecutive trading days of losses.

The KDP High Yield Daily index dropped 15 basis points to close Wednesday at 69.47 with the yield now 6.20%.

The index was down 12 bps on Tuesday and 10 bps on Monday.

After a large drop on Tuesday, the ICE BofAML US High Yield index saw a slight rebound. The index was up 6.2 bps with the year-to-date return now 1.221%.

The index dropped 33.8 bps on Tuesday after a 1 bp slide on Monday.

The CDX High Yield 30 index closed Wednesday at 105.03.

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