FXI, goeasy, CURO deals cap $6 billion week, new FXI notes firm; Intel, Penney fall

By Paul Deckelman

New York, Oct 27 – The high-yield primary market closed out a busier primary market week with a burst of activity on Friday as three issuers brought a total of $985 million of new dollar-denominated and fully junk-rated paper to market, according to syndicate sources.

FXI Holdings, Inc., a Media, Pa.-based manufacturer of flexible polyurethane foam, had the big deal of the day, pricing an upsized $525 million of seven-year secured notes.

Traders said that the new FXI bonds were the busiest junk credit of the day and said the notes had firmed smartly from their issue price when they reached the aftermarket.

goeasy Ltd., a Mississauga, Ont.-based provider of goods and alternative financial services, brought an upsized $325 million of five-year notes to market. The new bonds were later quoted higher.

CURO Financial Technologies Corp., a Wichita, Kan.-based consumer finance company, did a $135 million add-on to its existing 2022 secured notes that the company had priced earlier this year.

Traders meantime saw Thursday’s new deals – from Warrior Met Coal, Inc. and Brand Industrial Services, Inc. – trading up from the levels at which those issues had priced.

Away from the new and recently priced deals, traders said that communications satellite company Intelsat SA’s notes were lower throughout its capital structure in fairly active dealings, a day after the company posted lackluster quarterly numbers.

And traders said that retailer J.C. Penney Co. Inc.’s bonds fell sharply after it warned of a wider third- quarter loss than analysts had been predicting.

Statistical market performance measures were lower for a third consecutive session on Friday.

And those market performance gauges were also lower across the board versus where they had finished last week, when they were higher all around for the third time in four weeks.

FXI brings upsized deal

Back in the new-deal arena, FXI Holdings was heard by high-yield syndicate sources to have priced an upsized $525 million issue of seven-year senior secured notes (B2/B) at par to yield 7 7/8%.

The issue was increased from an originally announced $500 million.

The pricing occurred on the tight side of price talk, which anticipated a yield in the 8% area.

Jefferies LLC, Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. were joint bookrunners for the Rule 144A and Regulation S offering.

Proceeds from the deal will be used to help fund FXI’s buyout by One Rock Capital Partners.

goeasy five-year prices

The syndicate sources said that goeasy priced an upsized $325 million offering of five-year senior notes (Ba3/BB-) at par to yield 7 7/8%

The offering was enlarged from an originally announced $300 million.

It priced in line with revised price talk released Friday morning for a yield at 7 7/8%, which had tightened from the 8% to 8¼% price talk which had circulated in the market on Thursday. That earlier price talk, in turn, had widened from initial guidance envisioning a yield in the mid-to-high 7% area – where the notes ultimately did price.

Wells Fargo Securities LLC was left bookrunner and BMO Capital Markets Corp. was joint bookrunner for the Rule 144A and Regulation S for life offering.

goeasy plans to use the proceeds to repay credit facility debt and for general corporate purposes.

CURO adds on

CURO Financial priced a $135 million add-on to its existing 12% senior secured notes due 2022 (Caa1/B-) at 103.5 to yield 10.71%.

Bookrunners were Credit Suisse Securities (USA) LLC and Jefferies.

The notes will be issued under the same indenture under which the company sold its original $470 million of those notes. That regularly scheduled forward calendar issue, upsized from an initial $460 million, priced at 98.155 to yield 12½% on Feb. 1, 2017.

However, the new notes will trade under different CUSIP numbers than the previously issued notes and will not be fungible with the previously issued notes.

CURO plans to use the proceeds to fund a distribution to shareholders.

Shop Direct downsized

In the sterling market, Shop Direct Funding plc priced £550 million of five-year senior secured notes (B2/B+) at par Friday to yield 7¾%, high-yield syndicate sources said.

The issue was cut from an originally planned £700 million after the deal was restructured, with a planned tranche of floating-rate notes withdrawn.

Price talk on the issue was in the 7% area.

Global coordinator and lead left bookrunner Barclays will handle billing and delivery of the Rule 144A and Regulation S for life offering. Mediobanca was also a global coordinator, while Lloyds and HSBC were joint bookrunners.

The company, a Liverpool, England-based digital retailer and online credit provider plans to use the proceeds to refinance debt. An intended shareholder dividend was dropped when the floating-rate tranche was withdrawn and the overall issue downsized.

Week’s issuance picks up

Friday’s three dollar-denominated deals, totaling $985 million of fully junk-rated paper from domestic or industrialized-country borrowers, brought the week’s total issuance to just over $6 billion in nine tranches.

That was well up from last week, ended Oct. 20, when just $961 million had priced in four tranches – which was the lowest weekly new-deal total since the weeks ended Aug. 25 and Sept. 1, when no new issues were priced either week, according to data compiled by Prospect News.

The week’s new deals raised issuance for 2017 so far to $230.93 billion in 424 tranches, running about 20.9% ahead of the $190.97 billion which had priced in 292 tranches by this point on the 2016 calendar, the Prospect News data indicated.

FXI paper pops

In the secondary market, traders said the new FXI Holdings 7 7/8% senior secured notes were well received by investors when that paper hit the aftermarket.

One trader saw the notes trading between 100½ and 102 after pricing at par, with the final trades of the session going off in a 101½ to 101¾ bid range.

A second trader quoted the bonds going out at 101½ bid, while a third saw them at 101¾ bid.

More than $57 million of that new issue changed hands, shooting to the top of the day’s Most Actives list.

goeasy, CURO firmer

Friday’s two other issues were also quoted above their respective pricing levels, but on nowhere near the kind of volume the FXI offering had generated, traders said.

A trader estimated that goeasy’s 7 7/8% notes due 2022 were “around 102, so they did pretty decently.” Those notes had earlier priced at par.

A market source meantime said that the CURO Financial Technologies 12% senior secured add-on notes were “quickly quoted higher, between 104 and 107,” after pricing at 103.5.

He saw the paper ultimately having firmed solidly to a 108 to 109 bid context, well up from its issue price.

However, he noted that the existing CURO bonds had finished “in the 100 area last [Thursday] night” and wondered aloud why there was “such a huge discrepancy” between where the original bonds had been trading and where the add-on finally priced.

Thursday deals move up

Traders said that Thursday’s 8% senior secured notes due 2024 from Warrior Met Coal moved up solidly on Friday after pricing at par the session before.

One said that the Brookwood, Ala.-based metallurgical coal producer’s $350 million regularly scheduled forward calendar offering “traded really well” at 102½ to 102¾ bid.

“A lot of those traded today,” a second trader said, also pegging the notes in a 102½ to 102¾ bid context, on volume of more than $18 million.

Brand Industrial Services’ 8½% notes due July 2025 were meantime seen by a trader at 106 bid, 106½ offered, while a second saw the notes between 105½ and 105 7/8 bid.

The Kennesaw, Ga.-based provider of specialized services to energy, industrial and infrastructure customers did a quick-to-market $300 million add-on to its existing $700 million of those 8½% notes, which it had sold back in June.

The add-on priced at 105.5 on Thursday, yielding 7.299%.

Intelsat issues off

Away from the new deals, traders saw continued weakness in the bonds of Luxembourg-based communications satellite company Intelsat, which had fallen on Thursday after the company released what analysts termed disappointing third-quarter earnings.

“Intelsat was active again,” a trader said and, while he acknowledged that the bonds “did bounce off their lows” for the day, he added that “they still finished down a few points.”

He saw its Intelsat (Luxembourg) SA notes trading around 63 or 64, while the company’s secured Intelsat Jackson Holdings SA were around the par level.

A market source at another desk saw the Intelsat (Luxembourg) 7¾% notes due 2021 at 63 bid, calling them down nearly 4 points on the session, with more than $46 million of turnover.

Its 8 1/8% notes due 2023 closed at 61¼ bid, down more than 3 points on volume of over $14 million.

He saw Intelsat Jackson’s 9¾% notes due 2025 ending right at par, down 1 3/8 points on the session, with more than $26 million having traded.

JC Penney paper punished

“JC Penney kind of got beat up,” one of the traders said, seeing the underperforming Plano, Texas-based department store operator’s 5.65% notes due 2020 having plummeted by 6 points into “a 91-92 ZIP code.”

A second trader agreed, locating those bonds at 91½ bid going home, down 5½ points on the day, with over $29 million traded. Its 5 7/8% notes due 2023 likewise retreated, ending at 97¼ bid, with over $12 million traded.

The first trader attributed the carnage to the company’s pre-earnings announcement forecast. “They cut their outlook – and that was really bad.”

Penney said that it expects to lose between 40 and 45 cents per share when it reports fiscal third quarter numbers – far wider than the 18 to 20 cents of red ink that analysts had been expecting.

Indicators stay lower

Statistical market performance measures were lower for a third consecutive session on Friday, and were also down all around from where they had finished last Friday, which had been the third strong week out of the previous four.

The KDP High Yield Daily Index saw its third straight loss, dropping by 9 basis points to close at 72.25. That decline followed losses of 8 bps on Thursday and 7 bps on Wednesday.

Its yield actually did come in by 1 bp to 5.17% after two straight sessions of widening out, by 3 bps on Wednesday and by 1 bp on Thursday.

Friday’s levels compared unfavorably with last Friday’s 72.46 index reading and 5.15% yield.

The Merrill Lynch North American High Yield Index also recorded its third loss in a row, retreating by 0.051% Friday following losses of 0.009% on Thursday and 0.183% on Wednesday, which had snapped a streak of seven consecutive gains.

Friday’s loss dropped its year-to-date return to 7.375% from 7.43% on Thursday. Those levels were down from Tuesday’s 7.636% level, the peak level for the year.

For the week, the index lost 0.132%, versus the 0.282% gain in the week ended Oct. 20 – which had been its tenth consecutive weekly gain.

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