Yum! Brands, Howard Hughes drive by, Masco brings split-rate deal; Rite Aid up on Fred’s financing news

By Paul Deckelman and Paul A. Harris

New York, June 12 – The high-yield primary market opened the new week on Monday with a pair of purely junk-rated drive-by offerings totaling nearly $1 billion, as well as a sizable two-part split-rated transaction.

Yum! Brands – the fast-food chain operator of such well-known eateries as KFC, Pizza Hut and Taco Bell – served up some $750 million of 10-year notes in an upsized offering.

And real estate development company Howard Hughes Corp. did a $250 million add-on to the eight-year notes that it priced in March.

Traders saw both of those offerings at modestly higher levels versus their respective issue prices.

Building products company Masco Corp. meanwhile priced a $600 million split-rated two-part offering, equally divided into tranches of 10-year and 30-year paper.

Traders saw some activity on a generally quiet day in recently priced credits such as Hertz Corp. and HCA Inc. – the latter also a split-rated 30-year long bond.

Away from the new deals, Rite Aid Corp.’s bonds – recently in retreat amid investor worries that its planned merger with larger rival Walgreens Boots Alliance may by stopped by federal regulators – rebounded solidly on Monday, apparently helped by the news that a third party to that deal – regional drugstore chain operator Fred’s Inc. – has gotten increased lender commitments that would enable it to buy up to 1,200 Rite Aid stores that would have to be divested in order for any combination of Rite Aid and Walgreens is to go through.

Statistical market performance measures turned higher on Monday, after having been mixed on Friday and lower across the board for the three straight sessions before that.

Yum! upsizes

Trailing a relatively dormant week, last week, news volume in the high-yield primary market intensified on Monday, a session that saw drive-by deals and roadshow starts, including a roadshow for the biggest euro-denominated offer to hit the market thus far in 2017.

In the dollar-denominated market, two issuers priced single-tranche drive-by deals to raise a combined total of $955 million.

One of the two was upsized.

Executions appeared solid, as one priced at the rich end of talk while the other priced on top of talk.

Yum! Brands, Inc. priced an upsized $750 million issue of 10-year senior notes (B1/BB) at par to yield 4¾%.

The issue size was increased from $500 million.

The yield printed on top of yield talk in the 4¾% area.

Goldman Sachs was the left bookrunner for the debt refinancing. JP Morgan, Citigroup, Morgan Stanley and Wells Fargo were the joint bookrunners.

Hughes taps 5 3/8% notes

Howard Hughes Corp. priced a $200 million add-on to its 5 3/8% senior notes due March 15, 2025 at 102.25 on Monday.

The reoffer price came at the rich end of the 102 to 102.25 price talk, a market source said.

JP Morgan Securities LLC was the lead for the general corporate purposes deal.

BevMo! roadshow

Beverages & More, Inc. (BevMo!) plans to start a roadshow on Tuesday for a $190 million offering of five-year senior secured notes via Jefferies.

The deal is set to price later this week.

The Concord, Calif.-based company plans to use the proceeds to refinance debt.

Intrum Justitia launches €3 billion

Stockholm-based debt collector Intrum Justitia AB kicked off a news-heavy Monday in the European primary market when it showed up with the biggest overall amount of euro-denominated notes to hit the market this year: €3 billion equivalent of senior notes in four tranches.

The deal features €300 million minimum of five-year floating-rate notes, €300 million equivalent minimum of Swedish kroner-denominated five-year floating-rate notes, €500 minimum of five-year fixed-rate notes and €500 million minimum of seven-year fixed-rate notes.

The roadshow is set to run through Friday.

Joint bookrunner Goldman Sachs will bill and deliver. JPMorgan, Morgan Stanley, Danske Bank, Deutsche Bank, DNB Markets, Nordea, Nykredit, Swedbank and UBS also joint bookrunners.

The Stockholm-based debt collector plans to use the proceeds to refinance debt related to its merger with Netherlands-based Lindorff Group, AB.

Intrum Justitia should easily eclipse the €1.43 billion that North Carolina-based health information services provider Quintiles IMS Inc. priced in a single tranche on Feb. 23.

NTV starts roadshow

Milan-based railroad company Nuovo Trasporto Viaggiatori (NTV) started a roadshow on Monday for a €500 million offering of six-year senior secured floating-rate notes (Moody's: B1/Fitch: BB).

Banca IMI and Credit Suisse are global coordinators and joint bookrunners for the debt refinancing deal. Goldman Sachs is also a joint bookrunner.

Ocado £200 million secured notes

British online grocer Ocado started a roadshow on Monday for a £200 million offering of seven-year senior secured notes.

Barclays, HSBC, Goldman Sachs, Royal Bank of Scotland and RABO are managing the offer.

The Hatfield, United Kingdom-based company plans to use the proceeds to refinance debt.

The lion's share of euro primary market news rolled out on Monday, according to a London-based sellside source.

However look for one more deal to come as a drive-by before the end of the week, the source advised.

Yum! issue improves

In the secondary market, a trader said that the new Yum! Brands 4¾% notes due 2027 had pushed up to 100 5/8 bid in initial aftermarket dealings, after having priced at par earlier in the day.

He said that more than $24 million of the Louisville, Ky.-based fast food chain operator’s quick-to-market issue had changed hands.

Howard Hughes heads higher

A trader quoted the new Howard Hughes Corp. 5 3/8% notes due 2025 in a 103¼ bid context – up from the 102.25 level at which the Dallas-based real estate developer’s add-on deal had priced.

A second trader pegged the notes around 102¾ bid, 103 offered.

The company had priced $800 million of those notes at par on March 3.

Masco split-rated deal busy

The new Masco Corp. split-rated (Ba1/BBB/BBB-) deal’s 30-year tranche of 4½% bonds due 4047 was seen by a trader going home a shade under par, after having priced at 99.907 to yield 3.511%

Traders did not immediately report any initial aftermarket activity in the Taylor, Mich.-based building products company’s 3½% notes due 2021.

Recent deals busy

Among recently priced deals, a trader said that the new Hertz Corp. 7 5/8% notes due 2022 “were active today,” with over $21 million traded.

He said that the bonds – which priced at par back on May 31 after the Estero, Fla.-based vehicle rental company upsized that regularly scheduled forward calendar offering to $1.25 billion from an announced $1 billion.

The bonds have been skidding lower since then, with the trader agreeing with another market source’s assessment that Hertz “just can’t get out of its own way.”

Elsewhere, HCA’s 5½% bonds due 2047 were seen up another ¼ point, to 102 7/8 bid, with over $13 million trading.

The Nashville-based hospital operator’s new notes have firmed smartly since pricing at par on Thursday.

Rite Aid rebounds

Away from the new issues, Rite Aid Corp.’s 6 1/8% notes due 2023 were seen by a trader to be “up 1½ point or so,” on “pretty good volume” of more than $20 million.

He saw the notes going home at 94 7/8.

It was a solid comeback for Camp Hill, Pa.-based drugstore chain operator Rite Aid, whose bonds fell last week on investor worries that its Walgreens merger may not happen due to regulatory objections.

But Monday saw positive news as Memphis-based drugstore operator Fred’s Inc. announced that its lenders had upped their funding commitment for Fred’s planned purchase of 1,200 Rite Aid stores that would be have to be divested for the Walgreens deal to go though. It said the lenders are now ready to provide as much as $1.65 billion in support of that purchase.

Indicators turn better

Statistical market performance measures turned higher on Monday, after having been mixed on Friday and lower across the board for the three straight sessions before that.

The KDP High Yield Daily index jumped by 10 basis points on Monday to close at 72.54, its first gain after four consecutive setbacks, including Friday’s 4 bps retreat.

Its yield came in by 1 bp to 4.92%, after having risen over the previous three sessions, including Friday’s 1 bp widening.

A market source said that the Markit CDX Series 28 High Yield index firmed by around 5/8 point on Monday, its second such advance in as many days. It had also gained 3/32 point on Friday, after having been unchanged on Thursday and lower for three straight sessions. He saw the index ending Monday at 107 9/16 bid, 107 21/32 offered.

The Merrill Lynch North American High Yield index posted its second straight gain on Monday, firming by 0.079%; it had also turned upward on Friday after three successive losses, improving by 0.065%.

The gain raised the index’s year-to-date return to 5.011% from 4.928% on Friday, although it remained below last Monday’s 5.074%, which had been its sixth straight new 2017 peak cumulative return.

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