New high-yield bonds eyed; Tesla trades active; Staples’ new issue hits par; Trinseo performs well

By Stephanie N. Rotondo and Paul H. Harris

Seattle, Aug. 16 – The secondary high-yield bond market was “all new issue driven again,” a trader said Wednesday, while the day’s sole deal was a $275 million add-on to Solera, LLC’s 10½% senior notes due March 1, 2024.

The focus was centered on Tesla Inc.’s $1.8 billion of 5.3% senior notes due 2025, Staples Inc.’s $1 billion of 8½% notes due 2025 and Trinseo’s $500 million of 5 3/8% notes due 2025.

The ClubCorp Holdings Inc./Constellation Merger Sub Inc. $425 million issue of 8½% notes due 2025 also made an appearance.

But away from new issues, trading was a little more scattered, with little to no fresh news to cause any major swings or surges in activity.

In the healthcare space, Community Health Systems Inc.’s 8% notes due 2019 were on the busy side, but unchanged at 99, according to a trader.

Generic drug maker Endo International plc meantime saw its 6% notes due 2025 tick up over half a point to 81 3/8.

In the telecom sector, Frontier Communications Corp.’s bonds “continued to be sort of weak,” a trader said.

The trader pegged the 11% notes due 2025 with an 86 handle. He also said the 10½% notes due 2022 “dipped below 90,” hitting levels around 89½.

As for Windstream Corp., its 7½% notes due 2023 rose 1½ points to 79.

In the energy arena, Transocean Ltd.’s 9% notes due 2023 remained firm, rising nearly a point to 105½.

The name began gaining ground on Tuesday, when it was announced that the offshore oil drilling contractor announced it was buying Songa Offshore SE in a deal valued at $3.4 billion, including the assumption of debt.

Murray Energy Corp. continued to be topical in the wake of the company’s earnings release on Tuesday. But traders gave mixed reviews of the company’s debt in midweek trading.

At one desk, a trader said the 11¼% notes due 2021 “bounced” half a point to 71. At another desk, however, the paper was deemed “a little bit weaker again,” trading in a 70 to 71 context.

Because the St. Clairsville, Ohio-based company is private, the earnings were not readily available. Market sources did remark that the figures were less than stellar.

Overall, there was a mixed tone to the trading session, a trend seen in the last three out of four days.

The KDP High Yield index ended the day at 71.97, with a yield of 5.27%. The Markit CDX Series 28 High Yield Index, however, continued to inch upward, ending at 107.08 bid, 107.14 offered.

Solera tap prices, trades higher

Solera, LLC brought Wednesday's sole deal, a $275 million add-on to its 10½% senior notes due March 1, 2024 (Caa1/CCC+), which priced on top of price talk at 113.50.

The deal played to $900 million of orders, and the bonds were heading out Wednesday at 114 bid, 114.5 offered, an investor said.

The reoffer price renders a yield to worst of 6.104% and a yield to maturity of 7.819%

Goldman Sachs was the sole bookrunner for the quick-to-market deal.

The Westlake, Texas-based provider of software and services to the automobile insurance industry plans to use the proceeds to repay debt under its revolving credit facility, with any remaining proceeds to be used for general corporate purposes including strategic initiatives.

Only one deal remains on the active forward calendar, heading into Thursday.

Enova International Inc. is roadshowing $250 million of seven-year senior notes (Caa1/B-), via Jefferies.

As the market awaits official talk, initial guidance is in the 8½% area, an investor said, and added that the deal is expected to price during the present week.

Tuesday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Tuesday, the most recent session for which data was available at press time.

High yield ETFs sustained $18 million of outflows on the day.

Asset manager sustained $40 million of outflows on Tuesday.

New issues in focus

High-yield investors continued to eye newly priced deals on Wednesday – not a surprise, given that over $4 billion of new paper was added to the market in the first two days of the week.

One trader said Tesla’s 5.3% notes were “the most active,” edging up a shade to around 98¾.

Another trader echoed that level.

Since the issue priced on Monday at par, it hasn’t performed all that well, trading in a 98 to 99 context.

The issue size was increased from $1.5 billion.

The yield printed slightly wide of the 5¼% yield talk.

Goldman Sachs & Co. was the lead left bookrunner. Morgan Stanley & Co. LLC, Barclays, BofA Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and RBC Capital Markets Corp. were the joint bookrunners.

The Palo Alto, Calif.-based automaker, energy storage company and solar panel manufacturer plans to use the proceeds, including the additional proceeds resulting from the $300 million upsizing of the deal, to further strengthen its balance sheet during this period of rapid scaling with the launch of its Model 3, and for general corporate purposes.

As for Staples’ 8½% notes, they were seen rising 1½ points to par.

One market source quoted the paper at 99¾ bid, par offered, adding that the deal had traded into the 98 area on Tuesday.

“Then it kind of rebounded,” he said.

The issue size was decreased from $1.3 billion, after having been previously decreased from $1.6 billion. Of the $600 million reduction in the size of the bond offer, $500 million was shifted to the concurrent term loan.

The yield on the bonds printed 12.5 basis points beyond the wide end of yield talk in the 8¼% area.

BofA was the lead bookrunner.

Proceeds will be used to help fund the acquisition of Staples by Sycamore Partners.

In Trinseo, a trader said the 5 3/8% notes were “trading well,” seeing the bonds move up to 101¾.

Another trader called the debt half a point higher, also at 101¾.

The issue size was increased from $450 million.

The yield printed in the middle of the 5¼% to 5½% yield talk.

Deutsche Bank managed the sale.

The Berwyn, Pa.-based manufacturer of plastics, latex binders and synthetic rubber plans to use the proceeds, together with about $750 million of term loan borrowings and available cash, to pay off the Trinseo Materials euro-denominated 6 3/8% senior notes and the dollar-denominated 6¾% senior notes, both maturing in 2022, and to refinance the existing senior secured credit facility.

And, rounding out the recent issues, ClubCorp’s 8½% notes were pegged at par, unchanged on the day.

Earlier in the session, the bonds were quoted at 99¼ bid, 100¼ offered.

The issue size was decreased from $475 million, with proceeds shifted to the concurrent term loan. The $50 million of proceeds from the bonds were shifted to the term loan and increased the loan size to $1.175 billion from $1.125 billion.

The yield printed 25 bps beyond the wide end of the 8% to 8¼% yield talk.

Joint bookrunner RBC Capital Markets will bill and deliver. Citigroup, Barclays, Credit Suisse Securities (USA) LLC, Deutsche Bank and Goldman Sachs were also joint bookrunners.

The debt financing is being put into place in order to fund the acquisition of the Dallas-based owner and operator of private golf and country clubs and business, sports and alumni clubs by Apollo Global Management, LLC.

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