Lycra, BBA price; Thursday’s deals mixed; California Resources, United Rentals drops

By Abigail W. Adams and Paul A. Harris

Portland, Me., April 20 – The domestic and European high-yield primary market rounded out an active week with four deals pricing and several more on the forward calendar.

Lycra Co. priced an upsized $1 billion equivalent of senior secured notes (B1/B) in dual-currency tranches.

BBA Aviation priced a $500 million issue of eight-year senior notes (Ba2/BB) at par to yield 5 3/8%.

Gestamp Automocion, SA priced a €400 million issue of 3¼% eight-year senior secured notes (Ba3/BB+) at 99.129 to yield 3 3/8%.

Adler Real Estate AG priced €800 million of senior notes (S&P: BB) in two tranches.

The April 16 week in the primary market came to an orderly conclusion on Friday, with the entire expected calendar of deals for the week clearing.

Previous weeks saw deals unexpectedly hung in the market over the weekend, due in part to volatility in the broader financial markets.

That orderliness ought to help light up the green lamps along the new issue track ahead, sources say.

Heartland Dental, LLC’s $310 million offering of eight-year senior notes (Caa2/CCC) and Unilever Spreads’, or Flora Food Group, offering of €1.05 billion equivalent senior notes due 2026 (expected ratings B3/B-/B-) in euro- and dollar-denominated tranches are on the calendar for next week.

Fedrigoni’s €455 million offering of senior secured floating-rate notes due November 2024 (expected ratings B2/B+) and Hibu Group/Yell Bondco plc’s £225 million offering of five-year senior secured term notes due 2023 (expected B3/confirmed B-) are also set to price next week.

Meanwhile, the secondary performance of recently priced deals remained mixed.

New paper from Lycra, Apergy Corp. and LSB Industries, Inc. was seen up 1 to 2 points in the secondary market while new bonds from Nufarm Ltd. and Commercial Metals Co. were seen hovering just above their issue price.

Despite a drop off in equities, the high-yield market firmed on Friday with the overall market up 1/8 to ¼ point, a market source said.

While the overall market was up, the energy sector slumped. California Resources Corp.’s 8% senior notes due 2022 were down 2 points on Friday after a 1 point drop on Thursday.

United Rentals Inc.’s 4 7/8% senior notes due 2028 (Ba3/BB-) were down 2 points on the week after the company reported first quarter earnings on Wednesday.

The drop was a surprise, a market source said, as the Stamford, Conn.-based equipment rental company beat analyst expectations.

Upsized Lycra prices tight

Lycra priced an upsized $1 billion equivalent amount of senior secured notes (B1/B) in two tranches.

The acquisition financing deal, which was increased from $810 million equivalent, included €250 million of five-year notes that priced at par to yield 5 3/8%.

The yield printed at the tight end of yield talk set in the 5½% area, and inside initial price talk in the 6% area.

In addition, Lycra priced an upsized $690 million of seven-year notes at par to yield 7½%. The seven-year notes tranche was increased from $500 million originally.

The yield printed at the tight end of the 7½% to 7¾% talk and inside initial talk in the 8% area.

Joint global coordinator and sole physical bookrunner JPMorgan will bill and deliver. Barclays was also a joint global coordinator.

BBA Aviation prices tight

BBA Aviation priced a $500 million issue of eight-year senior notes (Ba2/BB) at par to yield 5 3/8%.

The yield printed at the tight end of official yield talk in the 5½% area which was itself tight to the 5½% to 5¾% initial guidance.

J.P. Morgan, Barclays, BofA Merrill Lynch, HSBC, NatWest, SMBC Nikko and SunTrust were the joint bookrunners.

The London-based aviation support and aftermarket services provider plans to use the proceeds to repay debt and for general corporate purposes.

Adler priced on spreads

The European primary market continued to generate a steady stream of news on Friday.

Adler Real Estate priced €800 million of senior notes (S&P: BB) in two tranches.

The deal, which came in an investment grade-style execution, featured €500 million of 1.78% five-year notes that priced at mid-swaps plus 170 basis points, at the tight end of talk for a spread in the mid-swaps plus 175 bps area.

The bonds were sold at a reoffer price of 98.896 to yield 2.11%.

The deal also included €300 million of 3% eight-year notes that priced at mid-swaps plus 240 bps, at the tight end of talk in the 250 bps area.

The eight-year notes were sold at a reoffer price of 98.491 to yield 3.217%.

Sole global coordinator and joint bookrunner JP Morgan will bill and deliver.

The proceeds will be used primarily to refinance a bridge loan structured in connection with the acquisition of Brack Capital Properties NV and to fund a tender offer of up to €200 million of the company’s €500 million 4¾% notes and for general corporate purposes.

Gestamp at a discount

Gestamp Automocion priced a €400 million issue of 3¼% eight-year senior secured notes (Ba3/BB+) at 99.129 to yield 3 3/8%.

The yield printed in the middle of the 3¼% to 3½% yield talk.

Joint bookrunner Deutsche Bank will bill and deliver. Bankia, BBVA, BNP Paribas, BofA Merrill Lynch, CaixaBank, Santander and SG CIB were also joint bookrunners.

The Madrid-based manufacturer of metal components for the automotive industry plans to use the proceeds to refinance debt.

The week ahead

The April 23 week is set to get underway with a healthy forward calendar of deals on the road or about to launch on roadshows.

The big deal already aboard the calendar is the Unilever Spreads transaction.

Flora Food Group, currently Unilever Spreads, is selling €1.05 billion equivalent of senior notes due 2026 (expected ratings B3/B-/B-) in €500 million and $500 million tranches.

The international roadshow wraps up on Wednesday.

Heartland Dental is set to wrap up a roadshow on Monday.

The Effingham, Ill.-based dental support organization is selling $310 million eight-year senior notes (Caa2/CCC) via Jefferies.

In a deal announced Friday, specialty paper manufacturer Fedrigoni plans to start a roadshow on Monday for a €455 million offering of senior secured floating-rate notes due November 2024 (expected ratings B2/B+).

Proceeds will be used to repay the bridge loan used to fund the buyout of the Verona, Italy-based company by Bain Capital Private Equity.

And in the sterling-denominated market, Hibu Group/Yell Bondco plc is on the road with a £225 million offering of five-year senior secured term notes due 2023 (expected B3/confirmed B-).

Look for opportunistic issuers who have been measuring the market, giving wide berths to the choppiness seen in late March and early April, to begin coming into the markets in North America and Europe in the April 23 week, sources say.

Weeks sees $5.83 billion of deals

Issuance for the U.S market in the latest week totaled $5.83 billion, the strongest weekly total since mid-March, and up from $2.92 billion the previous week.

Through Friday’s close, year-to-date issuance is $76.39 billion, still trailing the 2017 pace substantially.

At this point on last year’s calendar, new deal volume came to $98.14 billion, meaning that 2018 is trailing by 22.2%.

Lycra, Apergy trade up

Lycra’s dollar-denominated tranche of 7½% senior secured notes due 2025 and Apergy Corp.’s 6 3/8% senior notes due 2026 saw a strong secondary market performance.

Lycra’s 7½% notes were seen at 102 bid as soon as they broke for trade.

“They opened up strong,” a market source said.

The new notes were quoted at 102 bid, 102½ offered late in the afternoon and were active during Friday’s session, the source said.

Apergy’s 6 3/8% notes also traded strongly in the secondary market. The notes were seen at 101½ bid, 102 offered on Friday, which was relatively unchanged from Thursday’s levels, a market source said.

Apergy priced a $300 million issue of eight-year senior notes (B1/B) at par to yield 6 3/8% late Thursday.

The yield printed at the tight end of yield talk announced in the 6½% area.

LSB Industries’ discounted 9 5/8% senior secured notes due 2023 (Caa1/CCC) were seen trading about 1 point above their 99.509 issue price.

The notes were seen at par ¼ bid, par ½ offered on Friday, although they were not very active, a market source said.

LSB Industries priced a $400 million issue of 9 5/8% five-year senior secured notes (Caa1/CCC) at 99.509 to yield 9¾% on Thursday.

The yield printed at the tight end of the 9¾% to 9 7/8% price talk and in line with the 9½% to 10% initial guidance.

Just above par

While new paper from Lycra, Apergy and LSB was up about 1 or more points, new paper from Commercial Metals and Nufarm continued to trade just above par.

Nufarm’s new 5¾% senior notes due 2026 (B1/BB-) were unchanged on Friday at par ¼ bid, to par ½ offered, a market source said.

Nufarm priced an upsized $475 million issue of eight-year senior notes (B1/BB-) at par to yield 5¾% on Thursday.

The yield printed in the middle of yield talk that was set in the 5¾% area.

Commercial Metals’ 5¾% senior notes due 2026 (Ba3/BB+) were also seen unchanged on Friday at par ¼ bid, par ¾ offered.

“They’re stuck there,” a market source said.

Commercial Metals priced a $350 million issue of eight-year senior notes (Ba3/BB+) at par to yield 5¾% on Thursday.

The yield came at the tight end of talk for a yield in the 5 7/8% area. Early guidance was in the high 5% to 6% area.

California Resources drops

After gaining almost 8 points since the previous week, California Resources 8% senior notes due 2022 dropped 2 points on Friday after dropping 1 point on Thursday.

The notes were quoted on Friday at 85½ bid, 86½ offered after closing Thursday at 87.

“They had a heck of a run,” a market source said.

The 8% notes made large gains as the per-barrel price of West Texas intermediate crude oil for May delivery surged.

After rising $2 on Wednesday to $68.75, the oil price was down on Thursday to $68.29 and down again on Friday to $68.06.

United Rentals down

Despite beating analyst expectations for first quarter earnings, United Rentals’ 4 7/8% senior notes due 2028 were down 2 points on the week, a market source said.

The notes were seen down to 96¼ bid, 96¾ offered.

“They posted a decent quarter, they were just upgraded, I thought they would do okay,” a market source said.

United Rentals reported revenue of $1.73 billion and adjusted earnings per share of $2.87 for the first quarter after the market close Wednesday.

S&P raised its corporate credit rating of United Rentals and issue level ratings of the senior secured and unsecured notes to BB from BB- on Thursday.

Indexes lower

Indexes continued to lose ground on Friday after their winning streak came to an end on Thursday.

The KDP High Yield index was down 8 basis points on Friday to 71.01 with the yield rising to 5.64%.

The index was down 14 basis points on Thursday after seeing 10 consecutive trading days of gains.

While still in positive territory for the year so far, the Merrill Lynch High Yield index again dropped on Friday after a steep decline Thursday.

The index was down 10 basis points on Friday shaving the year-to-date return to 0.103%. The index dropped 37.9 bps on Thursday, cutting the year-to-date return to 0.203%.

The year-to-date return was 0.582% on Wednesday.

The CDX high yield 30 index was down 16 basis points on Friday to close the day at 106.88 after dropping 24 bps on Thursday.

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