Primary, secondary quiet pre-holiday; recent deals unchanged; Teva, HCA active; ATD gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 2 – The domestic primary market was quiet on Monday with the European primary market dominating a thin forward calendar.

Autodis SA started a roadshow on Monday for a €175 million offering of floating-rate notes due 2022, which will run until Wednesday.

K+S AG was scheduled to hold investor meetings on Monday ahead of a proposed €300 million minimum notes offer.

Enterprise Development Authority is heard to still be in the market with its $440 million offering of five-year senior secured notes after wrapping up a roadshow in the middle of the June 25 week.

While there was a surge of new deal activity last week, the first half of 2018 saw the lowest new issue volume since the first half of 2010.

The secondary space in junkbondland was equally quiet on Monday with several accounts out for the July 4 holiday, a market source said.

There was some pressure on the market early in the session with ETF’s coming in and equity markets down. In general, issues were trading off about ¼ point, a market source said.

While the market was under pressure before trading activity tapered in the afternoon, several recent deals continued to hold their previous levels, although trading of the new paper was light.

McClatchy Co.’s 9% senior secured notes due July 15, 2026 (B1/B-) were the most active of the recent deals with about $15 million of the bonds on the tape by mid-afternoon, according to a market source.

The notes were seen unchanged as was new paper from Stars Group Holdings BV, CHS/Community Health Systems and AmWINS Group, Inc.

While the new paper was slow to trade, Teva Pharmaceutical’s 3.15% senior notes due 2026 were volume movers on Monday and were up about ¼ to ½ point, a market source said.

HCA Inc.’s junk bonds were also active and down about ¼ point in line with the general market.

American Tire Distributors’ 10¼% senior notes due 2022 rose 4 points on Monday.

While it is unclear the cause for the price bounce, there is little hope of recovery for the junk bonds which are now languishing around 27, sources said.

Autodis starts roadshow

In Europe, Autodis SA started a roadshow on Monday for a €175 million offering of Euribor plus 437.5 basis points senior secured floating-rate notes due May 2022 (expected ratings B2/B).

Initial price talk is 99.25 to 99.5.

The roadshow wraps up Wednesday.

Left lead bookrunner BNP Paribas will bill and deliver.

Elsewhere in the euro-denominated high yield primary, Germany-based chemical manufacturer K+S AG was scheduled to begin meeting with fixed income investors on Monday ahead of a proposed €300 million minimum notes offer.

The notes would come with a six- or seven-year maturity.

Deutsche Bank, DZ Bank, Goldman Sachs and HSBC have the mandate.

The carry over

One dollar-denominated offer carried over from the June 25 week.

Tribal gaming concern Enterprise Development Authority is heard to still be in the market with its $440 million offering of five-year senior secured notes (S&P: expected B-) via Wells Fargo.

The roadshow wrapped up in the middle part of the June 25 week.

First half issuance lags

The first half of 2018 saw just $111.5 billion of new issue volume in 211 dollar-denominated tranches.

In terms of dollar amount, 2018 put up the lowest first half issuance since the first half of 2010, which saw $102.4 billion, and sharply lags the $145.4 billion average first half volume since 2010.

By contrast, the biggest first half during that interval was 2015, which saw $188.6 billion.

The 2018 sagging issuance numbers caused at least one of the big banks to revise its issuance forecast for the year.

Long before the ink was dry on the May and June issuance totals, BofA Merrill Lynch dropped its 2018 issuance forecast to $250 billion from the $270 billion it forecasted at the end of last year.

Notwithstanding the low volume of 2018's first half, it could still be a big, back-loaded year, market sources say.

That's in part because of a robust mergers and acquisitions pipeline now taking shape, much of it involving hefty high-yield components.

McClatchy day two

McClatchy’s newly priced 9% senior notes due 2026 were holding well above their issue price in secondary trading on Monday.

The notes, which priced at 97.242 to yield 9½% on Friday, were relatively unchanged at 98 5/8 bid, 99 1/8 offered, sources said.

The notes were quoted more than 1½ points above their issue price at 98½ bid, 99 offered after breaking for trade on Friday.

Proceeds will be used to redeem the company’s 9% senior notes due 2022, which were seen wrapped around 104.7 on Monday, according to a market source.

Unchanged

Despite the pressure on the market Monday, several of last weeks deals were unchanged although trading of the new paper remained light.

Stars Group’s 7% senior notes due 2026 were “holding in” around 101, a market source said. Stars Group priced an upsized $1 billion of the 7% senior notes at par on June 28.

Community Health’s 8 5/8% senior notes due 2024 were quoted down on the bid side at 99 3/8. However, the notes continued to trade between par and par 3/8 on Monday, which is the range they have remained in since pricing, a market source said.

Trading of the notes remained light with only $6 million of the bonds on the tape by late afternoon Monday.

Community Health priced an upsized $1,032,607,000 issue of the 8 5/8% notes at 99.457 to yield 8¾% on June 28 in a deal that was said to be 1.5 to 2 times oversubscribed.

AmWINS 7¾% senior notes due 2026 were seen unchanged at 101¼ with only one trade on the tape, a market source said.

AmWINS priced a $300 million issue of the 7¾% notes at par on June 28.

“Essentially, nothing is trading,” a market source said.

Teva active

While trading volume was light on Monday, Teva’s 3.15% senior notes due 2026 were active in the secondary space. The notes were up about ¼ to ½ point, a market source said.

They were seen trading between 80 3/8 to 80½.

HCA down

HCA’s 7½% senior notes due 2022 and 5 3/8% senior notes due 2025 were down about ¼ point in active trading on Monday, according to a market source.

The 7 ½% notes were seen trading between 108 5/8 and 108 7/8.

The 5 3/8% notes were seen trading between 98 1/8 and 98 3/8.

HCA is among the top holdings of the iShares US Healthcare Providers ETF, which is one the ETFs that saw a sell-off early in Monday’s session.

When ETFs trade down, names in the ETF basket “get moved around a little bit,” a market source said. “If they’re in the basket, they’re going to be underperforming.”

ATD up 4, down 70

ATD’s 10¼% senior notes due 2022 were up about 4 points to 27 after bottoming out at 23 last week, although the reason for the jump in price was not clear, a market source said.

“When it gets to these levels, it could just be a big buyer moving it,” a market source said.

There is also an active rumor mill surrounding companies in situations like ATD which could be affecting the price, the source said.

While the 10¼% notes saw an increase on Monday, there is little hope for a recovery, sources said.

The notes plummeted more than 30 points to bottom out at 23 last week after losing its distribution agreement with Bridgestone Americas for passenger and light truck tires.

The notes also dropped more than 30 points after Goodyear announced in late April it was ending its distribution agreement with ATD.

Prior to Goodyear’s announcement, the notes were trading around 97½.

The 10¼% notes have $925 million outstanding. “That’s a lot of money that’s out the window,” a market source said.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, the most recent session for which data was available at press time, according to a trader.

High-yield ETFs saw $47 million of inflows on the day.

However, actively managed high-yield funds sustained $33 million of outflows on Friday, the trader said.

Indexes down again

Two benchmarks for the high-yield secondary market were down on Monday after closing last week mixed.

The KDP High Yield index was down 9 basis points to close Monday at 70.30 with the yield now 5.92%. The index was down 5 bps on Friday after posting losses each day last week.

The CDX High Yield 30 index closed Monday down 9 bps at 105.68. The was down 5 bps on Friday.

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