Euro primary sees three deals; Refinitiv lower; MDC better; Neiman Marcus, CalRes rise

By Paul A. Harris and James McCandless

San Antonio, Sept. 21 –Euro-denominated transactions grabbed the spotlight in Friday’s high-yield new issue market, with three deals clearing during the session.

Italmatch Chemicals SpA and Promontoria MCS Holding SAS both brought offerings of floating-rate notes, sized at €410 million and €120 million respectively, while Garrett Motion Inc. priced a downsized €350 million issue of eight-year senior notes at par to yield 5 1/8% to help fund its spinoff from Honeywell International Inc.

In addition, there is already a full euro calendar for the week ahead.

In thin dollar-denominated activity, Northern Oil and Gas, Inc. priced a $350 million tack-on to its 8½% senior secured second-lien notes due May 15, 2023 (Caa1/B+) at 104.

The yield to worst came at 7.45%.

Like the euro primary, the dollar market also has a solid calendar for the upcoming sessions.

The secondary market closed the week focused on the newsworthy names of the week.

Refinitiv’s new dollar-denominated tranches ended lower Friday.

MDC Partners, Inc.’s bonds rose as the company expressed an interest in strategic alternatives.

Neiman Marcus Group, Inc.’s issues also gained despite a mixed second-quarter earnings report.

California Resources Corp.’s paper improved prior to a ratings upgrade.

Italmatch comes at revised talk

Among new issues, euro-denominated deals dominated Friday’s headlines.

Italmatch Chemicals priced a €410 million issue of six-year senior secured floating-rate notes (B3/B) with a coupon of Euribor plus 475 basis points at par.

The spread came on top of final spread talk and inside original spread talk that was set in the 500 bps area.

Joint global coordinator and joint bookrunner Goldman Sachs International will bill and deliver. BNP Paribas was also a joint global coordinator and joint bookrunner. Citigroup and Credit Agricole CIB were joint bookrunners.

Proceeds will be used to help fund the acquisition of Italmatch, a Genova, Italy-based specialty chemical additive manufacturer, by Bain Capital from Ardian.

Downsized Garret prices tight

Garrett Motion priced a downsized €350 million issue of eight-year senior notes (B2/B) at par to yield 5 1/8%.

The offering was decreased from €450 million, with €100 million of proceeds shifted to a concurrent bank loan.

Goldman Sachs, JPMorgan, Citigroup and Deutsche Bank managed the notes sale.

Proceeds will be used to help fund the spinoff of the company from Honeywell International.

MCS floater prices

Promontoria MCS Holding priced €120 million issue of six-year senior secured floating-rate notes (S&P: BB-) with a coupon of Euribor plus 537.5 bps at 99.5 via Louvre Bidco SAS.

The spread came 12.5 bps inside spread talk of Euribor plus 550 to 575 bps. The reoffer price came on top of price talk, according to a market source who added that Credit Suisse managed the sale.

Upon release from escrow, proceeds, along with the proceeds from an equity injection and cash on the balance sheet, will be used to fund a merger with France-based debt collector DSOgroup, to repay DSO debt, to fund DSO’s acquisition of an Italian debt collection and factoring company and for general corporate purposes.

El Corte Ingles roadshow

There is an active euro calendar crossing the weekend.

El Corte Ingles, SA plans to start a roadshow on Monday for a €600 million offering of 5.5-year senior notes (expected ratings Ba1/BB+/BB+).

Physical bookrunner BofA Merrill Lynch will bill and deliver. Goldman Sachs International is also a physical bookrunner.

The Madrid-based department store operator plans to use the proceeds for general corporate purposes including debt repayment.

El Corte Ingles joins one other euro-denominated offer already announced.

Germany’s Bilfinger SE (S&P: BB) mandated BNP Paribas, Deutsche Bank and HSBC to act as joint bookrunners for a €300 million offering of senior notes with a five-year to seven-year maturity.

The deal size will not grow.

Meetings with European fixed-income investors are set to begin on Monday.

Northern Oil, rich and tight

Amid a light news flow in Friday’s dollar-denominated primary, Northern Oil and Gas priced a $350 million tack-on to its 8½% senior secured second-lien notes due May 15, 2023 (Caa1/B+) at 104.

The yield to worst came at 7.45%.

The reoffer price came at the rich end of the 103.5 to 104 price talk. The yield to worst came at the tight end of the 7.45% to 7.61% yield talk.

RBC, Wells Fargo, ABN Amro, Capital One and Citizens were the joint bookrunners.

There is a 100 basis points PIK interest step-up. PIK payments will not be required when leverage is less than three times.

The Wayzata, Minn.-based independent oil and gas acquisition, exploration, development and production company plans to use the proceeds to repay bank debt and for general corporate purposes.

The week ahead

The week ahead will get underway to an active dollar-denominated calendar.

Altra Industrial Motion Corp. is marketing a $400 million offering of eight-year senior notes (B2/B+) on a roadshow set to wrap up Tuesday.

Initial price talk is in the high 6% area to 7%, and at that talk the deal is in good shape, playing to $600 million of orders, a trader said Friday.

Watch for the deal, which is expected to price on Tuesday, to come inside that talk, the trader advised.

Goldman Sachs is the left bookrunner for the dividend deal.

And Basic Energy Services, Inc. is back in the primary market with a deal that it postponed last March when it found the availability of attractive rates and flexibility on the part of bond buyers lacking, according to sources.

The Fort Worth oilfield services provider is roadshowing a $300 million offering of five-year senior secured notes via BofA Merrill Lynch, UBS and Morgan Stanley.

Initial talk is in the 11% area, a trader said.

Thursday outflows

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

For the second consecutive day, high-yield ETFs sustained hefty outflows. The ETFs were lost $522 million on Thursday.

Actively managed funds sustained $22 million of outflows on Thursday, the source added.

The news trails a Thursday report that the dedicated high-yield bond funds saw $967 million of net inflows in the week to the Wednesday, Sept. 19 close, according to information posted on the web site of Lipper US Fund Flows.

It’s a decent number, however it would have been substantially higher had the high-yield ETFs not taken a sizable ding on Wednesday, the final day of the reporting period.

The ETFs suffered $771 million of outflows on Wednesday, the trader said.

Refinitiv lower

In secondary trading, Refinitiv’s new dollar-denominated tranches closed lower to end the week.

The 8¼% notes due 2026 lost about ¼ point to close at around par 1/4, according to a market source.

The 6 ¼% notes due 2026 lost about ¼ point to close at around par ¼.

On Thursday, the 8 ¼% notes rose about ¼ point and the 6¼% notes lost about 1 point.

On Tuesday the company priced a downsized $4.25 billion equivalent amount of high-yield notes in four tranches.

The bond deal also included euro tranches and the company also raised $9.25 billion equivalent of term loans.

Proceeds from the bonds and loans will be used to help fund the acquisition of a 55% stake in Thomson Reuters Financial & Risk by Blackstone, Canada Pension Plan Investment Board and GIC, and for general corporate purposes.

MDC rises

Bonds of MDC Partners traded higher on Friday as the market learned that the firm is exploring strategic alternatives, which could possibly result in the sale of the company, a trader said.

MDC’s 6½% notes due 2024 were at 88 3/8 bid, late Friday, up 1 3/8 points on the day, the source added.

Neiman Marcus

In the retail space, Neiman Marcus’ issues rose, traders said.

The distressed retailer has been beaten up since transferring its e-commerce business, MyTheresa beyond the reach of its bondholders as a source of possible collateral, a bond trader recounted Friday.

However Neiman Marcus’ 8¾% notes due 2021 rose a point late Friday, when a $10 million block of the paper traded at 70, the trader said.

Another trader spotted the 8% notes due 2021 rise about ½ point to close at 69½ bid.

Debt investor Marble Ridge claimed Friday that the company may be in default as a result of the transfer.

The company disclosed the news as part of its recent earnings release, where the company reported rising sales and revenue and a net loss of $75.3 million for the fourth quarter of 2018. Adjusted EBITDA was $56.1 million for the fourth quarter and $477.1 million for the fiscal year.

“The same thing happened with PetSmart and it’s not doing them any favors,” another trader said, referring to a recent equity transfer of a large stake in its e-commerce arm Chewy.com into private equity and out of creditors’ hands. “They’ve got to be careful not to lose the trust of the bondholders.”

CalRes up

California Resources notes trended upward Friday, traders said.

The 6% notes due 2024 rose about 1½ points to close at around 85 bid. The 8% notes due 2022 added about ½ point to close at around 92 bid.

The notes tracked the movement of oil futures.

After the close Friday, Standard & Poor’s raised the company’s issue-level rating on its senior secured second-lien debt and revised the recovery rating on the debt to 2 from 4. The agency also affirmed the B issue-level rating on the company’s senior secured first-lien debt and the CCC- issue-level rating on its senior unsecured debt.

Indexes

The KDP High Yield Daily index fell by 1 bp on Friday to close at 70.36. The yield rose 1 bps to 5.86%.

The index lost 7 bps on Thursday to close at 70.37 with a rising yield of 5.85%.

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