Forestar, NGL Energy on tap; Cable & Wireless hovers at issue price; Intelsat jumps; Staples gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 3 – While two deals joined the active forward calendar in the domestic high-yield primary market on Wednesday, the European market saw two deals price.

NGL Energy Partners LP launched a $450 million offering of seven-year senior notes (B2/B+/B) with pricing expected before the end of the week.

Forestar Group Inc. also began marketing a $300 million offering of five-year senior notes (B2/B).

In the European market, Loxam Group priced an upsized €500 million two-part deal.

Germany-based SGL Carbon SE priced a €250 million issue of 5.5-year senior secured notes (B2/B) at par to yield 4 5/8%.

Meanwhile, the secondary space remained largely flat on Wednesday.

Cable & Wireless Communications Ltd.’s newly priced 5¾% senior notes due 2027 (Ba3/BB-/BB-) were trading in a tight range around their issue price, a market source said.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 jumped in high-volume activity following an analyst’s upgrade of the company’s stock due to a potential windfall from the sale of the C-band spectrum.

As Staples Inc. markets its new $2.13 billion two-tranche offering, the office supply retailer’s 8½% senior notes due 2025 continued to climb in high-volume activity.

After losing steam and trading down to par at the end of March, Power Solutions’ 8½% senior notes due 2027 (B3/B/B-) were improving in high-volume activity on Wednesday.

Loxam upsizes

The bulk of Wednesday's new issue activity took place in Europe.

Paris-based equipment rental company Loxam Group completed an upsized €500 million two-part deal.

It included an upsized €300 million tranche of seven-year senior secured notes (BB-), which priced at par to yield 2 7/8%.

The tranche size was increased from €265 million. The yield printed at the tight end of yield talk in the 3% area.

In addition, Loxam priced €200 million of eight-year senior subordinated notes (B) at par to yield 4½%. The yield printed on top of final yield talk, which had tightened from earlier talk in the 4¾% area.

BNP Paribas was the left lead bookrunner for the debt refinancing.

SGL prices tight

Germany-based SGL Carbon priced a €250 million issue of 5.5-year senior secured notes (B2/B) at par to yield 4 5/8%.

The yield printed at the tight end of yield talk in the 4¾% area.

The transaction was several times oversubscribed, according to a company press release.

SKion GmbH, one of SGL Carbon’s major shareholders, purchased €25 million of the issue, the release added.

Left global coordinator Deutsche Bank will bill and deliver for the debt refinancing deal.

Cash heavy, calendar thin

France-based Elis SA came away from the Tuesday European primary market with a one-handle print (a coupon less than 2%), signaling demand for junk that issuers and dealers are failing to meet, a market source said on Wednesday.

To recap, Elis priced a €500 million issue of 1¾% senior notes due April 2024 (S&P: BB+/Fitch: BB) at par, 12.5 basis points below the tight end of the 1 7/8% to 2% yield talk.

The deal was heard to be playing to €3 billion of orders.

It was the first new deal to come with a one-handle coupon since UK-based grocery retailer Tesco plc priced €750 million of 1 3/8% paper last October, the source said.

And that was a split-rated deal, with Fitch assigning its BBB- rating to the Tesco notes, which were rated BB+ by S&P and Ba1 by Moody's.

Cash-heavy accounts chasing a notably thin calendar are driving this technical disconnect in the euro-denominated primary market, sources say.

Euro-denominated issuance for 2019 to date is around €10 billion, significantly lagging 2018 issuance which was around €18.5 billion at the end of the first quarter, according to Prospect News data.

NGL Energy brings $450 million

In the dollar-denominated primary, NGL Energy Partners launched a $450 million offering of seven-year senior notes (B2/B+/B) into the market on Wednesday.

The deal is set to price before the end of the April 3 week.

Initial guidance has the notes coming to yield in the mid-to-high 7% area, a trader said.

Joint active bookrunner RBC Capital Markets LLC will bill and deliver.

The Tulsa, Okla.-based midstream services provider plans to use the proceeds to repay debt under its credit agreement and for general corporate purposes.

Forestar kicks off $300 million

Forestar Group began marketing a $300 million offering of five-year senior notes (B2/B).

Initial guidance has the deal coming with a yield in the 8% area.

JP Morgan is the lead.

The Austin, Texas-based land developer, which is 75% owned by DR Horton, Inc., plans to use the proceeds for general corporate purposes including land acquisition and development and debt repayment.

NGL Energy and Forestar take places aboard an active dollar-denominated new issue calendar that also features Staples with a $2,125,000,000 two-part deal: $750 million secured notes being guided in the mid-to-high 7% area, and $1,375,000,000 unsecured notes being guided in the high 9% to low 10% area.

In addition, Ensign Drilling Inc. is selling $700 million of five-year senior notes with initial talk in the 9% area.

And Golden Nugget Entertainment Inc. is marketing $375 million senior notes with initial guidance 8% area.

Staples and Ensign are expected to price ahead of the coming weekend.

Golden Nugget Entertainment, like the above-mentioned Forestar deal, is expected to price during the April 8 week.

Cable & Wireless at issue

Cable & Wireless’ newly priced 5¾% senior notes due 2027 were trading in a tight range around their issue price in the secondary space, a market source said.

The 5¾% notes were changing hands between 99 and 99.4 throughout Wednesday’s session, a market source said.

They were seen slightly above their issue price at 99¼ in the late afternoon with the yield 5.867%. More than $22.5 million of the bonds changed hands during Wednesday’s session.

Cable & Wireless priced a $400 million issue of the 5¾% notes at 99.195 to yield 5 7/8% in a Tuesday drive-by.

The new offering came less than a week after Cable & Wireless priced an upsized $300 million add-on to its 6 7/8% senior notes due 2027 (B2/BB-/BB-).

The add-on priced at 99.205 to yield 7%.

While the 6 7/8% notes have not seen much trading activity since pricing, they were quoted at 99¼ bid, par ¼ offered on Wednesday.

Intelsat jumps

Intelsat’s 8 1/8% senior notes due 2023 jumped in high-volume activity on Wednesday after an analyst stated the concern over opposition to the C-band proposal was overblown.

The 8 1/8% notes jumped 3 points to 74 with more than $20 million of the bonds on the tape by the late afternoon, according to a market source.

The bonds surged after a JPMorgan analyst upgraded the satellite communications provider’s equity.

The upgrade was due to the belief the market has underestimated the proceeds the company will receive from the sale of the C-Band spectrum.

Intelsat has been under pressure for much of March with the 8 1/8% senior notes dropping as much as 10 points.

Intelsat’s capital structure traded down as opposition mounted to the proposal to sell a portion of the C-Band spectrum to aid in the adoption of 5G in the United States.

Staples gains

With Staples’ megadeal in the works, the office supply retailer’s 8½% senior notes due 2025 were again posting gains in active trading.

The 8½% notes were up about 5/8 point to 109 5/8. More than $20 million of the bonds were on the tape by the late afternoon.

The 8½% notes have been on the rise since news circulated about Staples’ debt refinancing deal, which includes a $750 million tranche of secured debt, a $1.375 billion tranche of unsecured debt and $3.2 billion in term loans.

The 8½% notes will be taken out via a make-whole provision with proceeds from the new offerings, sources said.

Power Solutions improves

Power Solutions’ 8½% senior notes due 2027 (B3/B/B-) were showing signs of improvement on Wednesday.

The notes were up about ½ point in high-volume activity to close the day at par ¾, sources said.

More than $42 million of the bonds had changed hands during Wednesday’s session.

The notes were rebounding after trading down to par at the end of March.

While Power Solutions’ secured tranche of 6¼% senior notes due 2026 have held onto their gains in the secondary space, the unsecured tranche of 8½% notes lost steam after initially trading north of 101, sources said.

Power Solutions priced a $1 billion tranche of the 6½% notes at par and a $1.95 billion tranche of the 8½% notes at par on March 18.

Tuesday outflows

The dedicated high-yield bond funds saw negative flows on Tuesday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs were essentially flat on the day, with $6 million of outflows.

Actively managed high-yield funds sustained $110 million of outflows on Tuesday.

With Wednesday's numbers pending, the combined funds were tracking $1.8 billion of inflows for the five-day interval that concluded with Wednesday's close, according to the trader.

Indexes mixed

Indexes were again mixed on Wednesday with some largely flat and others posting gains.

The KDP High Yield Daily index was up 4 bps to close Wednesday at 70.35 with the yield now 5.79%. The index was up 2 bps on Tuesday and 14 bps on Monday.

The index was mixed throughout last week but closed with a cumulative loss of 3 bps on the week.

The ICE BofAML US High Yield index was up 14 bps with the year-to-date return now 7.776%. The index gained 3.6 bps on Tuesday and 22 bps on Monday.

The index saw a cumulative gain of 42.8 bps on the week last week, surpassing 7% returns on March 26.

The index initially crossed the 7% threshold on March 21 but sank below it the following day.

The index just recently passed 6% year-to-date returns on March 11.

The CDX High Yield 30 index dropped 1 bp to close Wednesday at 106.82. The index was down 17 bps on Tuesday after a 35 bps gain on Monday. The index saw a cumulative gain of 54 bps on the week last week.

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