Melco, Vizient set price talk; Mineral Resources gains continue; McDermott jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 16 – The domestic high-yield primary market saw some action on Tuesday as dealers set the stage for the $2.28 billion set to price during Wednesday’s session.

Melco Resorts & Entertainment Ltd. set price talk for its $500 million offering of seven-year senior notes (expected ratings Ba2/BB), and Vizient, Inc. set price talk for its $300 million offering of eight-year senior notes (B3) with both expected during Wednesday’s session.

Natural Resource Partners LP and Gogo Finance Co. Inc. are also expected to price on Wednesday.

The European primary market saw some action with Warner Music Group Corp. pricing a €195 million add-on to its 3 5/8% senior secured notes due 2026 and Europcar Mobility Group setting talk for its €450 million offering of seven-year senior notes (B3/B).

Meanwhile, the secondary market opened the day with gains that it gave back as the session progressed with more selling activity in the space, a market source said.

While volume tapered, Mineral Resources Ltd.’s 8 1/8% senior notes due 2027 (B+) continued to see gains with the newly priced notes now more than 2 points above their issue price.

McDermott International Inc.’s 10 5/8% senior notes due 2024 were again the focus of the secondary space with the notes jumping in active trading as the company completed a milestone in its Cameron LNG project.

Melco talks 5¼% to 5½%

Melco Resorts & Entertainment talked its $500 million offering of seven-year senior notes (expected ratings Ba2/BB) to yield 5¼% to 5½%.

The debt refinancing deal figures to play to an audience comprising both emerging-markets and high-yield accounts.

Deutsche Bank and ANZ are the joint bookrunners.

Vizient talks 6½% area

Vizient talked its $300 million offering of eight-year senior notes (B3) to yield in the 6½% area, tight to initial guidance in the high 6% area.

J.P. Morgan is leading the debt refinancing deal.

Natural Resource Partners is also in the market with $275 million six-year notes (Caa2/CCC+), expected to price Wednesday.

As the market awaits official talk, early guidance is in the 9% area.

And Gogo Finance Co. plans to price $900 million five-year senior secured first-lien notes (B3) on Wednesday. With official talk pending, initial guidance is in the high 9% to 10% area.

Warner €195 million tap prices rich

In the euro-denominated high yield primary, Warner Music Group priced a €195 million add-on to its 3 5/8% senior secured notes due 2026 at 103.875 to yield 2.695% in a quick-to-market Tuesday trade.

The reoffer price came 37.5 cents rich to the rich end of the 103.25 to 103.5 price talk.

Credit Suisse ran the books.

The New York-based music recording and publishing company plans to use the proceeds to redeem its 5 5/8% senior secured notes due 2022.

Europcar talk 4 3/8% area

Europcar Mobility Group talked its €450 million offering of seven-year senior notes (B3/B) to yield in the 4 3/8% area.

The offer is set to price on Wednesday.

Joint global coordinator BNP Paribas is the sole physical bookrunner.

BofA Merrill Lynch, Credit Agricole and HSBC are joint global coordinators.

The secondary space

The secondary space opened Tuesday strong but gave back most of its gains as the session progressed.

The market was up 1/8 to ¼ point early in the session but was poised to close the day unchanged to down ¼ point, a market source said.

While paper was difficult to find early in the day, more bonds were for sale into the afternoon.

However, volume was in general light with the illiquidity causing large price swings.

“One trade could reset the book,” a market source said.

While buyers in search of double B paper has been a theme in the secondary space, that trend may have run its course with interest peaking for paper with lower credit ratings, the source said.

Mineral Resources gains continue

Trading activity surrounding Mineral Resources’ newly priced 8 1/8% senior notes due 2027 slowed on Tuesday. However, the notes continued to see gains.

The 8 1/8% notes rose 1 point during Tuesday’s session. They were quoted at 102 bid, 102½ offered early in the session and were changing hands at 102 3/8 by the late afternoon.

The notes closed Monday at 101 3/8.

While the notes were among the most actively traded issues in the secondary space on Monday, only $8 million of the bonds were on the tape by the late afternoon on Tuesday.

Pent up demand for new paper was helping to drive the trading level of the notes, sources said.

Mineral Resources priced a downsized $700 million issue of the 8 1/8% notes at par on Friday.

The notes priced wide of initial guidance in the 7¾% to 8% area.

The 8 1/8% notes were strong out of the gate trading up 1 point soon after breaking for trade.

McDermott jumps

McDermott’s 10 5/8% senior notes due 2024 jumped in high-volume activity on Tuesday after the engineering, construction, procurement and installation company announced that it had completed a milestone in its Cameron LNG project.

The 10 5/8% notes traded up 2 7/8 points to close Tuesday at 90 3/8, according to a market source.

With more than $69 million of the bonds on the tape by the late afternoon, the notes were the most actively traded issue in the secondary space.

After a series of setbacks and cost overruns, McDermott announced that production at the facility was preparing to start production with pipeline feed gas beginning to enter the facility.

The 10 5/8% notes took a beating in February after McDermott announced an adverse charge in its earnings report due to cost overruns at the facility.

Monday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Monday, the most recent session for which data was available at press time, according to an investor.

High-yield ETFs saw $251 million of inflows on the day.

Actively managed high-yield funds saw $100 million of inflows on Monday, the investor said.

Indexes mixed

Indexes were mixed on Tuesday with one flat, one posting minor gains, and another minor loses.

The KDP High Yield Daily index was flat on Tuesday, closing the day at 70.59 with the yield still 5.72%.

The index was up 5 basis points on Monday after a cumulative gain of 18 bps on the week last week.

The ICE BofAML US High Yield index rose 7.7 bps with the year-to-date return now 8.671%. The index was up 1.9 bps on Tuesday after a cumulative gain of 69.4 bps on the week last week.

The index shot past 8% year-to-date returns on April 8 after only recently surpassing the 7% threshold on March 26 and passing 6% year-to-date returns on March 11.

The CDX High Yield 30 index dropped 8 bps to close Tuesday at 107.65. The index was up 4 bps on Monday after a cumulative gain of 68 bps on the week last week.

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