Morning Commentary: Rayonier bonds advance on loan news; recent issues cling to premiums

By Paul A. Harris

Portland, Ore., July 21 – Junk bonds of Rayonier Advanced Materials saw dramatic price improvements on Friday morning following news that the company secured a $250 million four-year term loan from funds managed by Oaktree Capital Management, a New York-based bond trader said.

The Rayonier A.M. Products Inc. 7 5/8% senior secured notes due January 2026 changed hands at 90, on Friday, after trading as low as 87 on Thursday, the source said.

The company said it would use the loan proceeds plus approximately $85 million in balance sheet cash to redeem its remaining $318 million senior notes due 2024.

The 2024 bonds also traded higher on the news, according to the trader.

The new debt structure will allow Rayonier to meet its obligations and provide flexibility to deleverage and to opportunistically make strategic investments, said president and CEO De Lyle Bloomquist in a press release.

Elsewhere, high-yield wireline telecom paper continued to improve on Friday, said the trader.

That improvement comes on the heels of a court filing by AT&T earlier in the week asserting that a story about lead contamination caused by unburied cables, which appeared a week ago in the Wall Street Journal (WSJ), hinges on test results that differ from those of industry experts.

In a court filing, AT&T alleged that WSJ relied on biased experts in reporting on unburied lead-clad cables that lay on the bottom of Lake Tahoe.

The filing suggested that lead-clad pollution liability is overblown, and investors seem to be agreeing, the trader remarked.

Among junk telecom names with exposure in the matter, the Frontier Communications Holdings, LLC 8 5/8% first-lien secured notes due March 2031 were 95 bid, 96 offered on Friday morning, having fallen to as low as 92, in the wake of the WSJ story, the trader remarked.

Prior to the appearance of the story that paper was trading around 97, the source added.

High-yield wireline paper looks like it’s coming back but is not all the way back yet, the trader remarked.

Among recent issues, the Coty Inc./HFC Prestige Products, Inc./HFC Prestige International U.S. LLC 6 5/8% senior secured notes due July 2030 (Ba2/BB) were par bid, par ½ offered on Friday morning.

Those bonds came in a well-oversubscribed $750 million issue that priced at par on Wednesday.

Meanwhile, the Beacon Roofing Supply Inc. 6½% senior secured notes due August 2030 (Ba3/BB) were par ½ bid, 101 offered on Friday morning.

The $600 million issue priced at par on Monday.

Recent deals are pricing sufficiently tight that more dramatic advances in the secondary market are unlikely, traders say.

The broad high-yield bond market advanced 1/8 of a point by mid-morning on Friday after opening unchanged, the New York-based bond trader.

Activity was muted, the source added.

The new issue market sat idle, as is often the case on summer Fridays.

Active week ahead

The week ahead figures to be active.

The sole announced deal comes from Brand Industrial Services, Inc., which is on the road with a $1.335 billion offering of seven-year senior secured notes (B3/B-) with initial guidance of 10¾% to 11%.

Reverse inquiry is heard to exceed the amount of the offer, the trader said, adding that the stage appears to be set for those bonds to trade well.

Meanwhile, a $1.625 billion deal backing the buyout of Arconic Corp. by Apollo Global Management and Irenic is expected to launch into the market during the week ahead.

It is expected to include $900 million of senior secured notes with 8¾% to 9½% initial guidance.

There is reverse inquiry at play in the secured notes, sources say, adding that early orders amount to the full size of the tranche.

The deal is also expected to include $725 million of senior unsecured notes with early guidance that has them coming 300 basis points to 350 bps behind the secured notes.

Sponsor Apollo is expected to take down the entire unsecured tranche.

Marketing of the Arconic deal could carry into the Aug. 1 week, sources say.

The euro-denominated new issue market also figures to be active in the week ahead.

Dealers circulated a save-the-date e-mail for Monday, when they plan to roll out a deal from the consumer/retail space that will feature sterling-denominated fixed-rate notes and euro-denominated floating-rate notes.

The deal is set to be marketed on a roadshow on Monday and Tuesday.

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