Global Aircraft eyed; Newfold Digital comes in; Rayonier up on asset sale; Organon rebound continues

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 16 – The high-yield primary market sat idle as the new week got underway.

One deal remained on the active forward calendar from last week.

Co-issuers Global Aircraft Leasing Co., Ltd. (GALC) and Global Sea Containers II Ltd. (GSCL II) are on the road with a $1.95 billion offering of five-year senior PIK toggle notes (Ba2//BB-).

They are in the market to pay off the GALC 6½% senior PIK toggle notes due September 2024.

The price of that 2024 paper has been in motion since the new deal was announced, implying some risk that the new notes won’t be successfully placed, sources say.

However talk of concessions from the issuer saw the 6½% bonds trade back toward the vicinity of their post-announcement highs, according to the bond trader who spotted them at 97¾ bid on Monday morning, up a point, implying that the new deal has found firmer footing, the source said.

They traded as high as 98 after the new deal was announced, early last week, then slipped to as low as 95 bid, 95¼ offered as the ice appeared to be thinning beneath the new $1.95 billion new offer, the trader recounted.

Noting that interest payments on the 2024 bonds were paid in kind three times – generally coinciding with the Covid-19 pandemic – potential buyers of the new bonds are keen to incentivize the company to make its coupon payments in cash, sources say.

There is one conspicuous incentive already structured into the deal: a whopping 200 basis points coupon step-up for PIK payments, 125 bps higher than the typical 75 bps PIK premium.

However investors want more, sources say.

Among proposals under discussion are a special funded escrow account covering initial cash coupon payments and an indenture prohibiting the company from cash dividend payments during a fiscal period in which it makes PIK payments to the new bondholders.

The new deal is in the market with initial talk that has it coming with a cash coupon in the 11% area, with the aforementioned 200 bps PIK step-up.

Pricing is expected this week.

Meanwhile, it was a quiet day in the secondary space with the cash bond market soft as bond yields continued to creep higher as the market awaits the next catalyst for movement.

While rates remain center stage, attention is starting to shift to earnings with the performance of the market becoming increasingly credit specific, sources said.

While CCC credits outperformed in the first half of the year as recession concerns alleviated, they have gotten crushed in the recent downturn in the market with investors shedding risk and turning toward more quality credits, a source said.

New and recent issues and topical news were the drivers of activity during an otherwise quiet session.

Newfold Digital Holdings Group, Inc.’s 11¾% senior secured notes due 2028 (B2/B/BB-) came in from their heights after jumping more than 1½ points on the break.

However, the notes continued to trade with a strong premium.

Rayonier A.M. Products Inc.’s 7 5/8% senior secured notes due 2026 (B2/B-) were among the largest gainers in the space with the notes lifted 2 points as the company mulls an asset sale.

Biotech Organon & Co.’s senior notes continued to rebound strongly in heavy volume after the company settled a patent royalties lawsuit that was scheduled to go to trial.

Newfold comes in

Newfold’s 11¾% senior secured notes due 2028 were softer on Monday after skyrocketing on the break the previous session.

The 11¾% notes were off ½ to ¾ point.

They were trading in the par ¾ to 101¼ context on Monday, a source said.

The notes shot up to a 101-handle and closed the previous session in the 101½ to 101¾ context.

The tech company priced an upsized $515 million, from $500 million, issue of the 11¾% notes at par on Friday.

The yield printed at the tight end of the 11¾% to 12% yield talk.

The notes offered a juicy yield that was hard to ignore, a source said.

However, $400 million of the deal’s proceeds will go to fund a sponsor dividend to Siris Capital Group, LLC and Clearlake Capital Group, LP.

Rayonier jumps on asset sale

Rayonier’s 7 5/8% senior secured notes due 2026 were among the largest gainers in the secondary space on Monday with the notes lifted 2 points following news the company was mulling an asset sale.

The 7 5/8% notes jumped to an 85-handle.

They were changing hands in the 85 to 85½ context heading into the market close, according to a market source.

The yield was about 15½%.

The chemical company was in focus following news it had hired advisers to help explore the sale of its paperboard and pulp assets, a source said.

Organon rebounds

Organon’s senior notes continued to rebound strongly after the heavy selling of the previous week.

The biotech’s 5 1/8% senior notes due 2031 (B1/BB-) jumped 2½ points to close the day on an 80 handle.

They were trading in the 80 to 80½ context heading into the market close with the yield about 8¾%.

The notes have now eliminated their losses from the heavy selling of the previous week.

The 4 1/8% senior secured notes due 2028 (Ba2/BB) jumped 1½ points to close the day on an 87 handle.

They were changing hands in the 87 to 87¼ context heading into the market close with the yield about 7½%.

The notes also eliminated their losses from the previous week.

Organon’s senior notes have seen heavy volume over the past week with the biotech on the verge of going to trial over patent royalties.

However, the company announced it had reached a settlement last Friday with the case terminated.

Indexes

The KDP High Yield Daily index was off 14 bps to close Monday at 48.89 with the yield 8.09%.

The index gained 10 bps on the week last week.

The ICE BofAML US High Yield index fell 12.2 bps with the year-to-date return now 5.124%.

The index was up 71.2 bps on the week last week.

The CDX High Yield 30 index was up 32 bps to close Monday at 100.39.

The index was down 23 bps on the week last week.

Fund flows

The dedicated high-yield bond funds sustained $358 million of net daily cash outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $238 million of outflows on the day.

Actively managed high-yield funds sustained $120 million of outflows on Friday, the source said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.