Commentary & Deal Flow

It was a modestly active Friday to end what was a very slow week in the high yield primary market. Today's new issue action included: one quick-print US$ deal priced in the US, one marketed Nordic US$ deal priced in Europe, and one overnight C$ deal priced in Canada. No new issues were announced for next week.

Announced and priced today was Spectrum Brands Inc $500m (up from $400m) 10yNC5 sr notes at 3.875% at 100 (vs price talk of 3.875%-4.00% and IPT of very low 4s).

Priced in Europe was the marketed Nordic deal Siccar Point Energy Bonds plc US$200m 5yNC2 sr notes at 9% at 99.00, yield 9.254% (vs revised price talk of 9% coupon with OID of 98.50-99.00, price talk of 9% coupon with OID of 98-99 and IPT of 9% coupon with OID of 97-99).

And priced in Canada was the overnight deal Cineplex Inc C$250m 5yNC2 sr sec 2nd lien notes at 7.50% at 100, yield 7.503% (vs price talk of 7.50%-7.75% and IPT of 8.00%-8.25%).

Heading into this week the expectation was that the new issue pace would slow, partly because it was a holiday shortened week, but mostly due to issuers now being in earnings blackout. Still, it was not expected to be a relaxing week for bankers and syndicate desks as they more fully focused on the booming loan market were audited financials are not needed.

Even though they got the direction right, Syndicate desks did not get the extent of the slowdown right. Estimates for this week's volume ranged from $4-10bn with most centered around the $5-7bn range. The actual volume for the week was below even the low point of this range and well below our guess of $7bn, as well as being the lowest of the year.

The final tally for global high yield new issue volume for the week was 6 deals (7 tranches) for USD5.196bn equivalent, consisting of 5 US$ deals (5 tranches) for USD3.450bn and 1 non-US$ deal (2 tranches) for USD1.746bn equivalent. February month-to-date volume is USD35.078bn equivalent, consisting of US$ USD25.100bn and non-US$ USD9.978bn equivalent. The YTD/first quarter to-date global volume is now USD100.015bn, consisting of US$ USD77.005bn and non-US$ for USD23.010bn equivalent. (Note we are not counting the US$200m Siccar Point Energy Nordic deal for volume).

Historically Presidents Day week has been slower with the average over the last ten years at $4.016bn. This year's Presidents Day week followed the historical precedent and even came in below the last ten years average and about half of last year's $6.70bn, which was the biggest week in the last ten years.

 With one US$ deal for $500m priced today the monthly tally for February is now $25.100bn, still in third place on the February US$ Volume Top Ten Table. Only $3.4bn is needed to move it to second place and with a pick up in deal flow expected next week this is almost a given. The move to 1st place is not as assured. New issuance of $11.9bn is needed next week to break the February US$ volume monthly record of $36.988bn set back in 2012.

Repaying debt continues to be the predominate use of proceeds with all five of this week's deals using the proceeds from their deals for that purpose.

This includes Avis Budget taking out the ultra high coupon/yield (10.50%/11.297%) liquidity-raiser bond issued back in May shortly after the high yield bond market re-opened following the the Covid pandemic new issue market shutdown in March. The refi cut the coupon in just a bit more than half to 5.375% and extended the maturity by almost three years to 03/01/29.

Including the car rental biz of Avis Budget, there was a good mix of sectors Energy E&P, Food packaging and Consumer products.

Except for today's 10y deal, all the tenors on this week's deals were 8y. Similarly, except for today's double-B deal, all of this week's deals were rated single-B.

There were no debut issuers this week.

Looking ahead to next week the expectation is that the new issue pace will increase, perhaps dramatically (it could hardly be slower than this week). There is a broad range of views for next week's high yield new issue flow. All see a busier week next week, but some, seeing smaller pipelines and with many issuers still in blackout, still see the new issue pace remaining on the slow side, while others, seeing bigger pipelines, and more issuers coming out of blackout, see the fast new issue pace seen most of this year returning.

There is no doubt that the demand for new issues remains strong and that very low clearing rates are very attractive to issuers (and with WTI flirting with the $60 mark, this now includes issuers from the energy sector; and with vaccinations proceeding apace, it also includes issuers from the travel and leisure sectors). It really is just a question of whether issuers are ready to go or not.

Syndicate desk estimates for next week's US$ new issue volume range from $6bn to $13.50bn with most centered around $8bn to $12bn. Our guess is in the upper range at $11bn.

European high yield deal flow is likely to remain on the slower side. Our guess is two deals for $1.2bn.

The high yield secondary market opened flat and firmed up a bit as the day went on. The high yield cash market finished the day flat to up an 1/8 of a point.

The CDX HY5 followed the opposite path, rising a 1/16 of a point at the open, and then slowly sliding through the day to finish down almost an 1/8 of a point at 108.988.

Today's new issues are performing well in the secondary market. Cineplex C$ deal was the outperformer of the week, rising 2 1/2 points, while Siccar Point Energy was up 3/4 of a point. And priced late in the day, Spectrum Brands broke at 100.25-100.75.

The rest of this week's deals were a little to a lot better today with the US$ outperformer of the day and week Comstock Resources, up 1 1/8 points today for a total gain of 2 1/4 points.

Today's secondary levels on this week's new issues:

Friday, February 19, 2021

Spectrum Brands Inc sr notes due 03/15/31, 3.875% at 100, 100.25-100.75.

Cineplex Inc sr sec 2nd lien notes due 02/26/26, 7.50% at 100, up 2 1/2 points to 102.50-1022.875.

Siccar Point Energy Bonds plc US$ sr notes due 03/04/26, 9% at 99.00, up 3/4 of a point to 99.75-100.25.

Thursday, February 18, 2021

Comstock Resources Inc sr notes due 03/01/29, 6.75% at 100, up 2 3/8 points to 102.375-102.875 (up 1 1/8 points from yesterday).

Wednesday, February 17, 2021

Avis Budget Car Rental LLC sr notes due 03/01/29, 5.375% at 100, up a 1/2 point to 100.50-100.875 (up a 1/4 point from yesterday).

Simmons Foods Inc sr sec 2nd lien notes due 03/01/29, 4.625% at 100, up 1 3/8 points to 101.375-101.625 (up 3/8 of a point from yesterday).

Vista Outdoor Inc sr notes due 03/15/29, 4.50% at 100, up a 1/2 point to 100.50-101.00 (up a 1/4 point from yesterday).

IQVIA Inc EUR sr notes due 03/15/26, 1.75% at 100, up 1 point to 101.00-101.25.

IQVIA Inc EUR sr notes due 03/15/29, 2.25% at 100, up 1 point to 101.00-101.25.

High yield new issue priced today:

02/19/2021 Spectrum Brands Inc $500m (up from $400m) 144A/Reg S sr notes due 03/15/31 (10y). NC5 (MWC T+50bp), then at 101.938, 101.292, 100.626. Equity claw: 3y 35% at 103.875. B2/B/BB (stable/negative/stable). Via RBC/CS/GS/JPM/BofA/WFS/Barc/DB joint books, CJS securities, BNP, UBS as co-managers. No reg rights. Settles 03/03 (T+8). 144A CUSiP: 84762LAX3. IPT: very low 4s. Px talk: 3.875%-4.00%. Launch: $500m at 3.875%. Priced: 3.875% at 100. +253.2bp vs 1.125% 02/15/31. Did investor call at 11am 02/19. Books closed at 1pm 02/10. UOP: along with $400m (up from $350m) sr sec term loan due 2028, to fund the tender offer for all of its $250m 6.125% sr notes due 2024 ($1,024.10 total consideration, including $50 consent payment) and up to $550m (up from $500m) of its $1bn 5.75% sr notes due 2025 ($1,032.10 total consideration, including $50 early tender payment). RBC is dealer manager. ($100m bond and $50m term loan upsizes to increase the tender offer by $50m and add $100m of cash to the B/S). Biz: a diversified global branded home and consumer products company, including residential locksets, residential builders’ hardware, plumbing, shaving and grooming products, personal care products, small household appliances, specialty pet supplies, lawn and garden and home pest control products, and personal insect repellents. HQ: Middleton, WI.

02/19/2021 Cineplex Inc (CGXCN) C$250m sr sec 2nd lien notes due Feb 26, 2026 (5y). NC2 (01/31/23) (MWC GoC+100bp), then at 103.75, 101.875, 100. Equity claw: 2y (01/31/23) 40% at 107.50. Special call: first 2 years (01/31/23) up to 10% at 103. Not rated. Via BMO/Scotia joint books, RBC co-lead, CIBC, NBF, TD as co-managers. Private placement in Canada, 144A in the US. Settles 02/26 (T+5). CUSIP: 172454AD2 (144A CUSIP: 172454AE0). IPT: 8.00%-8.25%. Px talk: 7.50%-7.75%. Launched: C$250m at 7.50%. Priced: 7.50% at 100, yield 7.503%. +685.4bp vs GoC 0.50% 09/01/25. Did investor call at 11am 02/18. UOP: $50m to permanently reduce its term loan facility, $50m to permanently reduce its revolver, $144m to pay down its revolver, which may be redrawn. Biz: a top-tier Canadian brand that operates in the film entertainment and content, media and amusement and leisure sectors. As a leading entertainment and media company, the Company welcomes millions of guests annually through its circuit of theatres and location-based entertainment venues across Canada. HQ: Toronto, ON.

02/19/2021 Siccar Point Energy Bonds plc (SICPOI) US$2000m (no grow) 144A/Reg S sr notes due 03/04/26 (5y). NC2 (MWC, discount rate 0.60%), then at 105.40, 103.60, 101.80, 100. CoC at 101. Not rated. Via DNB (B&D)/Pareto/SpareBank JLM. No reg rights. List Nordic ABM. Norwegian law for bond terms and guarantee agreements and English law for the intercreditor agreement. Semi pay (30/360), March 04, Sept 04, starting 09/04/21. Denoms: 200x200. Trade date 02/19. Settles 03/04 (T+10). CUSIP: NO0010937501. IPT: 9% coupon at 97-99. Px talk: 9% coupon with OID 98-99, wpir. Revised px talk: 9% coupon with OID of 98.50-99, wpir. Launched: $200m, 9% coupon at 99.00. Priced: 9% at 99.00, yield 9.254%. +869bp vs 0.375% 01/31/26. Did a series of fixed income investor calls starting 02/15 (global investor 02/16 at 8am CET). Books subject at 16.00 CET 02/18. UOP: along with cash on hand, to call SPEP01- Siccar Point Energy Bonds plc US$200m 9% sr notes due 01/31/23 (conditional buy-back at 103.95, callable at 103.60). Equity sponsors: Blackstone and BlueWaterEnergy. Biz: sub of Siccar Point Energy Limited, oil and gas E&P in the North Sea. HQ: Aberdeen, Scotland.

Credit Flow Research High Yield Forward

Credit Flow Research High Yield Forward Calendar

================ [ February 22 week ] ===============

Nothing currently scheduled, but an active week is expected.

====================== [ February/March ] ==================

Ladder Capital Finance Holdings LLLP/Ladder Capital Finance Corp (LADR) $400m sr notes. Existing Ba2/B+/BB+. UOP: to repay debt used to redeem on 01/27 its $300m 5.875% sr notes due 08/01/21 at 100. Biz: an internally-managed commercial real estate REIT providing financing, real estate securities investing, and owning and operating commercial real estate. HQ: New York City.

====================== [ 2021 ] ==================

Astound Broadband possible notes. UOP: finance Stonepeak Infrastructure Partners' purchase of Astound from TPG and Patriot Media Management for $8.1bn in cash. No details of the financing were disclosed, but given the size of the deal a high yield bond deal seems likely. BofA/Lazard are acting as financial advisors to Stonepeak. Closing is expected in Q2 20221. Biz: a leading broadband and cable TV services provider (RCN, Wave, Grande and enTouch brands). HQ: Princeton, NJ. (Acquisition announced 11/01/2020).

Teleflex Inc (TFX) possible notes. UOP: fund TFX's acquisition of Z-Medica LLC from Linden Capital Partners for $500m cash and up to an additional $25m cash upon the achievement of certain milestones. Teleflex initially plans to finance the acquisition at closing with a draw on its revolver. Following consummation of the transaction, Teleflex may look to opportunistically term-out its revolver through a note offering. Over the long-term, Teleflex intends to maintain its net debt to adjusted EBITDA (as calculated in accordance with the terms set forth in the Company’s existing Credit Agreement) at approximately 3.0x. Existing sr unsec notes are rated Ba3/BB. Closing is expected this quarter. Biz: a global provider of medical technology products. It primarily designs, develops, manufactures and supplies single-use medical devices used by hospitals and healthcare providers. HQ: Wayne, PA. (Acquisition announced 10/28/2020).

++++10/28/2020: the acquisition closed.

Currently split-rated Centene Corp (CNC) possible notes. Existing sr unsec Ba1/BBB-/BB+. UOP: fund the acquisition of Magellan Health Inc (MGLN) for $2.2bn in cash ($95 per share). Centene intends to primarily fund the cash portion of the acquisition through debt financing, and JPM has provided a $2.381 billion bridge financing commitment. Upon closing, Centene expects its debt-to-capital ratio to be in the low 40% range, and intends to use its strong earnings and cash flows to achieve its targeted debt-to-capital ratio in the upper 30% range within 12 to 18 months post close. Closing expected in the second half of 2021. Biz: a multi-national provider of healthcare insurance and other financial services to government sponsored and commercial healthcare programs. HQ: St Louis, MO. (Acquisiton announced 01/04/2021).

Corelogic (CLGX) possible notes. Via JPM/WFS. UOP: fund the LBO by Stone Point Capital and Insight Prtners for $80 per share in cash or an equity value of approximately $6bn. JPM/WFS have committed to provide $5.5bn in debt financing. Stone Point will contribute $2.5bn in equity. Closing is expected in Q2 2021. Biz: provides data and analytic services covering the property and real estate markets. HQ: Irvine, CA. (Acquisition announced 02/04/2021).

Cubic Corporation (NYSE: CUB) possible notes. UOP: fund the LBO by Veritas Capital and Evergreen Coast Capital (an affiliate of Elliott Investment Management LP), in an all-cash transaction valued at approximately $2.8bn ($70 per share). Closing is expected in Q2 2021. No further details one the debt financing were disclosed. Biz: provides data, analytical, training software products and services to government, defense and commercial customers around the world. HQ: San Diego, CA. (Acquisition announced 02/08/2021).

Cetera $525m sr unsec notes. Via GS/UBS. UOP: to finance the buyout of certain assets related to the independent financial planning channel of Voya Financial Advisors (VFA), a sub of Voya Financial, Inc. (VOYA), as well as to repay the existing 2nd lien term loan. Equity sponsor: Genstar. Biz: operates a network of nearly 8,000 financial advisors. VFA is expected to contribute approximately 900 financial advisors and $40 billion in client assets to Cetera. HQ: El Segundo, CA. (Acquisition announced 02/08/21).