Tibco, CDW, MGM add-on price; new CDW paper busy; KLX bonds flying high; market firmer

By Paul Deckelman and Paul A. Harris

New York, Nov. 24 – The high-yield primary sphere kicked off the final week of November on Monday with a trio of new deals collectively worth some $1.6 billion, with most of the day’s issuance coming out the technology sector.

Tibco Software Inc., a Palo Alto, Calif.-based provider of infrastructure and business software, came to market with a restructured $950 million offering of seven-year notes as a regularly scheduled forward-calendar deal. Those bonds priced too late in the session for any real aftermarket activity.

But there was plenty of secondary trading in one of the day’s other deals as CDW Corp., a Vernon Hills, Ill.-based integrated technology provider, priced a quick-to-market $575 million of 10-year notes via a pair of financing subsidiaries. The new bonds were the most actively traded junk issue of the day, holding near their issue price.

Monday also saw Las Vegas-based gaming giant MGM Resorts International do a smallish, quickly shopped add-on tranche to the more than $1 billion offering of 2023 notes that it priced last week.

Those original MGM bonds meantime were seen having pushed up to around 1 point above their issue price.

There was also brisk trading at higher levels in facilities maintenance and building supply provider HD Supply Holdings Inc.’s new seven-year paper that priced on Wednesday.

However, the biggest gainer among recently priced offering was Friday’s eight-year megadeal from KLX Inc., the company being spun off by aircraft interior systems manufacturer B/E Aerospace, Inc. Those bonds gained altitude on heavy volume.

Traders saw generally firmer levels on everything, but overall activity was already quiet in the run-up to this week’s Thanksgiving Day holiday, which will shutter U.S. fixed-income markets on Thursday.

Statistical market-performance measures were higher across the board for a second straight session.

Tibco prints at 12%

Tibco Software priced a restructured $950 million issue of 11 3/8% seven-year senior notes (Caa2/CCC) at 97.1 to yield 12%.

The coupon came at the wide end of the 11¼% to 11 3/8% coupon talk. The reoffer price came slightly rich compared to the 96.5 to 97 price talk. The yield printed on top of yield talk.

The notes become callable after three years at par plus 75% of the coupon. The call premium was increased. The earlier premium was 50% of the coupon.

There were also covenant changes.

J.P. Morgan, Jefferies and Merchant Capital Solutions were the joint bookrunners for the LBO financing.

CDW 10-year bullet

CDW Finance and CDW LLC priced a $575 million issue of 10-year senior notes (B3/B+) at par to yield 5½%.

The yield printed at the wide end of the 5 3/8% to 5½% yield talk.

Barclays was the lead left bookrunner quick-to-market debt refinancing deal.

J.P. Morgan, Goldman Sachs, Morgan Stanley, Deutsche Bank and BofA Merrill Lynch were the joint bookrunners.

MGM Resorts taps 6% notes

Less than a week after pricing $1.15 billion of 6% notes due March 15, 2023 (existing ratings B3/B+/BB), MGM Resorts returned on Monday with a $100 million add-on that priced at 100.75 to yield 5.886%.

BofA Merrill Lynch was the bookrunner for the quick-to-market deal.

The Las Vegas-based hospitality company plans to use the proceeds for general corporate purposes, including repaying certain debt maturing in 2015 and funding a portion of the development costs related to its Maryland and Massachusetts resort projects.

DHX Media talks C$150 million

DHX Media Ltd. talked is C$150 million offering of seven-year senior notes (/BB-//DBRS: BB(low)) to yield in the 6% area.

The deal via RBC and Scotia is set to price on Tuesday.

Elsewhere, the primary market remained quiet and notably illiquid on Monday, sources said.

There were signs that the impending Thanksgiving holiday in the United States – with a four-day extended weekend that gets under way following Wednesday's close – is already thinning the ranks of players in the high yield, a trader said on Monday afternoon.

Aside from the DHX Media Canadian dollar-denominated deal, the market expects to hear terms on two offerings that were carried over from last week.

The first is EnTrans International, LLC’s $250 million offering of six-year senior secured notes (B2/B).

The deal, in the market via bookrunner Credit Suisse, was talked last Thursday to yield 8¾% to 9%.

And Parq Resort and Casino was expected to price $200 million offering of seven-year senior secured second-lien notes (Caa1/B-) via Credit Suisse and Dundee.

Last Thursday, the deal was talked with an 11½% coupon to yield 12%.

Both deals were thought to still be in the market, sources said on Monday.

Negative flows

The cash flows to and from dedicated high-yield funds are not fueling a great deal of vigor in the new issue market at present, a source said on Monday.

The most recently reported daily flows for last Friday were mixed.

High-yield exchange traded funds saw $260 million of inflows on Friday. However, actively managed funds saw $205 million of outflows.

What more, tracking aggregate flows for both Thursday and Friday, the present reporting period, which wraps up at Wednesday's close, stands at negative $309 million, the source said.

Recounting the most recent funds flows information from Lipper-AMG for the week to Nov. 19, dedicated high-yield funds saw $281 million of outflows during that period, sources said.

CDW trades near issue

In the secondary market, traders saw considerable activity in the new CDW Finance/CDW LLC 5½% notes due 2024, after the technology services provider’s quickly shopped $575 million issue priced at par.

One trader saw the new bonds “bouncing around” in a par to 100¼ context, while a second saw the new issue “wrapped around par.”

Yet another market source pegged the new bonds right at the par level, estimating volume in the paper at more than $54 million by the close, making it the most active junk credit of the day.

The day’s other big deal – Tibco Software’s $950 million of 11 3/8% notes issued though Balboa Merger Sub Inc. as part of the financing for Tibco’s upcoming LBO – came too late in the day for any immediate aftermarket action, a junk market source said.

MGM bonds move up

Traders said that they did not see any kind of activity in the MGM Resorts add-on to its 6% notes due 2023 given the small size of that $100 million quick-to-market issue.

Earlier in the session, though, they did see some activity in the gaming and hospitality company’s existing 6% notes, some $1.15 billion of which priced at par on Thursday after that drive-by offering was upsized from the originally announced $1 billion.

A trader saw the bonds around the 101 bid level “earlier in the day, but I haven’t really seen too much trade since late morning in them,” he added.

A second trader saw the bonds at 101½ “on small trading.”

And a third located the bonds in a 100 7/8 to 101 3/8 context.

As had been the case on Friday, more established MGM bonds were lower in the face of the big new deal. The MGM 6¾% notes due 2020 were off about ¾ of a point on the day at 108 bid, on volume of over $8 million.

KLX takes flight

Friday’s big deal from KLX was seen trading sharply higher on Monday and on heavy volume.

Several traders saw those 5 7/8% notes due 2022 trading between 102 and 102¼ bid, or 102 1/8 to 102 3/8. One called them up 2 points on the session.

At one desk, the bonds were quoted at an even 102 bid, on volume of over $49 million.

KLX; which is being spun off from Wellington, Fla.-based aircraft interiors producer B/E Aerospace, priced $1.2 billion of the notes on Friday at par as a regularly scheduled forward-calendar offering.

The notes initially traded in a 100½ to 100¾ context, but there were some late quotes as high as the 101½ to 102 neighborhood, though on little volume, a trader said.

HD Supply sees active dealings

Elsewhere HD Supply Holdings’ 5¼% senior secured first-priority notes due 2021 were seen by a market source trading at 101 3/8 bid, up 1/8 of a point on the day. Volume was a brisk $15 million.

The facilities maintenance and building supplies company had priced $1.2 billion of the notes at par in a quick-to-market transaction on Wednesday.

When the bonds were freed for aftermarket dealings, traders saw heavy volume in the new issue, topping the $85 million mark. The bonds had traded as high as just under 101 bid and as low as 100 1/8, before ending in a context of 100 3/8 to 100½.

By Friday, they had moved up another up 7/8 of a point on the day, finishing at 101¼ bid, on active volume of over $22 million.

Slow session seen

Traders said that apart from the active dealings in the new paper, Monday’s session was slow, “and that’s only going to get slower,” one of them said, in the run-up to Thursday’s Thanksgiving holiday.

Market participants are anticipating that both the Wednesday and Friday sessions will be dead quiet, with few participants in and many of those leaving early.

Indicators up on day

Statistical indicators of junk market performance were higher across the board for a second straight session on Monday. They had also risen on Friday, after having been mixed on Thursday and lower all around for six straight sessions before that.

The KDP High Yield Daily index was up by 9 basis points on Monday to end at 71.82, after having jumped by 14 bps on Friday to break a five-session losing streak and a stretch of eight losses in nine sessions. That skid was interrupted only by one session during which it finished unchanged on the day.

The yield declined by 3 bps to 5.47%, after having come in by 6 bps on Friday. Before that, the yield had risen over the previous six sessions.

The Markit CDX North American High Yield Series 23 index posted its third straight gain on Monday, improving by 15/32 of a point for a second straight day to close at 107 3/8 bid, 107 7/16 offered.

The Merrill Lynch U.S. High Yield Master II index also improved on Monday, by 0.099%, on top of Friday’s 0.329% gain – its first advance after seven successive sessions on the downside.

The latest gain raised its year-to-date return back over the 4% mark, to 4.078% from Friday’s 3.975%. However, the index remained well down from its peak level for the year of 5.847%, recorded on Sept. 1.

According to the Finra-Bloomberg Active US High Yield Bond index, junk market volume rose to $2.885 billion on Monday, from $2.657 billion on Friday.

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