European primary active; Gray improves; Welbilt drops; McDermott improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 5 – While the domestic primary market was again quiet on Monday, the European market jumped into action with three large deals joining the forward calendar.

Verisure set a bank meeting and plans to start a roadshow on Tuesday for a €1,012,000,000 capital raise coming as bank loans and high-yield notes.

International Design Group SpA started a roadshow on Monday for a €720 million two-tranche offering and Intertrust Group BV started a roadshow for a €500 million offering.

Victoria plc set initial price talk on its €450 million offering, which is expected to price early to mid-week after unexpectedly carrying over from last week.

For the domestic primary market, HC2 Holdings, Inc.’s $535 million offering of five-year senior notes remains on the forward calendar after also carrying over from last week.

RegionalCare Hospital Partners Holdings, Inc. and LifePoint Health, Inc. will be on the road Tuesday through Thursday with their $1,575,000,000 offering of senior notes.

Meanwhile, the secondary space was largely flat on Monday with trading volume light as market players turn their attention to the U.S. midterm election and the impact its outcome will have on the markets.

While volume was light, Gray Television Inc.’s newly priced 7% senior notes due May 2027 (B3/B+/BB-) continued to gain strength in secondary trading.

With little new paper in the secondary space, trading activity continued to focus on earnings as the space enters the final stretch of earnings season.

Welbilt Inc.’s 9½% senior notes due 2024 dropped slightly in active trading after a third-quarter earnings miss.

McDermott International Inc.’s 10 5/8% senior notes due 2024 (B2/B-) continued to see active trading on Monday with the notes continuing to improve after a 10-point drop after the company’s third-quarter earnings announcement.

Verisure brings loan, notes

Verisure set a bank meeting and plans to start a roadshow on Tuesday in London for €1,012,000,000 of debt coming in the form of a bank loan and high-yield notes.

Verisure Holding AB is offering new term loan B paper (expected ratings B1/B). BofA Merrill Lynch and Nomura are joint global coordinators and physical bookrunners.

Verisure Holding AB is also offering new 4.5-year senior secured notes (expected ratings B1/B). Morgan Stanley is the lead bookrunner for the new secured notes.

And Verisure Midholding AB is offering add-on paper to its 5¾% senior notes due Dec. 1, 2023 (expected ratings Caa1/CCC+). Goldman Sachs is the lead bookrunner for the add-on.

The roadshow is set to run through the Nov. 5 week.

The Malmo, Sweden-based provider of security systems plans to use the proceeds to refinance its 6% senior secured notes due Nov. 1, 2022, as well as to repay its revolving credit facility and to fund a distribution to its shareholders.

International Design two-part offer

International Design Group started a roadshow on Monday for a €720 million two-part offering of seven-year senior secured notes.

The deal is coming in tranches of fixed-rate notes and floating-rate notes.

Tranche sizes remain to be determined.

The roadshow wraps up on Friday.

Joint global coordinator JPMorgan will bill and deliver.

Proceeds will be used to fund the buyout of the Italy-based lighting and furniture producer by Investindustrial and the Carlyle Group, and to repay debt.

Intertrust roadshow

Intertrust Group started a roadshow on Monday in London for a €500 million offering of seven-year senior notes.

Joint global coordinator Deutsche Bank will bill and deliver.

The Netherlands-based financial services company plans to use the proceeds, together with cash on hand and new bank debt, to repay existing bank debt.

Victoria talks

Meanwhile, in a deal that unexpectedly remained in the market over the past weekend due to market volatility, Victoria plc set initial price talk on its €450 million offering of five-year senior secured notes (BB-/expected BB) at 5½% to 5¾%.

The deal is expected to price in the early to middle part of the Nov. 5 week.

Different technicals for European market

One possible explanation for the steady operation of the European primary market while the dollar-denominated market has been largely sidelined is the technical strength of the latter, a London-based debt capital markets banker said on Monday.

While dollar-denominated high-yield bond funds have lately sustained headline outflows, the cash flows of the European junk funds have tended to be positive, the banker said.

European junk bond investors are seeing cash build up, with little new issue supply in which to put that cash to work, the source said.

European issuance was €4.3 billion for October, the slowest month since February, the banker added.

Also, the European new issue market seems to be less correlated with capital markets volatility, the banker remarked.

The dollar-market

The dollar-denominated active new issue calendar features a pair of deals.

One carried over the weekend.

HC2 Holdings was scheduled to price its a $535 million offering of five-year senior secured notes (Caa1/B-) last Friday, sources say.

The deal, which is in the market to take out the company's 11% senior secured notes due December 2019, came with early guidance in the low-to-mid 9% area.

Subsequently pricing widened and the deal's structure has been under review, sources say.

Early Monday, the market buzz had HC2 pricing with a 10% coupon at a discount to yield 11½% to 12%, a trader said.

The perception in the market is the deal is coming from a highly motivated issuer and will price, the source added.

Meanwhile, RegionalCare Hospital Partners and LifePoint Health plan to market $1,575,000,000 of eight-year senior notes (Caa1/CCC+) on a Tuesday through Thursday roadshow.

Initial guidance on the merger financing is in the 9¼% area, a trader said.

Gray improves

While trading of Gray Television’s 7% senior notes due May 2027 was light on Monday, the notes continued to improve, a market source said.

The notes were up 3/8 point to close the day at 101 3/8. The notes dominated trading activity on Friday, closing the day at 101.

Gray priced an upsized $750 million of the 7% notes at par in a Thursday drive-by. The initial size of the deal was $500 million.

In a reversal of a previous trend, which has seen issuers flock to the leveraged loan market, Gray’s concurrent term loan was downsized to $1.4 billion from $2.15 billion with proceeds shifted to the senior notes offering.

Proceeds will be used to fund Gray’s acquisition of Raycom Media Inc.

Welbilt drops

Welbilt’s 9½% senior notes due 2024 dipped in active trading on Monday after the restaurant equipment-maker reported third-quarter earnings prior to the market open.

The 9½% notes traded down about ½ point to 108 after missing consensus estimates on revenue and earnings per share.

Welbilt reported earnings per share of 19 cents on revenue of $412.9 million and EBITDA of $86.7 million for the third quarter.

Analysts had expected earnings per share of 27 cents on revenue of $421.3 million for the third-quarter.

While Welbilt’s 9½% notes dipped on Monday, they held up compared to Welbilt’s equity, which closed the day down 26.19%.

McDermott improves

McDermott’s 10 5/8% senior notes due 2024 continued to climb in active trading in the secondary space.

The notes rose about ¾ point to close Monday at 94¼, a market source said.

The notes were improved after McDermott hosted an investor day on Monday.

The 10 5/8% notes have seen a slight rebound after dropping 10 points on Oct. 31 after reporting third-quarter earnings.

McDermott missed earnings on its top and bottom line and announced a divestiture from its storage tank and U.S. pipe fabrication business.

Prior to the earnings announcement the 10 5/8% notes were trading around par ½.

Friday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Friday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $182 million of inflows on the day.

Actively managed high-yield funds were essentially flat with $5 million of inflows on Friday, the source added.

Both categories of funds sustained hefty cash outflows during the month of October, the trader said.

The ETFs posted negative-$3.6 billion on the month, while the actively managed funds were negative-$4 billion in October.

Combined year-to-date flows for both categories came to negative-$32.6 billion at Friday's close, the trader said.

Indexes gain

Indexes launched the week with gains after a mixed week where some indexes posted losses and others saw large gains.

The KDP High Yield Daily index was up 8 basis points to close Monday at 69.18 with the yield now 6.31%.

The index was down 13 bps on the week last week.

The ICE BofAML US High Yield index was up 5.8 bps on Monday with the year-to-date return now 1.064%.

The index was up 24.4 bps on the week last week, climbing back above the 1% year-to-date return threshold on Friday after dropping below it the week before.

The CDX High Yield 30 index climbed 23 bps to close Monday at 105.91. The index saw an 89 bps gain on the week last week.

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