Post-holiday primary cooks with Zayo, Endo and HealthSouth drive-bys; new, recent deals busy

By Paul Deckelman and Paul A. Harris

New York, Jan. 20 – It was back to work in Junkbondland on Tuesday following Monday’s market close for the Martin Luther King Jr. Day holiday. But unlike some back-to-work sessions following three-day weekends that seem to be almost like holidays themselves, with people straggling back into the office and not much getting done, Tuesday was a serious and busy session, particularly in the primary realm.

High-yield syndicate sources said that three deals totaling slightly more than $2.3 billion of proceeds got done, all of them opportunistically timed and quickly shopped drive-by transactions.

The big deal of the day was an upsized $1.2 billion offering of 10-year notes from Irish specialty pharmaceutical and medical devices manufacturer Endo International plc via several subsidiaries. It priced too late in the session for any initial aftermarket action, a trader said.

But there was some secondary market trading in the day’s other two deals, which had priced earlier in the session.

Zayo Group Holdings, Inc., a Boulder, Colo.-based telecommunications solutions company, brought a $700 million issue of 8-year notes to market via a pair of subsidiaries. The bonds saw brisk aftermarket action slightly below their issue price, traders said.

The day’s other deal – an upsized $400 million add-on to inpatient rehabilitation hospital operator HealthSouth Corp.’s existing 2024 notes – moved up from their issue price in busy dealings.

There was also a fair amount of trading going on in some of the deals that had priced last week, including issues from Valeant Pharmaceuticals International, Inc., Virgin Media, Inc. and Open Text Corp.

Traders said that new and recent deals mostly pushed existing bonds out of the spotlight, although here and there were exceptions, such as restructuring gaming giant Caesars Entertainment Corp. and plane maker Bombardier Inc., both of which had been active last week on news developments, as well as energy credits like California Resources Corp. and Linn Energy LLC.

Statistical indicators of junk market performance were meanwhile mixed for a fourth consecutive session.

Endo, upsized and inside of talk

The primary market roared into action on Tuesday, trailing the three-day weekend in the United States.

Three issuers, each bringing a single quick-to-market tranche, raised $2.3 billion.

Two of the three deals were upsized.

Executions harkened back to the hot market days of January 2014, with one deal coming at the tight end of talk, one coming at the rich end of talk and one coming inside of price talk.

Endo Ltd. priced an upsized $1.2 billion issue of 10-year senior notes (B1/B+) at par to yield 6%.

The acquisition deal was upsized from $1 billion.

The yield printed 12.5 basis points beneath the tight end of yield talk in the 6¼% area.

Joint physical bookrunner RBC will bill and deliver. Citigroup was also a joint physical bookrunner. Goldman Sachs was a joint bookrunner.

Zayo at the tight end

Zayo Group, LLC and Zayo Capital, Inc. priced a $700 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 6%.

The yield printed at the tight end of the 6% to 6¼% yield talk.

Goldman Sachs was the left bookrunner for the acquisition deal. Barclays, Morgan Stanley and RBC were the joint bookrunners.

SunTrust was the co-manager.

Upsized HealthSouth at rich end

HealthSouth launched and priced an upsized $400 million add-on to its 5¾% senior notes due Nov. 1, 2024 (existing ratings Ba3/BB-) at 102 to yield 5.34%.

The deal was upsized from $300 million.

The reoffer price came at the rich end of the 101.5 to 102 price talk.

BofA Merrill Lynch, Barclays, Citigroup Global Markets, Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley, RBC Capital Markets, Regions Securities LLC, SunTrust Robinson Humphrey and Wells Fargo Securities LLC were the joint bookrunners.

The Birmingham, Ala.-based owner and operator of hospitals plans to use the proceeds to repay debt, to fund acquisitions, investments, capital expenditures and working capital and for general corporate purposes.

TTM Technologies roadshow

TTM Technologies, Inc. began a roadshow on Tuesday for a $350 million offering of eight-year senior secured second-lien notes (expected ratings Caa1/B-).

JPMorgan and Barclays are the joint bookrunners.

Upon release from escrow, proceeds, along with a new bank loan, will be used to fund the acquisition of Viasystems Group, Inc. and to repay debt.

Elsewhere, Citgo plans to sell $1.5 billion of high-yield notes.

Timing on the deal, which will be led by sole bookrunner Deutsche Bank Securities Inc., has not yet been announced.

Proceeds will be used to fund a distribution to Citgo Holdings' ultimate parent.

The financing also includes a $1 billion term loan that is also being led by Deutsche Bank, which is set to launch at a Thursday bank meeting.

SIG Combibloc roadshow

In the euro-denominated primary market, Switzerland-based SIG Combibloc plans to start a roadshow in Europe on Thursday for a €700 million equivalent offering of eight-year senior notes (Caa1/B-).

The LBO deal is coming in dollar- and euro-denominated tranches, the sizes of which remain to be determined.

Global coordinator BofA Merrill Lynch will bill and deliver. Barclays and Goldman Sachs are also global coordinators. Nomura, RBC, Credit Agricole, Mizuho, RBS and UniCredit are bookrunners.

Sarens subordinated notes

Belgian-based Sarens Group is marketing an offering comprised of between €75 million and €150 million of seven-year subordinated notes, according to a London-based sell-side source.

An investor roadshow is underway, and the deal could last for the remainder of the present week, pending demand; it is expected to launch and price on Jan. 26.

The notes come with initial guidance that has them pricing with a five-handle yield, according to the source.

Joint bookrunner ING will bill and deliver. BNP Paribas, Degroof and KBC are also joint bookrunners.

The notes come with three years of call protection.

The Wolvertem, Belgium-based provider of heavy lifting and specialized transport equipment plans to use the proceeds to repay operating leases and exercise options linked to equipment leases.

Mixed flows

The cash flows of the dedicated high-yield funds were mixed on Friday, the most recent day for which data was available at press time, a market source said.

High yield ETFs sustained $89 million of outflows on the day, while actively managed funds saw $125 million of inflows.

Zayo, HealthSouth trade around

In the secondary arena, a trader said that Zayo Group’s new 6% notes due in April of 2023 were among the day’s most actively traded junk credits, with more than $14 million seen having changed hands by the close. He saw the bonds at around 99 9/16 bid, down from their par issue price.

A second trader quoted the new deal from the fiber-based provider of bandwidth infrastructure in a 99 5/8-to-100 1/8 bid context.

HealthSouth’s add-on to its existing 5¾% notes due 2024 were pegged by a market source at 102 7/8 bid, up from their 102 issue price, with over $13 million having traded.

Endo’s 6% notes due 2025 came too late in the day for any dealings. Its existing 7¼% notes due 2022 were about unchanged at 107 bid on volume of over $2 million, while there were only a few smallish trades in its existing 7% notes due 2019, around the 104½ bid mark.

New deals the day’s focus

A trader said that activity in the secondary market on Tuesday was “pretty slow, with everybody waiting for these new deals.”

He opined that “it seems accounts have put secondary trading [in existing issues] on hold – they’re focused on the primary market right now.”

He said that this reluctance to trade even extended to recently priced issues. He said that there was “some trading in them – but it was muted at best.”

Valeant tops actives

But at another shop, a trader said that Thursday’s offering from Canadian pharmaceuticals manufacturer Valeant was “right near the top” of the high-yield Most Actives list, with over $31 million of those 5½% notes due 2023 having changed hands, although that was down from the nearly $100 million of those bonds that had traded on Friday.

Valeant had priced $1 billion of those notes at par on Thursday in a quick-to-market transaction, and they had initially gotten as good as a 101¾-to-102 bid context. They had eased by around ½ point in Friday’s heavy trading, closing out around 101¼ bid, but on Tuesday the bonds had moved back up to around 101½ bid.

Virgin, Open Text are busy

Among other recently priced credits seeing a fair amount of activity on Tuesday, Virgin Media’s 5¾% notes due 2025 were finishing the day at 101¼ bid, up 3/8 point, on volume of over $13 million.

Virgin – a New York-based subsidiary of Liberty Global plc that provides phone, cable and internet service to customers in the United Kingdom, priced $400 million of those notes at par last Tuesday as part of a £925 million three-part regularly scheduled forward calendar offering of 10-year secured and unsecured notes that also included sterling- and euro-denominated tranches.

The bonds had initially traded in a 101¼-to-101½ bid context before settling in around current levels.

Open Text’s 5 1/8% notes due 2023 eased by 1/8 point on the day on volume of more than $12 million, but still finished at 102 5/8 bid – well up from the par level at which the Waterloo, Ont.-based business software provider had priced its $800 million issue last Monday, after upsizing that scheduled forward calendar transaction from an originally planned $600 million. The bonds had initially jumped to around 102 bid in their initial secondary dealings, and continued to firm in the days after that.

Bombardier resumes slide

Away from the new and recent deals, Canadian aerospace and railroad equipment maker Bombardier’s 6% notes due 2022 were on the slide for a third consecutive session on Tuesday, losing more than ¾ point to end at just under 91 bid with over $15 million of turnover.

That issue, as well as the company’s other bonds, had begun their nosedive on Thursday, plummeting more than 5 points in heavy trading after the plane maker announced a pause in the development of its new Learjet 85 medium-sized business jet, citing weaker demand for the aircraft.

That will lead to the loss of about 1,000 jobs at Learjet factories in Wichita, Kan., and in Mexico.

The company also issued lower guidance for its 2014 fiscal year ended Dec. 31, after taking a $1.4 billion fourth-quarter charge connected with Learjet.

The bonds dropped to around the 95 level from prior levels at par, fell another 3 points on Friday to settle around 92 bid and were continuing to ease on Tuesday.

Oil names lower

World crude oil prices – which had rallied at the end of last week to show its first weekly gain after seven straight weeks of getting hammered – resumed their slide on Tuesday, and oil and natural gas exploration and production credits went along for the downside ride.

Los Angeles-based E&P operator California Resources’ 5½% notes due 2021 lost about ½ point to end just below 81 bid on volume of more than $14 million, while its 6% notes due 2024 likewise declined by ½ point to 78¾ bid on over $12 million of turnover.

Houston-based Linn Energy’s 8 5/8% notes due 2020 dropped by 1¼ points to go home at 82 bid with over $10 million having traded.

The U.S. benchmark West Texas Intermediate crude for February delivery slid by $2.30, or 4.7%, on the day in trading on the New York Mercantile Exchange, finishing at $46.39.

Caesars up on plan developments

In the distressed-debt market, traders said Caesars Entertainment’s 10¾% notes due 2016 were trading actively – and better – as investors digested news out Monday that could impact the company’s restructuring plan.

The Las Vegas-based gaming giant’s 10¾% notes were called “quite active” by a trader on Tuesday.

The trader said the debt rose “almost 1½ points” to close around 21 5/8.

Another trader also deemed the issue “pretty active,” seeing the notes trade with a 21 handle.

On Monday, U.S. District Judge Shira Scheindlin gave credence to junior noteholders’ claims that Caesars was looking to thwart their recovery prospects by moving around assets.

The judge – overseeing a previous lawsuit filed by noteholders in Manhattan – said that such a transfer was a violation of the federal Trust Indenture Act of 1939.

While Caesars itself believes that it did no wrong by eliminating guarantees on junior debt back in August, it could give lower-ranking creditors more clout as they look to fight against a company reorganization plan that would give first-lien noteholders a 92% recovery and junior noteholders barely more than 10%.

Caesars put its main operating unit, Caesars Entertainment Operating Co., into Chapter 11 last week in order to restructure its more than $18 billion of debt.

Market indicators mixed on day

Statistical indicators of junk market performance were mixed for a fourth consecutive session on Tuesday; they had turned mixed on last Thursday after having been lower last Wednesday. Tuesday was the fifth session in the last six that those market measures have been mixed.

The KDP High Yield Daily index moved down by 7 basis points to close at 70.6 after having gained 3 bps on Friday, its second consecutive gain. The index was not published on Monday due to the Martin Luther King Day holiday observance.

Its yield rose by 1 bp on Tuesday to 5.63%, after having been unchanged at 5.62% on Friday, the same as it had finished on Thursday, when it had come in by 1 bp.

The Markit Series 23 CDX North American High Yield index saw its second consecutive loss on Tuesday and its seventh such downturn over the last eight sessions, easing by 1/16 point to close at 105 1/16 bid, 105 3/16 offered.

On Monday – when the index was published, despite the legal holiday – it was down by 1/32 point, which had followed a 3/8 point gain on Friday.

The Merrill Lynch U.S. High Yield Master II index, though, gained 0.027% on Tuesday, its second straight gain. On Monday, the index had added on 0.056%, which followed a 0.087% loss on Friday.

Monday’s gain lifted its year-to-date return narrowly back into the black, at 0.02%, versus a cumulative loss of 0.007% on Monday and 0.064% on Friday.

Overall activity picked up on Tuesday, with the Finra/Bloomberg High Yield index showing volume of $3.651 billion, up from $3.123 billion on Friday. There were no volume figures published for Monday.

Stephanie N. Rotondo contributed to this review.

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