Shea Homes two-parter, Surgical Care, GFL deals price; Valeant up on Endo bid for Salix

By Paul A. Harris and Paul Deckelman

New York, March 11 – The high-yield primary sphere continued to churn out new deals on Wednesday, with three issuers bringing four tranches of new dollar-denominated, fully junk-rated paper to market totaling $1.25 billion, all of it in regularly scheduled forward calendar issues.

That was up a little from the $1.1 billion that got done in two tranches on Tuesday.

Builder Shea Homes LP opened the door on a $750 million two-part issue consisting of eight- and 10-year notes, which firmed slightly from their issue price when they hit the aftermarket.

The market also saw a pair of $250 million transactions.

Canadian waste-management contractor GFL Environmental Inc. did an offering of five-year notes, while medical facilities operator Surgical Care Affiliates Inc. priced an issue of eight-year paper, with the latter bonds moving up a little in the secondary.

Traders reported active dealings in Tuesday’s offerings from financial services provider KCG Holdings, Inc. and chemical manufacturer Tronox Ltd., as well as Monday’s issue from energy operator Crestwood Midstream Partners LP.

But the busiest name of the day, they said, was drugmaker Valeant Pharmaceuticals International, Inc., whose eight-year notes rose solidly after sector rival Endo International plc came in with a surprise bid for Salix Pharmaceuticals Ltd., which Valeant is also trying to acquire; traders speculated that holders of Valeant’s existing bonds are hoping that Endo prevails in the bidding war, which would keep Valeant from having to issue the more than $9 billion equivalent of new bonds it would need to finance the Salix acquisition.

Statistical indicators of junk market performance turned mixed on Wednesday after having been lower across the board for the previous three sessions and for five sessions out of the previous six.

Shea Homes prices inside

The primary market saw three issuers price a combined four tranches of notes to raise an overall total of $1.25 billion on Wednesday.

There were no drive-by deals. Nor were any of Wednesday's issues upsized.

Executions were a mixed bag, with two of the four tranches pricing inside of talk, one pricing on top of talk and the other coming wide of talk.

Shea Homes and Shea Homes Funding Corp. priced $750 million of senior notes (B2/B+) in two $375 million tranches.

A tranche of eight-year notes priced at par to yield 5 7/8%, 12.5 basis points inside of the 6% to 6¼% yield talk.

A tranche of 10-year notes priced at par to yield 6 1/8%, also 12.5 bps inside of yield talk that had been set at 6¼% to 6½%.

J.P. Morgan had the books for the debt refinancing deal.

Surgical Care atop talk

Surgical Care Affiliates priced a $250 million issue of eight-year senior notes (Caa1/B-) at par to yield 6%.

The yield printed on top of yield talk.

Goldman Sachs was the left bookrunner. JPMorgan, Citigroup, Barclays, Morgan Stanley, BofA Merrill Lynch and SunTrust were the joint bookrunners.

The Deerfield, Ill.-based surgical center operator plans to use the proceeds, together with proceeds from a new term loan, to repay its existing term loan in its entirety, with any remaining proceeds to be used for general corporate purposes.

GFL Environmental at a discount

GFL Environmental priced a $250 million issue of 7 7/8% five-year senior notes (B3/B) at 99.488 to yield 8%.

The yield printed 25 bps beyond the wide end of the 7½% to 7¾% yield talk.

BMO was the left bookrunner. Credit Suisse was the joint bookrunner.

The Vaughan, Ont.-based environmental services company plans to use the proceeds to repay revolver and unsecured term loan debt, to fund the tender for up to C$50 million of its 7½% senior notes and for general corporate purposes, including potential acquisitions.

Reliance Comfort talk

Looking toward the Thursday session, Reliance Comfort talked its $375 million offering of eight-year senior secured notes (B1/BB-) to yield 6¼% to 6½%.

Books close at 2:30 p.m. ET Thursday, and the deal is set to price thereafter.

Joint bookrunner Barclays will bill and deliver. RBC is also a joint bookrunner.

The Toronto-based company plans to use the proceeds to refinance its 9½% senior secured notes due 2019.

Merlin massively oversubscribed

In the European session, Merlin Entertainments plc priced an upsized €500 million issue of non-callable seven-year senior notes (Ba2/BB) at par to yield 2¾%.

The deal was upsized from €480 million.

The yield printed at the tight end of the 2¾% to 3% yield talk.

The deal was 10-times oversubscribed, according to a London-based sellside source who added that the notes traded to 102 bid on the break before settling to 101 5/8 bid, at the London close.

Physical bookrunner HSBC will bill and deliver. Barclays and Royal Bank of Scotland were also physical bookrunners.

The Poole, England-based operator of location-based visitor attractions plans to use the proceeds, together with borrowings under its new senior facilities and cash in hand, to repay bank debt, as well as to pay termination fees and close certain hedging agreements.

Moto atop revised talk

Moto Hospitality priced a £175 million issue of second-lien notes due 2020 (//expected B+) at par to yield 6 3/8%.

The yield printed on top of yield talk that had been revised from earlier talk of 6½% to 6¾%.

Joint bookrunner Deutsche Bank will bill and deliver for the debt refinancing deal. Commerzbank, Credit Agricole, ING, Investec, Lloyds, Scotia and SG CIB were also joint bookrunners.

Wind two-part deal

Wind Acquisition Finance SA plans to price a €600 million two-part offering of senior secured notes (Ba3/BB) on Thursday.

The debt refinancing deal includes a tranche of new floating-rate notes due 2020 and an add-on to the 4% senior secured notes due July 15, 2020.

Tranche sizes remain to be determined.

Joint bookrunner Deutsche Bank will bill and deliver. Banca IMI, BNP Paribas, Credit Agricole and HSBC are also joint bookrunners.

Shea, Surgical Care firmer

In the secondary arena, a trader heard the new Shea Homes bonds quoted between par and 100¾ bid, and said those levels applied to both tranches of the Walnut, Calif.-based homebuilder’s deal.

With the offering of 5 7/8% notes due 2023 and 6 1/8% notes due 2025 having priced fairly late in the session, he said that “no real trades were happening” at that point.

Another trader pegged both issues at 100¼ bid, up from their par pricing levels.

A trader meantime said that Surgical Care Affiliates’ new 6% notes due 2023 were in a 100½-to101½ bid context in initial aftermarket dealings, up from their par issue price.

No immediate secondary market activity was seen in the day’s other new deal, GFL Environmental’s 7 7/8% notes due 2020.

Tronox trades actively

One of the busiest bonds of the day, traders said, was the new Tronox 7½% notes due 2022, which racked up “pretty good volume,” one said – more than $38 million.

He saw those notes trading between par and 100½ bid, while a second trader put the range between 100 1/8 and 100½ bid.

Yet another market source saw the bonds going home at 100¼ bid.

Tronox, a Stamford, Conn.-based producer and marketer of mineral sands, titanium dioxide pigment and electrolytic products, is in the process of acquiring FMC Corp.’s Alkali Chemicals division, financing the purchase with the proceeds from the notes deal.

The $600 million regularly scheduled forward calendar deal priced at par Tuesday via Evolution Escrow Issuer LLC, a special-purpose financing vehicle that will be merged with and into a Tronox subsidiary, Tronox Finance LLC.

KCG moves lower

There was also a fair amount of aftermarket activity in Tuesday’s other deal, from Jersey City-based financial services firm KCG Holdings.

More than $20 million of those 6 7/8% notes due 2020 were seen having changed hands – but at lower levels.

The $500 million regularly scheduled offering had priced at 98.962 to yield 7 1/8% and had initially traded in a 98¾-to-99 bid context, but on Wednesday “they were down from the get-go,” a trader said, seeing them at around 98½ bid.

A second trader also located the bonds at that lower level on Wednesday, while a third had them even lower – at 98 5/16 bid, which he called down 7/16 on the day.

Crestwood climbs

On the upside, a market source said that Monday’s offering from Crestwood Midstream Partners was trading higher on sizable volume, seeing those 6¼% notes due 2023 at 100¾ bid, a gain of 3/16 point on the day.

More than $11 million of those notes traded.

The Houston-based energy master limited partnership priced $700 million of those notes at par on Monday in an opportunistically timed quick-to-market offering.

Valeant up on Endo move

Away from the new deals, a trader said that “the story of the day” was Irish drugmaker Endo Pharmaceuticals’ sudden and unexpected interference with rival Valeant Pharmaceuticals’ previously announced attempt to acquire sector peer Salix Pharmaceuticals, which had the effect of pushing Valeant’s bonds higher.

He quoted Laval, Quebec-based Valeant’s 5½% notes due 2023 up one point.

A second trader saw the bonds up 1 1/8 point on the day at 99 11/16 bid, on volume of more than $48 million.

“Endo came in with a better bid for Salix,” the first trader said, “so now it looks like it [Valeant’s acquisition of Salix] isn’t going to happen.”

He said that would be good news for the holders of Valeant’s bonds, since the company announced earlier this week that it plans to issue more than $9 billion of new dollar- and euro-denominated debt to fund the acquisition – an announcement that sent the existing Valeant bonds lower and had analysts questioning the wisdom of nearly doubling the company’s already hefty leverage of more than $15 billion.

Last month Valeant announced its plan to acquire Raleigh, N.C.-based Salix for $10.1 billion, or $158 per share, but Endo said Wednesday that it is willing to pay $175 per share for Salix, or about $11.2 billion.

One of the traders said that Endo’s proposal – and the likelihood that it might have to issue debt to fund the takeover – pushed its existing 6% notes due 2025 lower, though on “only a couple of trades.”

He said the bonds were at 103½ bid, down about a point from Monday’s level, while another trader called the notes down only about ¼ point from where they were on Tuesday, seeing volume of around $5 million.

Endo’s 5 3/8% notes due 2023, though, lost 1¾ points, ending at 99¼ bid, with more than $6 million traded.

Salix’s 6¼% notes due 2021 were about unchanged at 111¼ bid, with just one sizable trade seen.

But its 1½% convertible notes due 2019 jumped to 258 bid from prior levels around 243, on volume of over $17 million, reflecting a surge in the company’s underlying stock shares on news of the new suitor bringing a higher bid.

Indicators turn mixed

Statistical indicators of junk market performance turned mixed on Wednesday after having been lower across the board for the previous three sessions and for five sessions out of the previous six.

The KDP High Yield Daily index held steady at 71.22, breaking a string of seven consecutive losses, including on Tuesday, when the index plunged by 42 bps.

Its yield, meanwhile, came in by 1 bp to 5.39% after having ballooned out by 15 bps on Tuesday, its seventh successive widening.

The Markit Series 23 CDX North American High Yield index eased by 1/32 point on Wednesday to finish at 107 5/16 bid, 107 11/32 offered, after having fallen by 11/32 point on both Monday and Tuesday.

But the Merrill Lynch U.S. High Yield Master II index broke out of a three-session slump on Wednesday, rising by 0.116%. On Thursday, it had retreated by 0.349%, its third loss in a row and its fifth setback in the prior six sessions.

Wednesday’s improvement lifted its year-to-date return to 2.267% from Tuesday’s 2.148%, although it remained down from its peak 2015 level of 3.125%, set last Monday.

© 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.