OneMain/Springleaf, WellCare prices; four deals on deck; Vistra dominates; Matador stuck at par

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 8 – The domestic primary market saw another active session on Wednesday with two deals pricing and several more on deck before the week draws to a close.

WellCare Health Plans, Inc. priced an upsized $750 million issue of eight-year senior notes (Ba2/BB) at par to yield 5 3/8%. The notes were up almost 1 point in high-volume trading after breaking for trade.

OneMain/Springleaf priced an upsized $700 million add-on to the Springleaf Finance Corp. 7 1/8% senior bullet notes due March 15, 2026 (B1/B+) at 100.5 to yield 7.039% in a Wednesday drive-by.

While some expected Marriott Vacations Worldwide Corp. to price its $750 million offering of eight-year senior notes on Wednesday, official price talk and timing have yet to circulate with rumors the order book is only a fraction of the deal size.

Marriott joins BMC Software, Herbalife Nutrition Ltd. and Verscend Holding Corp. on the calendar of deals expected to price before the week draws to a close.

Meanwhile, Vistra Energy Corp.’s new 5½% senior notes due 2026 (Ba3/BB/BB) dominated trading activity in the secondary space with notes starting the day weak but gaining strength as the session progressed.

While trading paled in comparison, Matador Resources Co.’s newly priced 5 7/8% senior notes due 2026 (B2/BB-) were also active in the secondary space although the notes were largely stuck at par.

ACI Worldwide, Inc.’s 5¾% senior notes due 2026 saw the lightest trading activity out of Tuesday’s deals. However, the notes put in a strong secondary market performance.

Meanwhile, Endo International’s junk bonds were active and on the rise after an earnings beat.

Tesla Inc.’s 5.3% senior notes due 2025 saw another day of high-volume trading on Wednesday but gave up most of Tuesday’s gains after CEO Elon Musk tweeted his intention to take the company private.

Oversubscribed WellCare upsized and tight

WellCare Health Plans priced an upsized $750 million issue of eight-year senior notes (Ba2/BB) at par to yield 5 3/8%.

The issue size increased from $700 million.

The yield printed at the tight end of yield talk in the 5½% area and inside of initial guidance in the 5¾% area, sources said.

WellCare's offer was halfway circled up by reverse inquiry and was five-times oversubscribed at the original size by Tuesday's close, a market source said.

JP Morgan was the lead for the acquisition financing.

OneMain/Springleaf upsized and rich

The high-yield drive-through window, which was open on Monday and Tuesday, reopened on Wednesday.

OneMain/Springleaf priced an upsized $700 million add-on to the Springleaf Finance Corp. 7 1/8% senior bullet notes due March 15, 2026 (B1/B+) at 100.5 to yield 7.039% in a quick-to-market trade.

The reoffer price came at the rich end of official price talk and initial price talk which were both set at 100 to 100.5.

Goldman Sachs was the left bookrunner.

BMC shares the spotlight

The new issue market motored through the first three busy sessions of the Aug. 6 week.

That being the case, dealers whittled down the active forward calendar to just four offerings expected to clear ahead of the coming weekend.

At least two of those are conspicuous due to a paucity of solid recent news about them, sources say.

BMC Software was due to wrap up the roadshow for its $1,825,000,000 equivalent two-part offering of eight-year senior notes (Caa2/CCC+) in Los Angeles on Wednesday.

Although tranche sizes were pending as of Wednesday's close, initial guidance on the dollar-denominated tranche remains unchanged in the 9¾% area, while talk on the euro-denominated tranche is heard to be in the 8¼% area.

The order book is heard to be just above deal size, according to a trader who added that covenant changes are expected. An aggressive covenant package has engendered investor pushback, sources say.

BMC might reasonably have expected having the new issue stage pretty much to itself, heading into the early part of August, a typically slow time for junk issuance.

However, the market has been anything but slow.

Although weekly issuance has run at a comparatively anemic $2.28 billion since the beginning of June, according to Prospect News data, the week of Aug. 6 has already put up $4.1 billion to Wednesday's close, with another $4 billion to price before the weekend.

Hence, while BMC Software might reasonably have expected to be pretty much alone under the spotlight for its highly leveraged LBO deal, the opposite has been the case, as it hit the market to price during a week in which issuance is expected to triple the weekly run rate that the market has seen since early June.

Late-week deals

Away from BMC Software, Marriott Vacations is in the market with a $750 million offering eight-year senior notes with initial guidance is in the 6½% area.

Some market watchers expected that deal to price Wednesday. However, there was no news on official price talk or timing by the Wednesday close, according to a trader who added that the buzz in the market has Marriott thus far playing to an order book that is a fraction of the deal size.

Apart from the BMC and Marriott deals, two offers are slated for late-week executions.

Herbalife is expected to wrap up the marketing of its $400 million offering of eight-year senior notes (B1/BB-) – a Jefferies deal – with investor calls on Thursday.

Initial guidance is in the mid-to-high 7% area, a trader said.

And Verscend Holding is marketing $1.15 billion of eight-year notes (Caa2) on a roadshow set to wrap up on Friday. As the market awaits official talk the guidance is in the 9¼% area, sources say.

WellCare trades up

WellCare’s 5 3/8% senior notes due 2026 traded more than 1 point above their issue price in high-volume activity after breaking for trade on Wednesday.

The notes were trading in a range of par and 101 1/8 after breaking for trade, a market source said.

The notes were quoted at 101 bid, 101½ offered and were seen changing hands at 101 1/8 in the late afternoon, sources said.

“This one traded better,” a market source said.

With more than $85 million on the tape in the late afternoon, the bonds were second only to Vistra Energy in trading activity in the secondary space.

Vistra dominates

Vistra Energy’s 5½% senior notes due 2026 were off to a lackluster start in early trading but gained strength as Wednesday’s session progressed.

The notes at times lagged their issue price trading to a low of 99.938.

However, they were seen trading between par 3/8 to par 5/8 in the late afternoon, a market source said.

With more than $128 million on the tape, the bonds dominated trading activity in the secondary space.

Vistra Energy priced an upsized $1 billion issue of the notes at par to yield 5½% in a Tuesday drive-by.

The deal was increased from $800 million.

The yield printed at the tight end of the 5½% to 5 5/8% yield talk and tight to initial talk in the high 5% area. The original issue size was $800 million.

Matador at par

Matador’s 5 7/8% notes were active but were largely stuck at par in the secondary space, sources said.

The notes were seen trading at par with more than $38 million on the tape late in Wednesday’s session.

Matador Resources priced an upsized $750 million issue of the notes at par in a Tuesday drive-by. The deal was increased from $700 million.

The yield printed at the tight end of the 5 7/8% to 6% yield talk and tight to initial talk in the low 6% area.

ACI strong

ACI’s newly priced 5¾% senior notes due 2026 saw light trading volume in comparison to the other deals that priced on Tuesday.

However, the notes were putting in a strong secondary market performance. They were quoted at par ¼ bid, par ¾ offered. Most trades were between par ½ and par ¾, a market source said.

There were about $24 million of the bond on the tape in the late afternoon, a market source said.

ACI priced an upsized $400 million issue of the notes at par to yield 5¾% on Tuesday.

The yield printed in the middle of yield talk in the 5¾% area and tight to initial guidance in the high 5% area to 6%.

Endo’s earnings

Endo’s junk bonds were active and making gains in the secondary space after the pharmaceutical company beat analyst expectations in its second-quarter earnings report and raised guidance.

More than $100 million of Endo’s junk bonds traded on Wednesday, a market source said.

The company’s 6% senior notes due 2025 were the most active in the secondary space and were up about 2½ points.

They were seen changing hands at 85 with more than $52 million of the bonds on the tape.

Endo’s 6% notes due 2023 were up about 1 5/8 point in active trading. They were seen changing hands at 88 5/8 with more than $30 million of the bonds on the tape.

Endo’s 5 3/8% notes due 2023 were up about 2¼ point. They were seen trading at 88¾ with more than $20 million of the bonds traded.

Endo reported non-GAAP earnings per share of 76 cents, which beat analyst expectations for 54 cents per share.

Endo raised its 2018 guidance to revenue of $2.75 billion to $2.85 billion from $2.6 billion to $2.8 billion.

Tesla in focus

Tesla’s 5.3% senior notes due 2025 saw another day of high-volume trading in the secondary space.

However, the notes were giving up some of Tuesday’s gains as the dust settles and speculation begins about CEO Elon Musk’s twitter announcement that he intended to take the company private.

The 5.3% notes were seen down about 1 point to trade at 91.5 on Wednesday.

They had gained about 1.5 to 2 points to trade as high as 93 on Tuesday. More than $44 million of the bonds traded on Wednesday.

While the notes remained active, they largely returned to their previous levels prior to Musk’s Tuesday tweet about taking the company private at $420 a share.

Indexes largely flat

Three benchmarks for the high-yield secondary market were largely flat on Wednesday after all posted solid gains on Wednesday.

The KDP High Yield Daily index was up 1 basis points to 70.61 with the yield flat at 5.78%. The index was up 7 bps on Tuesday and 3 bps on Monday.

The Merrill Lynch High Yield index was up 1.9 bps with the year-to-date return now 1.610%.

The index was up 15.9 bps on Tuesday and 9.1 bps on Monday.

The CDX High Yield 30 index was flat, closing Wednesday at 107.24. The index was up 10 bps to close Tuesday at 107.24. The index was also up 4 bps on Monday.

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