Fiat Chrysler, Murray megadeals lead $6.6 billion primary; Halcon up; funds gain $1.35 billion

By Paul A. Harris and Paul Deckelman

New York, April 9 – The high-yield primary market saw one of its busiest days of the year on Thursday, with $6.6 billion of new dollar-denominated, fully junk-rated paper seen having come to market in nine tranches.

Total deal volume was topped only by the $8.75 billion of such paper that got done in four tranches back on March 13 – although almost all of that issuance was attributable to just one deal, a giant-sized dollar/euro offering from drug maker Valeant Pharmaceuticals International Inc. that included three huge dollar-denominated tranches.

In contrast, Thursday’s activity was spread over eight separate issuers, with only one – carmaker Fiat Chrysler Automobiles NV – having as many as two tranches. Its $3 billion deal, split into equally sized tranches of five- and eight-year notes, came as a regularly scheduled forward calendar offering.

So was the day’s other megadeal-sized offering, coal producer Murray Energy Corp.’s downsized $1.3 billion offering of six-year secured notes.

Several smaller deals also came to market after having been shopped around to potential investors on roadshows. They included medical examination and case management services provider ExamWorks Group Inc.’s $500 million eight-year deal, the $400 million eight-year offerings from oil and natural gas operator Matador Resources Co. and lodging industry real estate investment trust Ryman Hospitality Properties Inc. and industrial battery manufacturer EnerSys’ $300 million eight-year issue.

The day’s other two issues were opportunistically timed and quickly shopped add-ons to existing bond issues, $600 million from software company Infor (US) Inc. and a $100 million tap from diversified holding company HRG Group Inc.

Traders saw some initial aftermarket dealings in the new issues from Fiat Chrysler, Murray Energy, ExamWorks and HRG Group, with all of the bonds being generally quoted up modestly from their respective issue prices.

Both tranches of drug maker Mallinckrodt plc’s big two-part issue that priced on Wednesday were seen busily trading on Thursday well above their issue prices, building on the solid gains first seen in Wednesday’s aftermarket.

Away from the new deals, Halcon Resources Corp.’s 2020 notes jumped in heavy trading on the news that the energy company had entered into an agreement with the holders of some of those notes, giving them stock in exchange for their paper.

Statistical indicators of market performance meanwhile remained mixed on Thursday for a second straight day after having been higher across the board for the previous two sessions.

High-yield mutual funds and exchange-traded funds saw their third consecutive weekly inflow, a $1.35 billion cash surge. That strengthened an already robust year-to-date net inflow position.

FCA prices $3 billion

Fiat Chrysler Automobiles priced $3 billion of non-callable senior notes (B2/BB-) on Thursday, according to a market source.

The deal included $1.5 billion of five-year notes that priced at par to yield 4½%. The yield printed at the tight end of the 4½% to 4¾% yield talk.

The long-maturity tranche was comprised of $1.5 billion of eight-year notes that priced at par to yield 5¼%. The eight-year notes priced in the middle of the 5 1/8% to 5 3/8% yield talk.

J.P. Morgan Securities LLC, BofA Merrill Lynch, Barclays, Citigroup Global Markets, Goldman Sachs & Co., Morgan Stanley & Co. LLC and UBS Investment Bank were the joint bookrunners.

The London-based automaker plans to use the proceeds for general corporate purposes, which may include refinancing the secured notes of its subsidiary, FCA US LLC (formerly Chrysler Group LLC).

Murray downsized, restructured

Murray Energy priced a downsized, restructured $1.3 billion issue of 11¼% six-year second-lien senior secured notes (B3/B-) at 96.856 to yield 12% on Thursday, according to an informed source.

The coupon and yield came on top of talk. The reoffer price came in line with price talk of about 96.8.

The size of the issue was decreased from $1.55 billion.

There are also covenant changes.

Deutsche Bank Securities Inc. and Goldman Sachs were the joint bookrunners.

The deal, which ran a late-March, early-April roadshow, was previously structured as a $1.55 billion two-part offer including five-year notes talked at 10¼% to 10½% and eight-year notes with talk heard to have pushed out to 12% from 10¾% to 11%.

Proceeds will be used to finance a portion of the acquisition of interests in Foresight Energy GP LLC and Foresight Energy LP and fund the concurrent tender offers for any and all of the 8 5/8% senior secured notes due 2021 and 9½% senior secured notes due 2020.

St. Clairsville, Ohio-based Murray Energy and St. Louis-based Foresight Energy are coal companies.

Infor tap

Infor (US) priced a $600 million add-on to its 6½% senior notes due May 15, 2022 (B3/B-) at 102.25 to yield 5.974% on Thursday, according to a syndicate source.

The reoffer price came at the rich end of the 102 to 102.25 price talk.

BofA Merrill Lynch was the left bookrunner.

Angel Island, Credit Suisse Securities (USA) LLC, Morgan Stanley, Barclays, RBC Capital Markets, Deutsche Bank, Goldman Sachs and KKR were the joint bookrunners.

The Alpharetta, Ga.-based provider of enterprise software and services plans to use the proceeds to repay all of its $560 million 11½% senior notes due 2018.

ExamWorks priced a $500 million issue of eight-year senior notes (B3/B-) at par to yield 5 5/8% on Thursday, according to a syndicate source.

The yield printed at the tight end of yield talk in the 5¾% area.

BofA Merrill Lynch was the left bookrunner. SunTrust Robinson Humphrey Inc., Wells Fargo Securities LLC, Barclays, Deutsche Bank, Fifth Third Securities and Goldman Sachs were the joint bookrunners.

The Atlanta-based company plans to use the proceeds to redeem all $250 million of its 9% senior notes due 2019, to repay its existing credit facility in full and for general corporate purposes, including acquisitions.

ExamWorks provides independent medical examinations, peer reviews, bill reviews, Medicare compliance, case management and related services.

Matador upsized

Matador Resources priced an upsized $400 million issue of eight-year senior notes (B3/B-) at par to yield 6 7/8% on Thursday, according to a market source.

The deal was upsized from $350 million.

The yield printed at the tight end of yield talk in the 7% area.

BofA Merrill Lynch was the left bookrunner.

Wells Fargo, RBC Capital Markets, BMO Securities, Scotia Capital and SunTrust Robinson Humphrey Inc. were the joint bookrunners.

The Dallas-based independent energy company plans to use the proceeds to pay down revolver debt assumed in connection with the merger of Harvey E. Yates Co. with and into Matador’s wholly owned subsidiary, as well as to fund a portion of its future capital expenditures and for other general working capital needs.

Matador is engaged in the exploration, development, production and acquisition of oil and natural gas resources.

Ryman prices tight

Ryman Hospitality Properties priced a $400 million issue of eight-year senior notes (B1/BB) at par to yield 5% on Thursday, according to an informed source.

The yield printed at the tight end of yield talk in the 5 1/8% area.

Deutsche Bank is the left bookrunner for the Rule 144A and Regulation S with registration rights offering. BofA Merrill Lynch, JPMorgan, Wells Fargo, U.S. Bancorp Investments Inc. and Credit Agricole CIB are the joint bookrunners.

The Nashville, Tenn.-based real estate investment trust is issuing via subsidiaries RHP Hotel Properties, LP and RHP Finance Corp.

The company plans to use the proceeds to repay its existing $300 million term loan A and pay down its revolver.

The REIT specializes in group-oriented, destination hotel assets in urban and resort markets.

EnerSys prices bullet

EnerSys priced a $300 million issue of non-callable eight-year senior notes (Ba2/BB+) at par to yield 5% on Thursday, according to an informed source.

The yield printed at the tight end of the 5% to 5¼% yield talk.

Goldman Sachs was the left bookrunner. BofA Merrill Lynch and Wells Fargo were joint bookrunners.

The Reading, Pa.-based manufacturer, marketer and distributor of industrial batteries plans to use the proceeds to repay its convertible notes in full, to pay down its revolver and/or for general corporate purposes.

HRG taps 7 7/8% notes

HRG Group priced a $100 million tack-on to its 7 7/8% senior secured notes due July 15, 2019 (Ba3/B+) at 104.5 to yield 6.069% on Thursday, according to an informed source.

The reoffer price came on top of price talk.

Credit Suisse and Jefferies LLC were the joint bookrunners.

The New York-based diversified holding company plans to use the proceeds to fund working capital and for general corporate purposes.

New Murray Energy, ExamWorks trade actively

In the secondary realm, Murray Energy’s new 11¼% second-lien senior secured notes due 2021 were one of the day’s most actively traded issues.

A market source said that more than $66 million of the new bonds changed hands, quoting them at 96¾ bid, slightly below the 96.856 level at which the coal producer’s downsized deal had priced.

However, others in the market were quoting the bonds a little higher than that, with one trader having seen the issue get as good as a 97 1/8-to-97 3/8 bid context.

There was also what one trader called “a decent amount” of volume seen in the new ExamWorks 5 5/8% notes due 2023.

Over $31 million of those notes traded, with the trader seeing them having gone as high as 102½ bid during the afternoon, up from their par issue price.

Another trader, though saw the notes trading at a more conservative 100½ bid.

Several different traders meantime offered levels on both tranches of the new Fiat Chrysler Automobiles two-part offering.

One said that “both of ’em were wrapped around 100¼,” up from the par level at which the $1.5 billion of 4½% notes due 2020 and $1.5 billion of 5¼% notes due 2023 had come to market.

Another trader saw the 4½% notes moving around in a 100½-to-100 5/8 bid context.

He also saw the 5¼% notes between 100 3/8 and 100½ bid.

HRG Group’s 7 7/8% senior secured notes due 2019 were seen having moved up to 105¼ bid, 105¾ offered, after having priced at 104½ bid.

Mallinckrodt holds gains

Wednesday’s two-part deal from Mallinckrodt was heavily traded on Thursday but stayed pretty near the levels that the notes had reached in their initial post-pricing aftermarket activity.

“The new Mallinckrodts were pretty active,” one trader said, pegging the Dublin-based pharmaceutical manufacturer’s new 4 7/8% notes due 2020 at 101½ bid, while seeing its 5½% notes due 2025 in a 101¾-to-102 bid context.

“They were doing all right,” another trader said, although he opined that the bonds had “perhaps given back a little” from Wednesday’s closing levels.

He saw the five-year notes at 101½ bid, 101¾ offered, while the 10-years traded between 101¾ and 101 7/8 bid.

A market source said the 10-years were the day’s most active credit in Junkbondland, with over $80 million having changed hands. He saw them up ¼ point on the day, at 101¾ bid, while volume on the five-year notes topped the $62 million mark; he saw those bonds off by ¼ point at 101¼ bid.

Mallinckrodt priced $1.4 billion of the notes on Wednesday as a regularly scheduled forward calendar deal brought to market via its Mallinckrodt International Finance SA funding unit, upsizing it from an originally announced $1.2 billion. The deal consisted of $700 million of the five-year notes, upsized from $500 million, and $700 million of the 10-years, with both tranches pricing at par. The five-years initially got as good a 101-to-101½ bid context, while the 10-years had gone home on Wednesday at 102½ to 102.

Mallinckrodt’s established 5¾% notes due 2022 moved up to just under 106 bid, a gain of 1¾ points on the day.

Halcon up on exchange

Away from the new or recently priced issues, Halcon Resources’ 9¾% notes “got as high as” 80 during Thursday trading but “came back in some,” ending with a 77 handle, a trader said.

However, that was still up 4 points on the day.

The bonds’ performance came as the Houston-based oil and gas company said it had entered into an exchange agreement with holders of the notes, in which the company will give them 65.5 million shares of stock for their bonds.

The exchange price is about $1.78 per share.

“That news gave the bonds a couple of points of lift and on considerable volume,” said a second trader, who also saw them ending at 77.

Another trader had the bonds up a deuce on the day, also at 77 bid, with over $42 million traded.

The debt might have also been impacted by a modest gain in oil prices.

West Texas Intermediate crude ended up 25 cents at $50.67 per barrel. Brent crude closed up $1.06, or 1.91%, at $56.61.

Indicators stay mixed

Statistical indicators of junk market performance were mixed for a second straight session on Thursday. They had turned mixed on Wednesday after having risen across the board on Monday and Tuesday and having been higher all around in six out of the previous seven sessions.

The KDP High Yield Daily index was unchanged at 71.64; on Wednesday, it had climbed by 13 basis points, its seventh straight advance and its 12th gain in the previous 13 sessions.

Its yield edged up by 1 bp on Thursday to close at 5.24% after having come in by 5 bps on Wednesday, its fourth consecutive decline.

The Markit Series 24 CDX North American High Yield index was up by 1/16 point at 107 23/32 bid, 107¾ offered. On Wednesday, it had suffered its first loss after two consecutive advances, finishing down by 1/16 point.

The Merrill Lynch U.S. High Yield Master II index posted its ninth straight gain on Thursday, improving by 0.005%, on top of Wednesday’s 0.191% rise.

Thursday’s improvement was its 15th in the last 15 sessions.

The latest gain lifted its year-to-date return to 3.319%, its second consecutive new peak level for the year so far. That was up from 3.314% on Wednesday, the previous high-water mark.

Funds see third straight gain

High-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends, have seen their third consecutive weekly inflow, market sources said Thursday.

Market sources said that $1.35 billion more came into those funds than left them during the week ended Wednesday.

This week’s inflow followed the $315.2 million cash injection reported last Thursday and an $856 million inflow the week before that.

The latest improvement further strengthened an already robust year-to-date net inflow position, which swelled to $10.68 billion. (See related story elsewhere in this issue.)

Stephanie N. Rotondo contributed to this review

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