Valeant trades down on overall lower session; Petsmart follows; recent issues First Quantum, AK Steel down

By Colin Hanner and Paul Harris

Chicago, March 21 – As equity markets tumbled into a freefall on Tuesday, the high-yield secondary space traded mixed on the session, with the most-active issues coming from Valeant Pharmaceuticals International Inc., which continued to leak after several sessions of similar declines.

“Everything was weak today following equity markets,” a trader said of the high-yield arena in general. Stocks had their worst day of the year amid a series of impending policy decisions by a Trump presidency.

Market sentiment, along with the continuing declines of some issues, paired for some steeper gains on the session, a trader said.

“There was a little more activity today,” the trader said. “[Monday] was definitely sleepy.”

Phoenix-based pet retailer Petsmart, Inc. was “active and lower,” a trader said, following declines the company’s debt had on Monday.

Newer issues First Quantum Minerals and AK Steel Holding Corp. were seen lower on the session, in a similar vein to declines seen a day before.

Hospitals were mixed on a day that brought President Trump before Congress to bolster support for the American Health Care Act, which goes to a vote on Thursday in effort to supplant the current healthcare act.

Community Health Systems Inc. and Hospital Corporation of America were mixed on the session.

Dana prices tight

Two issuers priced single-tranche, dollar-denominated deals on Tuesday, raising a combined total of $552 million.

One deal was an a.m.-to-p.m. drive-by, while the other was announced on Monday.

In drive-by action, Dana Inc. priced a $400 million issue of eight-year senior notes (B1/BB) at par to yield 5¾%.

The yield printed at the tight end of the 5¾% to 5 7/8% yield talk.

Citigroup was the left bookrunner for the debt refinancing.

EnPro taps 5 7/8% notes

EnPro Industries, Inc. priced a $150 million add-on to its 5 7/8% senior notes due Sept. 15, 2022 (B1/BB-) at 101.00, rendering a 5.554% yield to worst, and 5.66% yield to maturity.

The reoffer price came on top of price talk in the 101 area.

BofA Merrill Lynch, HSBC and Wells Fargo were the joint bookrunners.

The Charlotte, N.C.-based manufacturer of engineered products plans to use the proceeds to repay debt under its senior secured revolving credit facility and for general corporate purposes.

Elsewhere, Scotland-based KCA Deutag was expected to price $525 million of five-year senior secured notes (Caa1/CCC+).

However no terms were available at press time.

The deal engendered some investor pushback, following which the company came with covenant changes and set talk at 10½% to 10¾%, market sources said.

Subsequent to those covenant changes, talk was reeled in to 10¼% to 10½%.

Dole roadshows secured deal

Dole Food Co., Inc. started a roadshow on Tuesday in New York for a $375 million offering of eight-year junior priority secured notes.

The whisper has the deal coming with a yield in the 7% area.

The deal is expected to price late this week.

Morgan Stanley, Deutsche Bank, BofA Merrill Lynch and Scotia are the joint bookrunners.

The Westlake Village, Calif.-based fruit and vegetables company plans to use the proceeds to refinance its term loan B and ABL facility, and pay a settlement.

Arrow Global upsizes

In the European market Arrow Global Finance plc priced an upsized €400 million issue of Euribor plus 287.5 basis points senior secured floating-rate notes (expected ratings Ba3/BB).

Joint global coordinator and joint physical bookrunner JP Morgan will bill and deliver. Goldman Sachs International, HSBC and DNB Markets were also joint global coordinators and joint physical bookrunners.

The Manchester, England-based purchaser of consumer debt and provider of receivables management solutions plans to use the proceeds to refinance €335 million of floating-rate notes due 2021.

The additional €40 million of proceeds resulting from the upsizing of the deal will be used to repay debt under the revolving credit facility.

Cerba prices tight

Cerba priced €180 million of eight-year senior notes at par to yield 5 3/8%.

The yield printed at the tight end of yield talk in the 5½% area.

Joint global coordinator Deutsche Bank will bill and deliver for the acquisition financing. JP Morgan and Natixis were also joint global coordinators.

BNP Paribas and Credit Suisse were joint bookrunners.

Aramark starts roadshow

Aramark started a roadshow in London on Tuesday for a €325 million of offering of eight-year senior notes (Ba3/BB+).

The debt refinancing deal is expected to price on Wednesday.

Joint bookrunner Goldman, Sachs will bill and deliver. Credit Suisse, Barclays, J.P. Morgan, BofA Merrill Lynch, Morgan Stanley and Wells Fargo are also joint bookrunners.

The notes come with three years of call protection.

Mixed Monday flows

The cash flows of the dedicated high-yield bond funds were mixed on Monday, the most recent session for which data was available at press time.

High yield ETFs saw $168 million of inflows on the day.

However actively managed funds sustained $205 million of outflows on Monday.

Dedicated bank loan funds, meanwhile, saw $160 million of outflows.

Tuesday volatility in stocks and commodities could slow down opportunistic issuers who might have been pondering a Wednesday pass at the high-yield drive-through market, a syndicate banker said shortly after the Tuesday close.

The Dow Jones Industrial Average fell 238 points on Tuesday, the official recounted.

Oil prices also saw a significant drop during the day, the source added, spotting the barrel price of West Texas Intermediate crude for May 2017 delivery at $47.34, down 1.82%, or 88 cents.

Valeant’s declines continue

“The most active name” in all of high-yield was Valeant’s 6 3/8% notes due 2020, which “traded a ton,” a trader said. Those notes were down 3/8 point to 87.

Following not too far behind were the 7% notes due 2024, which were down 5/8 point to 101¼.

The 6½% notes due 2022 were down 3/8 point to 101½, a trader said.

And rounding out issues were the 6 1/8% notes due 2025, which were unchanged at 73¾, and the 5 3/8% notes due 2020, down 1/8 point to 86.

Though not as pertinent as the deadline-driven American Health Care Act bill currently navigating through Congress, President Trump rehashed his continuing fight against drug companies in comments made at a rally in Louisville, Ky. on Tuesday night.

“Once healthcare reform is done and Obamacare has been repealed, it will be time to get to work on medicine, bringing down the cost of medicine by having a fair and competitive bidding process,” Trump said at the event.

Petsmart ‘active and lower’

Seeing some lower trading especially late in the day, Petsmart’s 7 1/8% notes due 2023 were down 1¼ points to 91¾.

At another desk, a trader said the notes were hovering around a 93 handle, but dropped to a 91½ zip code late in the day for a 1½-point loss.

First Quantum down again

Recent issues from First Quantum Minerals saw declines that were down more so than Monday’s margins.

The 7¼% notes due 2023 were down 5/8 point to 98½, a trader said.

The Toronto-based copper, nickel, gold and zinc-mining company had priced $1.1 billion of those notes at par last Thursday to yield 7.249%.

Also included in the pricing were $1.1 billion of 7½% notes due 2025, which also priced at par in a regularly scheduled deal.

A trader said the 7½% notes due 2025 were down “1 point and change” to 98¼ on the day, and a market source said the notes had a 98¼ bid, 98¾ offer.

AK Steel drags

AK Steel’s 7% notes due 2027 – priced at par last Thursday in a $400 million deal – were pegged at a 97½ bid, 98 offer, a trader said, a 2-point decrease.

“The whole sector is getting dragged down a little bit,” a trader said of the steel sector, adding that the sector performance and a softness in the general market was dragging the recent issue down.

Hospitals mixed on uncertain week

A vague sense of uncertainty spilled out of a closed-door meeting of House Republicans on Tuesday, where President Trump asked representatives to support the American Health Care Act, a day following hesitation by the House Freedom Caucus to support the bill.

“The president just came here and knocked the ball out of the park,” House Speaker Paul Ryan said of the meeting on Tuesday, according to media outlets.

The swift on-the-surface about-face of the bill’s progress affected healthcare and hospital corporations on the session, which felt the brunt of Trump and Ryan’s remarks as a signal that repeal-and-replace of President Obama’s Affordable Care Act could occur soon.

The new bill is expected to go to the House on Thursday for a vote.

Franklin, Tenn.-based hospital operator Community Health Systems’ 6 1/8% notes due 2023 were down ½ point to “par and a quarter,” a trader said.

The 8% notes due 2019 were down 5/8 point to 97¾.

Community Health’s stock was down 68 cents, or 7.64%, to $8.22.

Nashville-based Hospital Corporation of America’s 5 7/8% notes due 2023, meanwhile, were up on the session, with a ¼-point increase to 106.

High-yield mixed bag

As oil prices waned on the day, high-yield issuances trended down, though PBF Holding Co. LLC., the holding company for petroleum refiner PBF Energy Inc., was flat in its 8¼% notes due 2020, which remained at 102¼.

Frisco, Tex.-based oil and natural gas acquirer, developer, producer and explorer Comstock Resources, Inc.’s 10% notes due 2020 were down 1¼ points to par, a trader said.

Stamford, Conn.-based telecommunications company Frontier Communications Corp.’s 8¾% notes due 2022 were down almost 1 point to 95½ to 95¾, a trader said.

And St. Louis cereal brand Post Holdings Inc.’s 5% notes due 2026 were down 1 point to 94½.

Market indicators

For the second-consecutive session, statistical market performance measures were lower, the fourth lower session for the market in the last seven trading sessions.

The Markit CDX Series 27 High Yield index dropped for the second-consecutive session by more than ¼ point to end at a 106 6/7 bid, 106 9/10 offer, its ninth loss in 12 sessions. On Friday, the index had firmed by almost 3/32 point.

The KDP High Yield Daily index fell by 7 basis points to finish at 71.63, its second-straight loss after two-straight gains. Between Thursday and Friday, it had risen by 34 bps.

Its yield was up 3 bps to 5.39% after remaining unchanged on Monday. The yield had risen on Friday by 7 bps and 8 bps a session prior.

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