Morning Commentary: Refinitiv active on sponsor ‘dividend’ expectations; Envision on deck

By Paul A. Harris

Portland, Ore., Sept. 28 – Bonds in the conspicuous autumn LBO deal from Refinitiv remained active and were slightly weaker on Friday morning on an expectation in the market that sponsors including Blackstone could extract cash from the enterprise in the form of a dividend, a bond trader said.

The Refinitiv unsecured paper, the 8¼% senior notes due Nov. 15, 2026 (Caa2/B-/B+), were 99 3/8 bid on Friday morning, perhaps slightly weaker but more or less unchanged, yet very active, the trader said.

Those bonds came on Sept. 18 in a downsized $1,575,000,000 tranche (from $1.8 billion) as part of an overall $4.25 billion equivalent amount of secured and unsecured dollar- and euro-denominated paper backing the acquisition of a 55% stake in Thomson Reuters Financial & Risk by Blackstone, Canada Pension Plan Investment Board and GIC.

Demand for the deal enabled sponsors to realize substantial interest savings, the trader recounted.

And although the sponsors made some concessions on the offering documents, the covenants remained decidedly issuer friendly, the source said, adding that the sponsors could pay themselves a dividend of up to $2 billion right after the buyout closes.

Such a dividend might be accomplished by means of asset sales or another pass at the leverage markets, the trader said.

Elsewhere in the secondary market, freshly minted bonds of Chesapeake Energy Corp. were holding in at par, after drooping earlier in the week.

The bonds in question were the Chesapeake Energy 7½% senior notes due Oct. 1, 2026 (Caa1/B-), the trader said.

They came last Tuesday at par in a $400 million tranche, a portion of a two-part $1.25 billion senior notes issue that also included $850 million of 7% notes due Oct. 1, 2024, which also priced at par.

The reason for the buoyancy in the Chesapeake paper is the continued good news from the oil patch, the trader said.

Oil prices, lately on the march as geopolitical tension threatens supply disruptions, were up smartly again on Friday.

The barrel price of West Texas Intermediate crude oil for November 2018 delivery was $73.31 at mid-morning, up $1.19, or 1.65%, on the day.

Envision notes on tap

Envision Healthcare Corp. talked its downsized $1,225,000,000 offering of eight-year senior notes (Caa1) to yield in the 8¾% area, on Friday morning.

Books close at 11 a.m. ET on Friday, and the deal is set to price thereafter.

The size of the notes offering decreased from $1,625,000,000 with $400 million of proceeds shifted to the concurrent term loan, increasing its size to $5.45 billion from $5.05 billion.

Talk on the bonds comes tight to earlier whisper of 8¾% to 9%, as well as tight to initial price talk in the high 8% area, sources say.

Earlier in the week the deal was heard to be going very well at that initial price talk, a trader said.

Timing on the notes offering is accelerated. A roadshow that had been expected to continue into the Oct. 1 week was shortened.

Proceeds will be used to help fund the buyout of the company by KKR for $46.00 per share in cash, or about $9.9 billion including the assumption or repayment of debt.

One other dollar-denominated deal is on the calendar as possible Friday business.

Vine Oil & Gas LP has been marketing $350 million of senior notes due April 15, 2023. Initial price talk is in the 9½% area. However, there was no fresh news on the deal Friday morning.

Meanwhile in the European primary market Madrid-based Viajes El Corte Ingles, SA announced in a Friday morning press release that it priced €600 million of 5.5-year senior notes with a 3% coupon.

That was the tight end of the 3% to 3¼% yield talk, according to sources.

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