Stericycle prices, trades up; Vistra Energy, Grubhub gain; Envision Healthcare hits new low

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 7 – The domestic high-yield primary market saw one split-rated offering price during the session.

Stericycle, Inc. priced an upsized $600 million split-rated issue of five-year senior notes (BBB-/BB+) at par to yield 5 3/8% on Friday.

While the forward calendar is thin for the coming week, it is not empty.

The forward calendar for the coming week includes a $505 million offering of eight-year senior notes backing the leveraged buyout of U.S. Renal Care, Inc., a $1.39 billion two-part secured notes offer backing the merger of Multi-Color Corp. with W/S Packaging Holdings, Inc. and a $150 million offering from Norway's Petroleum Geo-Services ASA, issuing as PGS ASA.

Meanwhile, the secondary space closed out the week on solid footing with the market strong heading into the close, a market source said.

New paper remained in focus with recent issues trading well above their issue prices.

Stericycle’s new paper saw a strong start out of the gate with the notes up more than 1 point.

Grubhub Inc.’s 5½% senior notes due 2027 (Ba3/BB) continued to post gains on Friday after skyrocketing on Thursday.

Vistra Energy Corp.’s 5% senior notes due 2027 (Ba3/BB/BB) were also putting in a strong performance in the secondary space.

While the overall market was strong on Friday, Envision Healthcare Corp.’s 8¾% senior notes due 2026 dropped to its lowest level since pricing following the company’s first-quarter earnings conference call.

Stericycle upsizes

Stericycle priced Friday's sole dollar deal—an upsized $600 million split-rated issue of five-year senior notes (BBB-/BB+) that came at par to yield 5 3/8%.

The issue size increased from $550 million.

The yield printed in the middle of the 5¼% to 5½% yield talk, which came slightly wide to initial guidance in the low 5% area.

The BBB- rating from S&P Global Ratings notwithstanding, the deal priced on the high-yield desk.

BofA Securities Inc. was the left bookrunner.

The new notes were active in the secondary space and trading well north of 101, a market source said.

They traded as high as 101¾ after breaking for trade, the source said.

The calendar

A $505 million offering of eight-year senior notes backing the leveraged buyout of U.S. Renal Care is set to start on Monday.

Barclays is the lead left bookrunner. BofA Securities Inc., BMO Securities, Macquarie Capital (USA) Inc., RBC Capital Markets LLC and SunTrust Robinson Humphrey Inc. are the joint bookrunners.

The U.S. Renal Care deal takes a place on a new issue calendar that was thin heading into the weekend.

The biggest offering on the active calendar, heading into the June 10 week, is a $1.39 billion two-part secured notes offer backing the merger of Multi-Color with W/S Packaging Holdings, Inc., a Platinum Equity deal.

It has engendered some investor pushback, a trader said on Friday.

On the table are $650 million of seven-year notes (expected ratings B2/B) with initial guidance in the low 7% area and $740 million of eight-year notes (expected ratings Caa2/B-) with initial guidance in the low 9% area.

However, investors find the documents to be wanting, in terms of lender protection, and want substantial revisions or considerably more juice, according to the trader.

Negotiations are heard to be underway with a single anchor order eyeing 10% of the deal, the trader said.

And Norway's Petroleum Geo-Services, issuing as PGS ASA, is in the market with a smallish deal being marketed on a big roadshow which started Thursday in Oslo, with ensuing stops in London, Singapore, Hong Kong, New York and Boston

The energy-related seismic services company seeks to place $150 million of senior secured notes due January 2025 (Caa2/CCC+/CCC+).

Initial talk is in the 12% area.

Grubhub gains

Grubhub’s 5½% senior notes due 2027 continued to post gains in the secondary space after a strong start on Thursday.

The notes were seen at 101½ bid, 101¾ offered early in the session and stood poised to close the day at 101½, sources said.

The notes were active with more than $91 million in reported volume heading into Friday’s close.

While the notes traded as high as 102 after breaking for trade on Thursday, they closed the day at 101.

Grubhub priced an upsized $500 million issue of the 5½% notes at par on Thursday.

Final price talk was 5½% to 5¾%, which tightened substantially from early guidance of 6% to 6¼%.

The deal was heard to be playing to a $3 billion-plus order book before final pricing was announced, a source said.

Vistra trades up

Vistra’s 5% senior notes due 2027 were also putting in a strong performance in the secondary space.

The notes were seen at 101 bid, 101¼ offered early in the session and traded up to 101 3/8 bid, 101 5/8 offered later in the afternoon, sources said.

The notes also saw high-volume activity.

Vistra priced an upsized $1.3 billion issue of the 5% notes in a Thursday drive-by. The issue size increased from $1 billion.

The yield came at the tight end of yield talk in the 5 1/8% area and in line with initial guidance in the low 5% area.

The deal of straight-junk-rated notes trailed Vistra’s $2 billion split-rated offering.

Vistra priced a $1.2 billion tranche of 3.55% five-year notes at 99.807 with a spread of 170 basis points over Treasuries and an $800 million tranche of 4.3% 10-year notes at 99.784 with a 220 bps spread over treasuries on Tuesday.

Envision drops

Envision Healthcare’s 8¾% senior notes due 2026 were trading down in high-volume activity on Friday following the physician staffing company’s earnings call, a market source said.

The 8¾% senior notes dropped 3 points to trade down to 81, according to a market source. More than $29.5 million of the bonds were on the tape by the late afternoon.

The 81 closing price marked a new low for the notes.

The notes sold off after the company, which was acquired by private equity firm KKR in 2018, hosted an earnings conference call for investors Friday morning, according to a market source.

The 8¾% senior notes have been under pressure since pricing in September 2018.

Envision priced a $1.225 billion issue of the 8¾% notes at par to partially fund KKR’s leveraged buyout of the company.

The notes have traded down since pricing with the covenants for the deal reportedly weak.

Thursday fund flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $50 million of inflows on the day.

However, actively managed funds sustained $25 million of outflows, the source said.

News of Thursday's daily flows follows a Thursday afternoon report that the combined high-yield funds sustained $3.22 billion of net outflows in the week to the Wednesday, June 5 close, according to Lipper US Fund Flows.

That is the biggest weekly outflow since the week that ended Dec. 26, 2018, the market source said.

The most recent outflow is the twelfth weekly outflow to top the $2 billion mark since the beginning of 2018.

The breakdown of the outflows in the week to Wednesday's close saw the junk ETFs sustaining $1.38 billion of outflows, while actively managed funds saw $1.84 billion of outflows on the week.

Funds which report on a monthly basis sustained $544 million of outflows during May, leaving total net outflows from the combined funds at $5.9 billion on the month, the source said.

In the year to Thursday's close, the combined high-yield funds have seen $6.6 billion of net inflows, the source added.

Indexes gain

Indexes closed out the week on strong footing with all posting cumulative gains.

The KDP High Yield Daily index gained 17 bps to close Friday at 69.80 with the yield now 5.87%.

The index was up 4 bps on Thursday, 7 bps on Wednesday and 18 bps on Tuesday after sliding 6 bps on Monday.

The index saw a cumulative gain of 40 bps on the week last week.

The ICE BofAML US High Yield index gained 35.3 bps with the year-to-date return now 8.566%. The index gained 12.7 bps on Thursday, 17.7 bps on Wednesday and 43.7 bps on Tuesday after sliding 4.7 bps on Monday.

The index saw a cumulative gain of 104.7 bps on the week and again crossed the 8% year-to-date threshold on Wednesday after dropping below it on May 29.

The index has largely posted returns above 8% since early April.

The CDX High Yield 30 index gained 23 bps to close Friday at 105.86. The index was up 25 bps on Thursday and 9 bps on Wednesday after skyrocketing 92 bps on Tuesday.

The index dropped 17 bps on Monday.

The index saw a cumulative gain of 132 bps on the week last week.

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