Vivint prices; recent NGPL stays busy; Intelsat gains, hospitals off, funds lose $21 million

By Paul Deckelman and Paul A. Harris

New York, July 27 – After several days of delay, high-yield syndicate sources said that security alarm and home automation services provider Vivint, Inc.’s planned $400 million note issue finally priced on Thursday – but not before there was some surgery on the offering, shortening the tenor and call protection and making some covenant changes demanded by would-be investors.

In the secondary realm, traders did not immediately report any aftermarket dealings in those six-year notes.

The traders did see continued brisk activity in Tuesday’s big two-part offering from natural gas pipeline and storage facilities operator NGPL PipeCo LLC as well as in the company’s existing bonds.

They did not see much trading in other recently priced issues such as Ashton Woods USA LLC and AMC Networks, Inc.

Away from the new deals, Intelsat SA’s various note issues were higher on the day, gaining altitude after the communications satellite company reported better second-quarter numbers and expressed confidence in its ability to meet its debt maturities over the next few years.

Hospital operators’ bonds, on the other hand, remained under pressure after Community Health Systems, Inc. issued preliminary second-quarter numbers, including sagging sales and wider losses. Its own bonds were the volume leaders on the day while the contagion spread to sector peer Tenet Healthcare Corp.’s bonds.

Statistical market performance measures moved lower on Thursday after being higher across the board on Tuesday and Wednesday and mixed for two straight sessions before that. Thursday marked the first lower session for those indicators since July 6.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – eased slightly this week, according to numbers released on Thursday, unable to sustain the momentum generated by a giant-sized net inflow recorded last week. The funds saw a net outflow of $21 million on the week, a stark contrast to last week’s $2.22 billion net inflow (see related story elsewhere in this issue).

Vivint restructures, prices

In Thursday’s dollar-denominated primary market, Vivint (APX Group, Inc.) priced a restructured $400 million issue of senior notes due Sept. 1, 2023 (Caa2/CCC) at par to yield 7 5/8%.

The maturity of the notes was decreased from seven years. Call protection was decreased to two years from three years.

There were also covenant changes.

The yield printed at the tight end of yield talk that had been set in the 7¾% area. Prior to restructuring, the former seven-year offer had been talked in the 8% area.

The debt refinancing deal, which had been set to price in the early part of the July 24 week, faced investor pushback based upon what one investor described as an aggressive covenant package.

There was a $200 million anchor order that hinged on concessions on those covenants, the source added.

BofA Merrill Lynch, Credit Suisse, Citigroup, Deutsche Bank, Goldman Sachs, Macquarie, HSBC, Mizuho, Citizens and Guggenheim were the joint bookrunners.

AssuredPartners sets talk

Pending further announcements, AssuredPartners, Inc. could clear the calendar for the July 24 week as it is scheduled to price its $450 million offering of eight-year senior notes (Caa2/CCC+) on Friday morning at the conclusion of meetings with high-yield investors on the West Coast of the United States.

The deal was talked on Thursday to yield 7% to 7¼%.

Demand for AssuredPartners is intense, according to sources.

The buzz in the market is that the book contains orders from in excess of 100 accounts, a trader said.

Morgan Stanley, BofA Merrill Lynch, Barclays, RBC, BMO and Macquarie are the joint bookrunners.

Beyond AssuredPartners, only one deal is parked on the active forward calendar, set to price in the July/August crossover week.

Cornerstone Chemical Co. was scheduled to start a roadshow on Thursday for a $430 million offering of seven-year senior secured notes (B2/B) backing the buyout of the company by Littlejohn & Co. LLC from H.I.G. Capital.

Initial talk has the deal coming to yield in the low-to-mid 7% area, an investor said.

An August pipeline is beginning to build, set to include high-profile merger and acquisition deals from Clubcorp Holdings Inc., with a $475 million offering, H&E Equipment Services, Inc. with $825 million and Staples Inc. for $1.6 billion.

However sources are pulling up short of forecasting a vigorous late-summer calendar, even though the market is trading at the tightest levels in nearly three years and there is cash to put to work.

Allfunds prices PIK toggle

In the European primary market Spain-based Allfunds Bank priced a €575 million issue of seven-year PIK toggle notes (expected ratings Ba2/BB-) at par to yield 4 1/8%.

The notes pay a 4 1/8% cash coupon, with a 75 basis points step up to 4 7/8% for PIK coupon payments.

The deal priced tighter than the 4¼% to 4½% talk.

Global coordinator Goldman Sachs will bill and deliver for the buyout deal. BofA Merrill Lynch was also a global coordinator. Barclays, Citigroup, Morgan Stanley and Santander were the joint bookrunners.

NGPL notes remain busy

In the secondary market, a trader remarked that “the new PipeCo bonds are still active,” referring to NGPL PipeCo LLC’s two-part issue of five- and 10-year notes, which priced on Tuesday.

He said that the company’s 4 7/8% notes due 2027 were 2027 down by 1/8 point on the day, trading at 102¾ bid, while its 4 3/8% % notes due 2022 were up by ¼, point, going home at 103 bid.

A second trader pegged the five-year paper at 102 5/8 bid, 103 offered, calling that up 1/8 point on the day, while the 4 7/8% 10-year notes were about unchanged.

At another shop, the five-year paper was seen going home at 103 bid, unchanged on the day, with around $15 million having changed hands.

He saw the 10-year notes off by 1/8 point at 102¾ bid on turnover of more than $10 million.

NGPL, a Houston-based owner and operator of natural gas pipelines, compression facilities and storage reservoirs, had priced both tranches of those notes at par on Tuesday and the new notes soared to a 102½ to 103 bid context in heavy trading on Wednesday – over $160 million of the 10-year notes and almost $110 million of the five-years.

The $1.4 billion quick-to-market issue was divided into equally sized $700 million tranches.

The company’s existing 7.768% bonds due 2037, which had traded actively at firmer levels on both Tuesday and again on Wednesday, continued their winning ways on Thursday, adding on another 1/8 point to 124¼ bid on volume of more than $14 million.

Other new deals little seen

While the NGPL notes continued to rack up decent-sized trading levels for a relatively sedate session, other recent deals were not seen doing very much in the aftermarket on Thursday.

A trader saw the new Ashton Woods 6¾% notes due 2025 down by 1/8 point to 101 1/8 bid on “only a handful of trades, really”.

The Atlanta-based homebuilder, along with co-issuer Ashton Woods Finance Co., had priced $250 million of those notes at par on Tuesday in a forward calendar offering. The new notes had quickly moved up to the 101 bid level when they were offered for secondary dealings.

The trader meantime said that AMC Networks’ new 4¾% notes due 2025 had traded up by 1/8% point at 101 1/8 bid, though that was on “just a couple of trades.”

The New York-based cable television network operator and content generator priced $800 million of those notes at par last Wednesday in a quick-to-market transaction. Those bonds too had quickly moved up to around their current levels around 101.

Healthcare names get hit

Away from the new issues, “there was some activity in the hospitals,” a trader said.

Community Health’s 6 7/8% notes due 2022 “were very active,” trading up ¼ point to 86 bid

He noted that the Franklin, Tenn.-based hospital operator’s issue “rebounded by ¼” – after having gotten clobbered to the tune of around 4 points on Wednesday, coinciding with the release of the company’s disappointing second-quarter preliminary results.

Among those numbers were a 10.8% fall in total admissions versus a year ago and a 2.5% drop in admissions at “same-store” hospitals the company had also operated last year.

That in turn led to a nearly 10% fall in revenues from the year-ago quarter, with management projecting a net loss of $137 million, or $1.22 per share. On an adjusted basis, the loss should come in around 25 cents per share – versus Wall Street’s expectations of a modest 6 cents per share profit for the period.

In Wednesday’s dealings, the trader said the company’s 6 1/8% notes due 2023 were down ¼ point to 102¼ bid and there was “also some activity in the 7 1/8% notes due 2020, unchanged but active.”

A second trader agreed that Community Health debt “continues to be pretty active.”

He said that the issue of 6 7/8% notes was going out at 85½-86, “not too much different than where it had been yesterday [Wednesday].”

Wednesday “was the day they really fell. They got clobbered, trading in the morning with an 89 handle but by the end of the day, it was in an 85-86 context. So after getting beat up for almost 4 points [Wednesday], it traded sideways for the most part today, in an 85-86 context, at the higher end of that range in the afternoon.”

Another market source said the 6 7/8% notes were the busiest bond in Junkbondland, with over $30 million changing hands, followed by the 6¼% notes, with over $20 million traded, and the 7 ¼% paper, generating over $19 million of turnover.

Community Health’s Dallas-based rival, Tenet Healthcare’s 7% notes due 2025 were down almost 2 points on the day at 98, a trader said. Its 5 1/8% paper due 2025 was down 1½ points at 100¼ bid.

Tenet’s 8 1/8% notes due 2022 were down 1½ points to 107 bid.

Intelsat on the rise

Away from the healthcare debacle, traders saw Intelsat’s notes higher across the board, including the Luxembourg-based communications satellite company’s recently priced Intelsat Jackson Holdings SA 9¾% notes due 2025 which were up ¼ at 102 1/8 “on a bunch of trades,” one trader said.

Volume in that issue, which priced at par on June 19, amounted to more than $14 million, landing it high up on the day’s Most Actives List.

The trader also saw Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 up around ¼ point to 60 bid while the company’s 5½% notes due 2023 gained 1/8 point to end at 85 5/8 bid.

Another trader said: “Intelsat’s numbers were out, getting pretty good.”

He said that “the bonds have already been rallying into earnings so there wasn’t a tremendous amount of reaction – but I would say the bonds continued to trend higher.

He saw “the LuxCo bonds up ½ point to 1 point, while the Jackson paper was marginally better.”

Intelsat reported second quarter revenues of $533 million, down slightly from market expectations – but its 20 cent per share adjusted net loss was considerably smaller than the 30 to 35 cents of red ink most analysts were forecasting.

During the company’s conference call, its chief financial officer expressed confidence in the company’s ability to meet its several billion dollars of junk bond and term loan maturities that will be coming due within the next three years (see related story elsewhere in this issue).

Energy lags despite oil rise

Back on Earth, traders saw oil and gas-related credits – recently on a roll, in line with surging crude oil prices – falling back on Thursday, even as crude continued to strengthen on world commodity markets .

For instance, a market source quoted Denver-based exploration and production company QEP Resources Inc.’s 5¼% notes due 2023 down 1½ points at 97½ bid, with over $18 million moving around.

“Even with oil up, some of the energy guys were lower,” another trader said.

He pegged Denver-based Whiting Petroleum Corp.’s 5% notes due 2019 down 1 point to 98¼ bid on volume of over $14 million.

London-based offshore energy drilling contractor Ensco plc “was a little under pressure,” he said, with its 5¾% notes due 2024 trading down 5/8 point to 66¾.

Another trader said: “It’s interesting – a name like California Resources Corp.’s 8% notes due 2022, pretty much a sector bellwether that normally trades pretty actively – I don’t think there was one round-lot trade today.”

He saw Houston-based EP Energy Corp.’s 8% notes due 2025 – which he also called something of a fairly active energy sector bellwether issue – lower on the day Thursday.

He said those bonds “went out yesterday straddling 79, today they went down a point, 77½ to 78.”

The energy credits retreated despite a fourth straight strong session for world crude prices. September-delivery West Texas Intermediate crude gained 29 cents per barrel, ending at on the New York Mercantile Exchange at $49.04, while September-contract North Sea Brent crude closed up 52 cents a barrel in London trading at $51.48.

Indicators thrown for a loss

Statistical market performance measures moved lower on Thursday after being higher across the board on Tuesday and Wednesday, and mixed for two straight sessions before that. Thursday marked the first lower session for those indicators since July 6.

The KDP High Yield Daily Index was unchanged on the session, holding steady at 72.66, where it had finished out on Wednesday after rising 5 basis points during that session, its second gain in a row. It had also risen on Tuesday after a loss on Monday, its first setback after eight straight upside moves.

The Markit CDX Series 28 High Yield Index ended down 1/8 point on Thursday at 107 5/8 bid, 107 21/32 offered, its first loss after two straight upturns, including Wednesday’s nearly 3/32 point advance.

And the Merrill Lynch North American High Yield Index eased by 0.007% on Thursday, its first loss after three sessions on the upside, including Wednesday’s 0.102% improvement.

Thursday’s loss dropped the index’s year-to-date return to 6.109% from Wednesday’s 6.117% finish, which had been its third consecutive new peak level for the year.

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