WellCare, upsized Equinix drive-bys lead second straight $4 billion day; new Community Health heavily traded

By Paul Deckelman and Paul A. Harris

New York, March 8 – The high-yield primary market remained red-hot on Wednesday, with more than $4 billion of new U.S. dollar-denominated and fully-junk-rated paper from domestic or industrialized-country borrowers getting done for a second consecutive session.

As was the case on Tuesday – which saw $4.7 billion of such paper hitting the tape by the close, the heaviest single-session new-issue volume so far this year – the day’s new issuance came in six tranches, with opportunistically timed and quickly marketed drive-by transactions once again dominating the proceedings.

Interconnection and data-centers company Equinix Inc., had the day’s big deal, with an upsized $1.25 billion of 10.2-year notes.

Not far behind was WellCare Health Plans, Inc., a provider of managed-care services, which priced $1.2 billion of eight-year notes.

Canadian soft-drink bottler Cott Holdings Inc. was heard to have popped the top on an upsized $750 million of eight-year notes. Cott and Equinix were the day’s only non-drive-by deals, high-yield syndicate sources indicated.

There was also a trio of smaller deals, as real estate developer iStar Inc. did $375 million of five-year notes, midstream energy operator SemGroup Corp. priced $325 million of eight-year paper and gaming company Motor City Casino Hotel brought $200 million of five-year paper to market.

In the Canadian-dollar market, Gibson Energy Inc., another midstream energy concern, priced an upsized C$350 million of 7.25-year notes.

Secondary market traders saw very heavy volume in Tuesday’s new CHS/Community Health Systems Inc. six-year secured notes, and also saw considerable activity in the hospital operator’s existing issues.

Statistical market performance measures were lower across the board for a third consecutive session on Wednesday; they had turned southward on Monday and continued to move lower on Tuesday, after having been mixed last Thursday and then again on Friday.

Equinix upsizes

A news-heavy Wednesday session in the dollar-denominated market saw six issuers – four of them coming with drive-bys – raise a total of $4.1 billion.

Two of the six upsized their deals.

However executions came with signs that there may be a bit of indigestion in the primary market, sources said.

Three of the six tranches came at or in line with talk. Two priced at the wide ends. And one came wide of talk.

None came at the tight end of talk.

Equinix, Inc. priced an upsized $1.25 billion issue of 10.2-year senior notes (B1/BB+) at par to yield 5 3/8%.

The issue size was increased from $1,125,000,000.

The yield printed in the middle of the 5¼% to 5½% yield talk.

J.P. Morgan, BofA Merrill Lynch, RBC, Barclays, Goldman Sachs, MUFG and TD were the joint bookrunners.

The Redwood City, Calif.-based interconnection and data center company plans to use the proceeds for general corporate purposes, including working capital, acquisitions, retirement of debt and other business opportunities.

WellCare at the wide end

WellCare Health Plans, Inc. priced a $1.2 billion issue of eight-year senior notes (Ba2/BB) at par to yield 5¼%.

The yield printed at the wide end of 5% to 5¼% yield talk. Initial guidance was in the 5% area.

J.P. Morgan, SunTrust, Wells Fargo, Goldman Sachs, BofA Merrill Lynch and MUFG were the joint bookrunners.

The Tampa, Fla.-based provider of government-sponsored managed care services plans to use the proceeds to redeem or repay $900 million of its 5¾% senior notes due 2020, repay amounts outstanding from time to time under its revolving credit facility, and, thereafter, for general corporate purposes including organic growth and working capital.

Cott upsizes

Cott Holdings, Inc. priced an upsized $750 million issue of eight-year senior notes (B3/BB-) at par to yield 5½%.

The issue size was increased from $650 million.

The yield printed at the wide end of the 5¼% to 5½% yield talk.

Deutsche Bank, J.P. Morgan, SunTrust, BofA Merrill Lynch and Wells Fargo were the joint bookrunners.

Proceeds, along with cash on hand, will be used to repurchase any and all of the outstanding Cott Beverages Inc. 6¾% senior notes due 2020 via tender and/or redemption.

The additional proceed, resulting from the $100 million upsizing of the deal, were raised in anticipation of calling the company's 10% senior secured notes due 2021 in September of this year.

iStar atop talk

iStar prices a $375 million issue of five-year senior notes (B+) at par to yield 6%.

The yield printed on top of official price talk in the 6% area, but wide to initial guidance of 5¾% to 6%, according to a trader.

BofA Merrill Lynch, J.P. Morgan, Barclays, Citigroup, Morgan Stanley, Raymond James and Wells Fargo were the joint bookrunners for the debt refinancing deal.

MotorCity drives by

MotorCity Casino Hotel priced a $200 million issue of five-year senior notes (Caa1/B-) at par to yield 6%.

The yield printed tight to initial guidance in the low 6% area, a trader said.

BofA Merrill Lynch and Fifth Third were the joint bookrunners for the debt refinancing.

SemGroup at a discount

SemGroup Corp. priced a $325 million issue of 6 3/8% eight-year senior notes (B2/B+) at 98.467 to yield 6 5/8%.

The yield printed 12.5 basis points beyond the wide end of the 6¼% to 6½% yield talk.

Credit Suisse, RBC, Citigroup, SunTrust, TD, JP Morgan, Deutsche Bank, Wells Fargo, Capital One and Morgan Stanley were the joint bookrunners for the debt refinancing.

The market felt heavy to a New York-based high yield bond trader who took note of a heavy amount of new issue volume that has materialized in the wake of the JP Morgan Global High Yield & Leveraged Finance Conference which wrapped up a week ago.

Investors are feeling a bit squeezed, in terms of coupons, the source added, saying that the market has backed up, and the buyside does not necessarily feel as though the widening is reflected in the rates being printed on recent deals.

“People may be getting tired of paying yesterday's prices,” the trader remarked.

However a debt capital markets banker chalked up any hints of indigestion on Wednesday to the fiscal calendar, and not the forward calendar.

The early March onslaught of deals happens every year after the mid-to-late February issuance blackout during which potential issuers must report fresh financial numbers before bringing deals, the banker said.

Gibson Energy upsizes

In the Canadian dollar-denominated primary market Gibson Energy Inc. priced an upsized C$350 million issue of 5¼% senior notes due July 15, 2024 (Ba2/BB) at par to yield 5.251%.

The issue size was increased from C$300 million.

The yield printed at the wide end of the 5 1/8% to 5¼% yield talk.

RBC and BMO were the joint bookrunners and joint global coordinators for the debt refinancing deal. Scotia was also a joint bookrunner.

Still to clear

In the wake of Wednesday's action a healthy new issue calendar remains to be cleared.

Much of it is expected to do so by Friday's close.

Iamgold Corp. talked its $500 million offering of eight-year senior notes (B3/B+) to yield 6½% to 6¾% on Wednesday.

Order books were scheduled to close Wednesday afternoon, and some market sources were expecting terms to materialize before the Wednesday market close.

However no terms were available at press time.

A trader said the deal was held overnight, and is expected to price on Thursday, and added that pricing may be coming wider than Wednesday's talk.

American Axle & Manufacturing Holdings Inc., has circulated guidance in its $1.2 billion two-part offering of senior notes (B2/B/BB-).

Notes in the short-maturity tranche, eight-year notes which come with three years of call protection, are guided at 6% to 6¼%.

Notes in the long maturity tranche, 10-year notes which come with five years of call protection, are guided at 6¼% to 6½%.

The deal is expected to price on Thursday.

Foresight Energy roadshow

Looking beyond the end of the present week, Foresight Energy LLC started a roadshow on Wednesday for a $500 million offering of seven-year second lien senior secured notes (Caa2/CCC/CCC).

The roadshow is scheduled to wrap up on Tuesday, and the deal is set to price thereafter.

Goldman Sachs is the left bookrunner. Huntington, Deutsche Bank and Citigroup are the joint bookrunners.

The St. Louis-based producer and marketer of thermal coal plans to use the proceeds, together with its new credit facility, proceeds from the Murray Energy investment and cash from the balance sheet, to repay and terminate its existing term loan and revolver, and redeem its second lien notes and exchangeable PIK notes.

And KCA Deutag plans to sell $525 million of five-year senior secured notes, according to a trader.

Syndicate members had not stepped forward as of press time on Wednesday.

Tuesday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Tuesday, the most recent session for which data was available at press time, a trader said.

High yield ETFs sustained a big $572 million of outflows on the day.

Actively managed funds sustained $80 million of outflows on Tuesday.

Whatever forces may be creating heaviness in the junk bond market appear not to be weighing upon the leverage loan market, however.

The dedicated bank loan funds saw $240 million of inflows on Tuesday, the trader said.

WellCare up slightly

In the secondary market, a trader saw WellCare Health Plans’ new 5¼% notes due 2025 in a par to 100¼ bid context, versus its par issue price.

With the day’s other deals having priced late in the session, the traders did not immediately report seeing initial aftermarket activity in those deals.

Existing Cott paper active

A trader did see some activity in Mississauga, Ont.-based soft-drink bottler Cott’s existing 6¾% notes due 2020, calling them essentially unchanged at 103 21/32 bid, on volume of more than $14 million, including more than $10 million of round-lot trades.

New Community Health heaviest trader

Among the deals which priced on Tuesday, a trader exclaimed that the new Community Health Systems 6¼% senior secured notes due 2023 “were trading like monkeys” – noting that an overwhelming $222 million of the Franklin, Tenn.-based hospital operator’s new bonds traded, easily topping the day’s Most Actives list.

He saw those bonds in a 100¼ to 100 3/8 bid context, just slightly below where they had ended up in initial aftermarket dealings on Tuesday after that upsized $2.2 billion drive-by deal had priced at par.

A second trader pegged the new notes at 100 3/8 bid.

The company’s existing issues – which had retreated on Tuesday on a combination of the new of the big new offering plus market angst over possible changes to the U.S. Obamacare healthcare laws – were again lower on Wednesday, with its 6 7/8% notes due 2022 seen off another ¼ point at 86¼ bid, with over $53 million traded.

Dallas-based sector peer Tenet Healthcare Corp.’s 6% notes due 2020 likewise continued to move lower, ending down 1 point at 105¼ bid.

Hilton Worldwide seen little changed

Traders also saw considerable activity in the new Hilton Worldwide Finance LLC/Hilton Worldwide Finance Corp. two-part megadeal issue which had priced on Tuesday.

One quoted the McLean, Va.-based hospitality company’s 4 5/8% notes due 2025 and its 4 7/8% notes due 2027 “wrapped around par,” the level at which the $900 million of eight-year notes and $600 million of 10-year notes had priced in Tuesday’s quick-to-market offering.

Indicators move lower

Statistical market performance measures were lower across the board for a third consecutive session on Wednesday; they had turned southward on Monday and continued to move lower on Tuesday, after having been mixed last Thursday and then again on Friday.

The KDP High Yield Daily index swooned by 28 basis points on Wednesday to close at 72.16, its fourth loss in a row after two straight advances and fifth such downturn in the last seven sessions. On Tuesday, it had

plunged by 17 bps.

Its yield ballooned out by 10 bps, to 5.11%, its fourth consecutive widening out; it had moved up by 6 bps on Tuesday. The stretch of wider yields, dating back to Friday, had been its first such widenings in nearly a month, since Feb. 8, with the yield having either come in or been unchanged in all of the sessions since then.

The Markit CDX Series 27 High Yield index was down by almost 9/32 point on Wednesday to close at 107 1/8 bid, 107 5/32 offered, its fourth loss in the last five sessions, after having fallen by 13/32 point on Tuesday.

The Merrill Lynch High Yield index also moved deeper on the downside, its fifth setback in a row after eight consecutive sessions before that moving upward. It was down by 0.343% on Wednesday, on top of Tuesday’s 0.302% retreat.

The loss cut its year-to-date return to 2.156% from Tuesday’s 2.507%; that’s down more than 1 full point from last Wednesday’s 3.19%, which had been its eighth straight new peak level for 2017.

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