Primaryside focus turned to Europe; new T-Mobile, AMC deals active; new Valeant joins retreat

By Paul Deckelman and Paul A. Harris

New York, March 14 – As a monster snowstorm blasted parts of the northeastern United States with as much as two feet of snow on Tuesday – though considerably less than that in many places – the high-yield primary market saw a blizzard of deals denominated in non-dollar currencies as the market’s focus shifted to Europe, at least temporarily.

A trio of deals denominated in euros priced – a €600 million issue of seven-year notes from French automobile manufacturer Peugeot SA, a €500 million offering of 5.5-year PIK toggle notes from Polish telecommunications company Play Topco SA and €500 million of eight-year notes from U.S-based healthcare oriented real estate investment trust Medical Properties Trust, Inc., which became the latest in a recent string of domestic borrowers finding the euro-denominated market more to their liking than the domestic dollar-denominated junk bond arena.

There was also one sterling-denominated deal getting done, as British highway rest stop and service station operator Moto Hospitality priced a £150 million issue of 5.5-year secured paper.

The forward calendar meantime grew, as French recycling firm Paprec Holding got ready to hit the road to market a planned €225 million add-on to its existing 2022 notes. Initial guidance emerged on French engineering company SPIE’s upcoming €600 million offering of seven-year notes.

Back in the domestic new-deal junk market, nothing was heard going on – a circumstance of both the big storm, which sharply reduced attendance at many shops in New York and other northeastern business centers, as well as the sheer exhaustion that has set in after last week’s record-breaking new issuance of more than $17.5 billion.

In the secondary realm, traders reported active volume in Monday’s new issues from wireless provider T-Mobile US, Inc. and movie theater operator AMC Entertainment Holdings Inc., among other recent new deals.

Elsewhere, Valeant Pharmaceuticals International Inc.’s new issue as well as its existing bonds – the latter already recently under pressure on investor worries about how pharmaceutical and other healthcare companies might fare should Obamacare be repealed in the U.S. – retreated further on Tuesday, in line with a slide in its shares after billionaire investor Bill Ackman’s Pershing Square hedge fund liquidated its entire position in the troubled Canadian drugmaker, talking a multi-billion-dollar haircut.

But Neiman Marcus Group’s notes were higher in active dealings, on the news that the struggling luxury retailer is exploring strategic options that could include the sale of the company – and is reportedly in talks about such a transaction with Canada’s Hudson’s Bay Co., which already controls Neiman Marcus’ high-end rivals Saks Fifth Avenue and Lord & Taylor.

Statistical market performance measures were lower across the board for a second consecutive session on Tuesday; they had turned lower on Monday, resuming a recent negative trend, after having turned mixed on Friday. Before that, they had been lower all around for four consecutive sessions.

Peugeot oversubscribed

All the primary market action on Tuesday was in Europe, where the news volume was notably high.

Paris-based automobile manufacturer Peugeot SA launched and priced a €600 million issue of seven-year notes (Ba2//BB+) at par to yield 2%.

The deal, which played to €1.5 billion of orders, came with initial price guidance in the 2 3/8% area, sources said.

BNP Paribas, Credit Agricole, Commerzbank, HSBC, Natixis, Santander and SG CIB were the adctive bookrunners. SG will bill and deliver.

Medical Properties euro deal

Alabama-based Medical Properties Trust, Inc. launched and priced a €500 million issue of eight-year senior notes at par to yield 3.325%, joining a parade of US-based companies that have visited the euro-denominated primary market thus far in 2017.

Credit Agricole and Goldman Sachs were the joint active bookrunners.

The health care focused REIT plans to use approximately €200 million of the proceeds to prepay and extinguish its €200 million of bank debt under its euro-denominated revolving credit and term loan facilities, €200 million to finance the remaining closings of the real estate assets being acquired from Median Kliniken group Sarl, with remaining proceeds for to be used for general corporate purposes, which may include investing in additional healthcare properties.

Elsewhere Polish telecom Play Topco SA priced a €500 million issue of 5.5-year PIK toggle holdco notes (Caa1//B-) at par to yield 5 3/8%, in a deal that had an audience among European high-yield accounts as well as emerging markets accounts, sources say.

JP Morgan was the lead bookrunner.

The Warsaw-based company plans to use the proceeds to fund a dividend.

Moto tight to talk

In the sterling-denominated market Moto Hospitality priced a £150 million issue of 5.5-year second lien notes (Fitch: expected B+) at par to yield 4½%.

The yield printed at the tight end of the 4½% to 4¾% yield talk.

Joint bookrunner Deutsche Bank will bill and deliver for the debt refinancing deal. Commerzbank, Credit Agricole, HSBC, ING, Investec, Lloyds, NatWest, Santander and Scotia were also joint bookrunners.

SPIE talk is 3¼% area

The Wednesday European session also promises to be an active one.

France-based engineering group SPIE gave initial guidance in the 3¼% area on its €600 million offering of seven-year notes on Tuesday.

The deal is set to price on Wednesday.

HSBC, SG CIB and Natixis are leading the offering.

Paprec roadshow

France-based recycling firm Paprec Holding plans to run a Wednesday-Thursday roadshow for a proposed €225 million add-on to its 5¼% senior secured notes due April 1, 2022 (expected ratings B1/B+).

Global coordinator Credit Suisse will bill and deliver. Credit Agricole is also a global coordinator.

Proceeds will be used in part to fund Paprec's proposed acquisition of Collectes Valorisation Energie Dechets SAS ("Coved") and repay Coved's existing shareholder loans.

Monday outflows

The daily cash flows of the dedicated high yield bond funds were decidedly negative on Monday, the most recent session for which data was available at press time, according to a portfolio manager.

High yield ETFs sustained a substantial $293 million of outflows on the day.

Actively managed funds saw a whopping $550 million of outflows on Monday.

High yield market sentiment is somewhat negative right now, the manager remarked.

An expected 25 basis points hike in the Fed Funds rate, a decision expected to be rendered on Wednesday by the Federal Reserve Bank's Federal Open Market Committee, is part of the story, the manager said.

The massive early March burst of issuance – a gargantuan $25.8 billion since the beginning of the month – has also caused some erosion of market sentiment, the investor said.

To put that issuance amount into perspective, issuance on the month to March 13 (no dollar-denominated deals priced on Tuesday) is greater than all the entire-month issuance totals, save for three, going back to the beginning of 2016.

An aggravating factor is the tendency for deals to be priced ultra tight, leading to secondary market performances that have generally been uninspiring, the investor said.

T-Mobile, AMC trade actively

A trader in the secondary market saw most of the new or recently priced deals “hanging in,” around the status quo.

For instance, he saw the new T-Mobile US bonds “all pretty active, all around 100 to 100¼” bid.

At another desk, a trader said the Bellevue, Wash.-based No. 3 U.S. wireless provider’s three tranches of new notes were all trading around 100 1/8 bid.

He said that its 4% notes due 2022 and its 5 3/8% notes due 2027 were each down around 1/8 point from their best aftermarket levels, while its 5 1/8% notes due 2025 were up 1/8 point on the session.

He said trading in the new T-Mobile paper was brisk, even if price movement was dull, as some $29 million of both the five-year and eight-year notes and $26 million of the 10-year paper changed hands on Tuesday.

T-Mobile had priced $500 million of each series of notes at par on Monday in a quick-to-market offering.

A trader said that AMC Entertainment’s 6 1/8% senior subordinated notes due in May of 2027 “were still around their same 100 1/8 to 100¼ bid area.

“They traded on volume – but didn’t really get going anywhere.”

A second trader saw the bonds retreat to 99¾ bid, 100¼ offered, which he said was down about 5/8 point from where the notes had ended up on Monday after having priced at par earlier.

A third trader saw the bonds ending the day at par right on the nose, which he called down 1/8 point, with over $22 million having traded.

AMC, a Leawood, Kan.-based movie theater operator, priced $475 million of the notes at par in a quickly shopped transaction.

The bonds had priced at par in unscheduled, quickly shopped drive-by offering.

Recent issues active, easier

Traders saw some decent volume levels on other recently priced issues, but said they were trading slightly easier on the day, in line with a generally soggy secondary market.

A trader saw Redwood City, Calif.-based data centers company’s Equinix Inc.’s 5 3/8% notes due 2027 at 100 ¾ bid, down about 1/16 point on the day, with over $14 million having traded.

That $1.25 billion regularly scheduled forward calendar offering had priced at par last Wednesday after upsizing from $1.125 billion.

CHS/Community Health Systems Inc.’s 6¼% senior secured notes due 2023 eased by ½ point, a trader said, ending at 99 5/8 bid, with over $13 million traded.

The Franklin, Tenn.-based hospital operator had priced $2.2 billion of those notes at par last Tuesday, after the drive-by deal was upsized from an original $1.75 billion.

Olin Corp.’s 5 1/8% notes due 2027 fell back by 3/8 point, closing at 99¾ bid, on $11 million of turnover.

The Clayton, Mo.-based chemicals and firearms ammunition manufacturer’s $500 million of notes priced at par in a quick-to-market deal on March 6.

New Valeants ease

Valeant Pharmaceuticals International’s two new tranches of bonds – which heretofore had firmed and had managed to hold onto those gains – were also slightly easier on Tuesday.

Its 7% notes due 2024 were seen off by nearly ½ point on Tuesday, ending at 101½ bid, a trader said, on volume of over $30 million, while its 6½% notes due 2022 lost more than ½ point to finish at 101 3/8 bid, with over $17 million having traded.

The Laval, Que.-based drugmaker had priced $1.25 billion of the five-year notes and $2 billion of the seven-years, both at par, in a regularly scheduled forward calendar offering last Thursday, and both tranches had firmed smartly in the aftermarket, each getting up to around a 101½ to 102 bid context.

A trader agreed with the suggestion that the new Valeant bonds had weakened, along with the company’s existing paper,

A trader agreed with the suggestion that those bonds had finally cracked under pressure and had moved lower, along with the already-weakened existing paper, in line with a slide in the company’s New York Stock Exchange-traded shares; the stock swooned by $1.22, or 10.07%, ending at $10.89, on more than four times its normal volume, pushed down by the news that major shareholder Pershing Square, helmed by billionaire investor Bill Ackman, had liquidated its more than $4 billion position, taking a sizable loss after losing confidence in Valeant’s efforts to turn the company’s struggling finances around.

Existing Valeant paper drops

The Ackman news was a further blow to the company’s already existing bonds, which had already been battered over the past week by investors pulling out of them to play in the new deal, as well as by investor angst over the prospects for pharmaceutical companies such as Valeant should the U.S. healthcare laws undergo major changes.

Its 6 3/8% notes due 2020 fell by 1 point on Tuesday to 89 bid, with about $16 million having traded.

Valeant’s 5 ½% notes due 2023 dropped by 1½ points, to 74¼ bid, with over $15 million having traded.

And its 5 3/8% notes due 2020 were down by more than a deuce on the day, to 87 7/8 bid, on volume of over $13 million.

Neiman Marcus up on M&A hopes

Elsewhere, Neiman Marcus Group’s recently beleaguered paper was solidly higher on Tuesday; the high-end Dallas-based department store and catalog retailer’s 8% notes due 2021 were seen by traders up more than 2 points on the day, at 58 bid, on volume of over $55 million, topping the junk market’s Most Actives list.

Its 8¾% notes due 2025 rose more than 1½ points on the day to end at 53 bid, with over 415 million having traded.

The bonds firmed after the company indicated that it was reviewing strategic options, possibly including the outright sale of the whole company.

The Wall Street Journal reported that Neiman Marcus was in possible sale talks with Hudson’s Bay, the Canadian retailing company that already owns two of Neiman Marcus’ competitor in the luxury goods market – Saks Fifth Avenue and Lord & Taylor.

Indicators stay lower

Statistical market performance measures were lower across the board for a second consecutive session on Tuesday; they had turned lower on Monday, resuming a recent negative trend, after having turned mixed on Friday. Before that, they had been lower all around for four consecutive sessions.

The KDP High Yield Daily index plunged by 19 basis points on Tuesday to end at 71.43, its eighth straight loss and ninth such downturn in the last 11 sessions. On Monday, it had eased by 3 bps, after retreating by 2 bps on Friday.

Its yield rose by 6 bps on Tuesday to 5.35%, its eighth consecutive widening out; it had risen by 1 bp on both Friday and again on Monday, after having ballooned out by 16 bps on Thursday.

The Markit CDX Series 27 High Yield index lost around ¼ point on Tuesday to end at 106 7/16 bid, 106 15/32 offered, its seventh straight downturn and eighth setback in the last nine sessions. It had been down by over 3/16 point on Monday, on top of Friday’s 3/32-point retreat.

The Merrill Lynch High Yield index posted its second straight loss on Tuesday and its seventh such downturn in the last eight sessions, backing off by 0.41%, after having moved down by 0.219% on Monday – in contrast to Friday’s 0.05% firming.

Tuesday’s loss dropped its year-to-date return to 1.1%, from 1.517% on Monday; those levels remain well down from the index’s 2017 peak level of 3.19%, which was hit on March 1.

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