Quicken megadeal paces second straight $3.5 billion day; heavy trading in new Valeant, older bonds busy too

By Paul Deckelman and Paul A. Harris

New York, Dec. 5 – The high-yield primary market stayed red-hot on Tuesday, with half a dozen issuers churning out some $3.54 billion of dollar-denominated and fully junk-rated paper in six tranches.

It was the second consecutive session that issuance topped $3.5 billion – a two-day bond barrage of an intensity not seen since early March, according to data compiled by Prospect News.

Online lender Quicken Loans, Inc. had the big deal of the day – an upsized $1.1 billion regularly scheduled forward calendar offering of 10-year notes.

Out of that same sector, consumer finance company OneMain Holdings, Inc. priced a quickly shopped and solidly upsized $875 million of 5.25-year notes, while Oxford Finance, whose business is to provide capital exclusively to life sciences and healthcare services companies throughout the world, did a regularly scheduled $300 million of five-year notes.

Away from the financial issuers, deathcare provider Service Corp. International drove by with an upsized $550 million of 10-year notes, while glass bottle manufacturer Owens-Illinois Inc.’s European division also did a quick-to-market $310 million offering of 5.25-year paper.

Rounding out the day’s pricing activity, iron ore miner Cleveland-Cliffs Inc. priced $400 million of six-year secured notes.

Domestic data services company Equinix, Inc. meantime tapped the euro-denominated market with a €1 billion issue of 10-year notes.

Besides the deals that actually priced, high-yield syndicate sources saw other issuers lining up to sell new bond issues over the next few days, including Itron, Inc., Par Pacific Holdings, Inc. and ACE Cash Express, Inc.

In the secondary market, traders saw brisk activity at higher levels in the new deals from Service Corp. and Oxford Finance, as well as in such other recently priced issues as Continental Resources, Inc., Genesis Energy, LP and Calpine Corp.

But as active as those Monday deals were, they paled in comparison to that session’s other transaction, the new eight-year notes from Valeant Pharmaceuticals International, Inc., the clear volume leader on the day.

And the Canadian drug manufacturer’s existing bonds were also high up on Tuesday’s Most Actives list, firming across the board.

Statistical market performance measures turned mixed on Tuesday after having been stronger all around on Monday. It was their second mixed session in the past three trading days, having also been mixed on Friday.

Quicken at a discount

The primary market throttle remained wide open on Tuesday.

Quicken Loans Inc. priced $1.01 billion of 5¼% senior notes due Jan. 15, 2028 (Ba1/BB) at 99.027 to yield 5 3/8%.

The issue size was increased from $1 billion.

The yield printed at the wide end of yield talk in the 5¼% area.

Credit Suisse was the lead bookrunner for the dividend-funding and general corporate purposes deal.

OneMain upsizes

OneMain Holdings, Inc. priced an upsized $875 million issue of 5 5/8% non-callable 5.25-year senior notes (Fitch: B) at par to yield 5.627% in a Tuesday drive-by.

The issue size was increased from $500 million.

The yield printed slightly wide of yield talk in the 5½% area.

Goldman Sachs was the left bookrunner.

The Evansville, Ind.-based consumer finance company plans to use the proceeds for general corporate purposes, which may include debt repayments.

Service Corp. upsized and tight

Service Corp. International priced an upsized $550 million issue of 10-year senior notes (S&P: BB) at par to yield 4 5/8% in a quick-to-market trade.

The issue size was increased from $525 million.

The yield printed at the tight end of yield talk in the 4¾% area.

JP Morgan Securities LLC was the lead for the debt refinancing deal.

Cleveland-Cliffs at a discount

Cleveland-Cliffs Inc. priced a $400 million issue of 4 7/8% six-year senior secured notes (Ba3/BB-) at 99.347 to yield 5%.

The yield printed at the wide end of the 4¾% to 5% yield talk. Initial guidance was in the high 4% to low 5% area.

BofA Merrill Lynch was the left bookrunner.

The Cleveland-based independent iron ore mining company plans to use the proceeds, along with proceeds from a concurrent convertible notes offer, to finance a substantial portion of its hot briquetted iron capital project, and for general corporate purposes.

Oxford Finance places five-year notes

Oxford Finance priced a $300 million issue of five-year senior notes (Ba3/B+) at par to yield 6 3/8%.

J.P. Morgan and Barclays were the leads.

The Alexandria, Va.-based specialty finance company plans to use the proceeds to fund a dividend and repay bank debt.

Itron brings $300 million

Itron, Inc. was scheduled to launch a $300 million offering of eight-year senior notes (expected ratings B2/BB-) on a late Tuesday morning conference call.

The debt refinancing deal is expected to price on Friday.

Wells Fargo is the left bookrunner.

Par Pacific secured deal

Par Pacific Holdings, Inc. plans to launch a $300 million of senior secured notes due 2025 on a Thursday investor conference call.

The deal is expected to price during the Dec. 11 week.

BofA Merrill Lynch and Goldman Sachs are joint bookrunners.

The Houston-based company plans to use the proceeds to repay bank debt, as well as to repay the forward sale amount under supply and offtake agreements with J. Aron & Co. LLC, and for general corporate purposes.

ACE Cash launching Wednesday

ACE Cash Express, Inc. plans to launch a $290 million offering of five-year senior secured notes on a Wednesday conference call.

The debt refinancing deal is set to price later in the Dec. 4 week.

Credit Suisse is the lead bookrunner. Jefferies LLC is the joint bookrunner.

Equinix 2 7/8% print

News volume in the European primary also remained high on Tuesday.

Equinix, Inc. priced a €1 billion issue of 10-year senior notes (S&P: BB+) at par to yield 2 7/8%.

The yield printed tight to initial talk in the 3% area.

BofA Merrill Lynch, Citigroup, JP Morgan and RBC were the bookrunners.

The Redwood City, Calif.-based data services company plans to use proceeds, together with about $10 million cash on hand, to repay in full its existing €995 million term loan due 2024.

Owens-Illinois drives through

Owens-Illinois, Inc. subsidiary OI European Group BV priced a $310 million issue of 4% 5.25-year senior bullet notes (Ba3/BB) at par to yield 4.001% in a quick-to-market Tuesday trade.

The yield came in the middle of yield talk in the 4% area.

Global coordinator Goldman Sachs was the left bookrunner. BofA Merrill Lynch, BNP Paribas, Credit Agricole, JP Morgan, Scotia and Wells Fargo were the joint bookrunners.

The Toledo, Ohio, manufacturer of glass containers, plastic health care packaging and plastic closure systems plans to use the proceeds, together with cash from its balance sheet, to pay off its euro-denominated term loan A, of which there was $304 million equivalent outstanding as of Dec. 5.

Perstorp sets price talk

Perstorp Holdings AB set price talk in its €485 million two-part offering of notes.

The deal includes Perstorp Holdings’ €250 million floating-rate senior secured notes due September 2022 (expected B3/confirmed B) talked with a 425 basis points to 450 bps spread to Euribor.

In addition the deal includes Prague CE Sarl’s €235 million senior subordinated notes due December 2022 (S&P: CCC-) talked in the 10% area, including two points of original issue discount. The deal is set to price on Wedensday.

Goldman Sachs is the bookrunner.

The frenetic pace of the European primary market will end sooner than later, a senior London-based syndicate banker said on Tuesday.

Investors have expressed fatigue, the banker added.

Primary activity could continue into the Dec. 11 week, albeit at a pace more moderate than that seen in recent sessions.

However the wind-down of the 2017 European high yield primary market should get underway soon, the source said.

Mixed Monday flows

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

High-yield ETFs saw $165 million of inflows on the day.

However actively managed high yield funds sustained $70 million of outflows on Monday.

Dedicated bank loan funds were also negative on the day, sustaining $55 million of outflows on Monday, the investor said.

Biggest 1-2 day in nine months

The day’s $3.54 billion of new U.S. dollar- denominated and fully junk-rated paper was slightly higher than the $3.51 billion of such paper from domestic or industrialized-country issuers which had priced on Monday.

According to data compiled by Prospect News, it thus marked the biggest two-day bond binge, with issuance over $3.5 billion each day, seen since the second week in March, when $4.7 billion priced on March 7, followed by $4.1 billion on March 8 and an eye-popping $6.64 billion on March 9, the single busiest new-issuance day seen so far this year.

Traders noted the intense ramp-up in primaryside activity that started last week, when some $13.1 billion of new paper priced in 23 tranches throughout the week, the data indicated, as issuers rushed to get their deals done before the onset of the traditional year-end activity lull in Junkbondland.

Service Corp., Oxford gain in aftermarket

In the secondary market Tuesday, Houston-based funeral home and cemetery operator Service Corp.’s new 4 5/8% notes due 2027 showed plenty of life, with over $48 million traded, putting the issue high up on the day’s Most Actives list.

A trader saw the notes going out at 101 bid, up from their par issue price, while a second saw them finishing in a 100¾-to-101 bid context.

A trader initially pegged Oxford Finance’s new 6 3/8% notes due 2022 in a 100 3/8-to-101 3/8 bid range.

But a little later on in the session, another market source said that improved solidly beyond that, rising to a close around 102¼ bid, with over $25 million having changed hands.

The traders meantime did not immediately report any significant initial aftermarket dealings in the day’s other new deals, from Detroit-based online lender Quicken Loans, or from One Main Holdings, Cleveland-Cliffs or Owens-Illinois, all of which priced later in the session.

Valeant deal dominates Actives list

The traders said that Valeant Pharmaceuticals International’s new 9% notes due 2025 was easily the volume leader during Tuesday’s session, with more than twice as many having traded as the next most active issue – Continental Resources’ new 10-year paper.

“Tons of it traded,” one market source said, seeing the new bonds push up to around the 100 1/8 bid level.

A second trader saw the notes a little below that, at 99 7/8 bid, but said they were “trading OK,” noting that the Laval, Que.-based drug manufacturer had priced its quickly shopped $1.5 billion on Monday at a discounted 98.611 price, yielding 9.25%, after the megadeal was upsized from an originally announced $1 billion.

At another desk, a trader saw the bonds a little above 100 3/8 bid, calling that a gain of more than ¼ point.

He estimated volume in the new deal at a breath-taking $145 million traded on the day.

Existing Valeant bonds busy

While the new Valeant bonds were the toast of the market, the company’s existing paper was not forgotten by investors.

A trader said that the existing bonds were “busy – but the [capital] structure was relatively unchanged, with no big movements.”

For instance, Valeant’s 6 1/8% notes due 2025 edged up by 1/8 point to close at 87¾ bid, with over $31 million traded.

Other Valeant issues firmed a little bit more than that, another trader said, seeing its 5 7/8% notes due 2023 up ¼ point on the day at 89¼ bid, while its 7½% notes due 2021 gained 3/8 point to end at 100 3/8 bid, both on around $20 million of volume.

And its 5 /8% notes due 2021 gained nearly ½ point on the day to 95 7/8 bid, with around $10 million traded.

Monday issues active

Besides the Valeant deal, traders saw considerable activity in the other deals that priced Monday, with one pointing out that the junk market’s Top Five most active credits “were all new deals” – Monday’s four offerings plus Tuesday’s Service Corp. issue.

After Valeant, Continental Resources Corp.’s 4 3/8% notes due 2027 was the next most active issue, with over $71 million moving around.

But the Oklahoma City-based oil and gas exploration and production company’s new deal was ending at 99¾ bid, which a trader called unchanged – and down from the par level at which that $1 billion deal had priced on Monday after the drive-by offering was upsized from the originally announced $750 million.

Genesis Energy’s 6¼% notes due May 2026 were likewise about unchanged on the day, trading at 100¼ bid, a trader said, on turnover of more than $42 million. The Houston-based midstream energy master limited partnership had priced its $450 million 8.5-year issue at par Monday in a quick-to-market transaction.

Monday’s other new deal – Houston based electric power generating company Calpine’s add-on to its 5¼% senior secured notes due June 1, 2026 – was seen holding steady at 100 3/8 bid, on volume of over $35 million.

Calpine had priced that quickly shopped $560 million addition to its original $625 million of the notes that it sold last year, at par, after upsizing it slightly from an originally announced $550 million.

Energy names improve

Away from the new and recently priced issues, a trader noted that California Resources Corp.’s benchmark 8% notes due 2022 “was very active again,” quoting the Los Angeles-based exploration and production company’s paper up nearly 1 point on the day.

At another shop, those bonds were seen up by 13/16 point on the day, at 78 9/32 bid, with over $28 million traded.

Houston-based sector peer EP Energy’s 9 3/8% notes due 2020 closed at 78 bid, up 1¼ points on the day.

Those oil and gas credits have lately been on the rise, whether or not crude oil prices were also rising; on Monday, the bonds had firmed even though crude got crunched for the first time after two straight gains before that.

On Tuesday, though, January-delivery West Texas Intermediate crude gained 15 cents a barrel in New York Mercantile Exchange trading, ending at $57.62, while the February North Sea Brent crude contract firmed by 41 cents per barrel in London futures trading, to settle at $62.86.

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday after having been stronger all around on Monday. It was their second mixed session in the past three trading days, having also been mixed on Friday.

The KDP High Yield Daily Index was off by 4 basis points on Tuesday, closing at 71.88, its first loss after two consecutive gains of 3 bps on Friday and another 6 bps on Monday.

Its yield meantime rose by 1 bp, to 5.28%, after having come in by 1 bp on Friday and another 4 bps on Monday.

The Markit CDX Series 29 index eased by 1/16 point, ending at 107 13/16 bid, 107 27/32 offered, after having edged upward by more than 1/32 point on Monday, following Friday’s 1/16 point retreat.

But the Merrill Lynch North American High Yield Master II Index stayed strong for a fifth consecutive session Tuesday, advancing by 0.015%, on top of Monday’s 0.124% gain. It had also improved by 0.012% on Friday.

Its latest upturn raised the index’s year-to date return to 7.333% from Monday’s close at 7.317%.

The year-to-date return, though, still remains off from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.