Downsized Ineos prices, Radiation, Prospect Medical too; Inergy up; funds gain $644 million

By Paul Deckelman and Paul A. Harris

New York, April 26 - A restructured and radically downsized Ineos Finance plc bond deal came to market on Thursday, its $775 million size just one third that of the deal that was originally shopped around to investors. High-yield syndicate sources also noted that a planned euro-denominated tranche from the British chemical company was scrubbed, leaving just dollar-denominated bonds. But investors apparently didn't mind, as the new deal firmed smartly in the aftermarket.

Ineos accounted for more than half of the $1.45 billion of new junk that priced, the rest coming from two health-care sector companies that, like Ineos, each did a senior secured bond deal. Radiation Therapy Services, Inc. priced $350 million of five-year notes, and Prospect Medical Holdings, Inc. brought $325 million of seven-year notes. Radiation Therapy rose a little from its discounted issue price, but Prospect Medical faded after notching some early gains, finishing below the issue price.

Wednesday's new deals from homebuilder D.R. Horton, Inc. and industrial products distributor Anixter International Inc. were both seen having added to their initial aftermarket gains, as was clothing manufacturer Levi Strauss & Co., which brought a deal on Tuesday.

Away from the new deals, Inergy LP's bonds and shares were on fire after the propane distributor announced plans to sell its retail unit for nearly $2 billion.

On the downside, Leap Wireless International Inc. and sector peer MetroPCS Wireless Inc. were both hit hard after the rival prepaid wireless operators each announced disappointing quarterly numbers.

But they were the exception to the rule. Most names were seen better, and statistical indicators of junk market performance were on the upside.

And another indicator - high-yield mutual fund flows, considered a good gauge of overall junk market liquidity trends - was also better. Both of the major fund-tracking services saw sizeable inflows in the most recent week.

AMG posts $644 million inflow

As things were wrapping up on Thursday, market participants familiar with the weekly AMG high-yield mutual fund flow statistics said that in the week ended Wednesday, $644 million more came into those weekly reporting funds than left them.

That was almost identical to the $637 million inflow seen by Arcata, Calif.-based AMG - a unit of Thomson Reuters' Lipper/FMI division - the week before, which ended April 18.

The latest week's inflow brought the year-to-date net inflow figure up to an estimated $16.52 billion, according to a Prospect News analysis of the numbers - up from the previous week's $15.87 billion, although it was still slightly below its peak level for the year of $16.53 billion, which was seen in the week ended April 4, according to the analysis.

Inflows have now been seen in 16 weeks of 2012 so far against just one solitary outflow, although that was a big one - the yawning $1.29 billion cash hemorrhage seen in the week ended April 11. That outflow had snapped an amazing string of 18 straight weeks of inflows totaling $18.64 billion, which dated back to the week ended Dec. 7, according to the Prospect News analysis.

EPFR sees $1.03 billion inflow

The other fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs from AMG's, saw an inflow of $1.03 billion in the latest week. This came on top of the previous week's $649 million cash addition.

As was the case with the AMG number, it was the second consecutive inflow following a gigantic $1.17 billion outflow seen in the week ended April 11 - the first such outflow seen this year after 14 straight inflows. That outflow also broke a larger 18-week winning streak that had dated back to the beginning of December.

On a year-to-date basis, the cumulative inflow figure rose to more than $33 billion.

EPFR's figures and those of AMG generally point in the same direction, although their actual numbers usually differ since they calculate their respective fund-flow totals very differently. EPFR, for instance, includes results from non-U.S. domiciled funds excluded from the more narrowly focused AMG tally as well as from the domestic junk mutual funds and exchange-traded funds.

Cumulative fund-flow estimates, whether of the AMG numbers from Lipper/FMI or those from EPFR, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable percentage of the total amount of money coming in - fueled the record new-deal borrowing binges seen in both 2009 and then in 2010, as well as the robust secondary market seen both years, and continued to be the driver behind 2011's near-record issuance.

Those fund flows are also seen as the key element behind the high-yield secondary market's fairly strong performance so far this year and its active new-deal pace, with issuance volume running about neck and neck with last year.

Ineos massively downsizes

Ineos Finance priced a massively downsized $775 million issue of eight-year senior secured notes (B1/B+) at par to yield 7½% on Thursday.

The yield printed at the tight end of the 7½% to 7 5/8% yield talk. That talk had been revised lower from previous talk of 7 5/8% to 7 7/8%.

The offering was downsized from the originally announced amount of $2.2 billion equivalent. Funding was shifted to the company's bank loan.

A contemplated euro tranche was withdrawn.

J.P. Morgan Securities LLC and Barclays Capital Inc. were the joint global coordinators and joint bookrunners. Goldman Sachs & Co. and UBS Securities were joint bookrunners.

The Lyndhurst, England-based chemical company plans to use the proceeds to refinance bank debt.

Downsizing not due to demand

The massive migration into the bank loan from the bonds reflected the company's desire to drive down its cost of capital in the big refinancing, sources said on Thursday.

The bank loan is also subject to early prepayment, a portfolio manager observed.

The downsizing of the bonds was definitely not a reflection of the demand, a syndicate source said.

"There were sufficient orders to get the whole $2.2 billion done had the company wished to go that way."

Radiation Therapy upsizes

Radiation Therapy Services priced an upsized $350 million issue of 8 7/8% senior secured second-lien notes due Jan. 15, 2017 (B1/B+) at 99.527 to yield 9%.

The yield printed at the wide end of the 8¾% to 9% yield talk.

Wells Fargo Securities LLC was the left bookrunner for the issue, which was upsized from $335 million. Morgan Stanley & Co. LLC, SunTrust Robinson Humphrey Inc. and Barclays were the joint bookrunners.

The Fort Myers, Fla.-based provider of radiation therapy services plans to use the proceeds to repay debt and for general corporate purposes.

Prospect Medical prices

Prospect Medical Holdings priced a $325 million issue of seven-year senior secured notes (B2/B-) at par to yield 8 3/8%, in the middle of the 8¼% to 8½% yield talk.

Morgan Stanley, Credit Suisse Securities (USA) LLC and RBC Capital Markets were the joint bookrunners.

Proceeds, along with cash on hand, will be used to repay some of the company's outstanding debt, including its 2014 notes, as well as to make a distribution to Ivy Holdings for the redemption of its 13½% senior redeemable exchangeable cumulative preferred stock and for general corporate purposes.

Faurecia for Friday

France's Faurecia SA plans to price a €250 million offering of seven-year senior unguaranteed notes (expected B2) on Friday.

Global coordinator and joint bookrunner Credit Agricole will bill and deliver. BNP Paribas, HSBC, Mitsubishi and Natixis are joint bookrunners.

The Nanterre, France-based automotive equipment supplier plans to use the proceeds to reduce outstanding debt, including the repayment of part of its revolver, and to extend its debt maturity profile and diversify sources of funding.

Europcar starts Friday

In other news from European high yield, Europcar Groupe SA will start a roadshow on Friday in Paris and Frankfurt for its €335 million offering of five-year senior subordinated secured notes.

The roadshow continues in London on Monday and Tuesday.

More details will follow, a source said.

Joint bookrunner Deutsche Bank will bill and deliver. Credit Agricole, Goldman Sachs, JP Morgan, SG and Royal Bank of Scotland are joint lead managers.

BNP Paribas and Lloyds are bookrunners.

The Saint Quentin en Yvelines, France-based car rental company plans to use the proceeds to refinance debt.

Ineos improves

When the new Ineos Finance eight-year senior secured notes were freed for secondary dealings, a trader saw them having jumped to 102¼ bid, 102½ offered from their par issue price.

Ineos, a second trader said, "opened really strong." He saw the bonds at 102½ bid, 103 offered on the break. "Then they faded just a touch after that" to end at 102¼ bid, he said.

Radiation Therapy up a little

The new five-year senior secured notes of Radiation Therapy Services firmed modestly when they began trading in the secondary, a trader said. He saw the bonds at par bid, 101 offered versus the upsized $350 million deal's 99.527 issue price.

A second trader said that the Fort Myers, Fla.-based radiation therapy services provider's new issue "was not doing much. There wasn't a lot of action." He quoted the bonds about unchanged from issue at 99½ bid, 101 offered.

However, he said later on the bonds were at par bid, 101 offered.

No pop for Prospect Medical

The day's other new issue - from Los Angeles-based hospital operator Prospect Medical Holdings - struggled from the get-go.

After the $325 million seven-year secured deal priced at par, it moved up initially, but it didn't stay there long. A trader saw the bonds at 100 3/8 but then said they traded into a bid at that level.

A second trader saw the bonds initially at 100 1/8 bid, 100 5/8 offered but then said that they moved down to 99¾ bid, 100¼ offered, straddling their issue price.

Not long after that, he cautioned that "Prospect is fading," pegging the bonds going out below their issue price at about 99¼ bid, 99¾ offered.

Recent deals hold their own

In line with the market's generally firmer tone, traders saw some of the deals that priced earlier in the week continuing to trade around, or even above, the aftermarket levels to which they had moved after their respective pricings.

For instance, one of the traders saw Anixter International's 5 5/8% notes due 2019 trading at 102 bid, 102¼ offered on Thursday, and a second saw them in a narrow 102-102 1/8 context.

That was up from levels around 101 3/8 bid, 101¾ offered at which the Glenville, Ill.-based diversified industrial products distributor's quickly shopped $350 million deal had traded on Wednesday. They priced at par earlier that session.

A trader saw D.R. Horton's new 4¾% notes due 2017 at 101 3/8 bid, 101 5/8 offered on Thursday, while another saw them even better at 101¾ bid, 102¼ offered.

The Fort Worth-based homebuilder priced its upsized $350 million quick-to-market deal at par on Wednesday after upsizing it from an originally announced $300 million, and the new bonds had risen to around 101½ bid, 101 7/8 offered.

A trader said that Levi Strauss' 6 7/8% notes due 2022 were trading Thursday at 102¼ bid, 102¾ offered.

The venerable San Francisco-based blue jeans maker priced its $385 million drive-by offering at par late Tuesday after upsizing it from the originally announced $350 million. When they were freed to trade, the new bonds were seen having firmed a point to a 101-102 context, and they continued to move up on Wednesday, going home around 102 bid, 102¼ offered.

Energetic Inergy

Away from the new deals, the news that Inergy will sell its retail propane business and assets to sector peer Suburban Propane Partners LP for $1.8 billion set Inergy's 6 7/8% notes due 2021 on fire.

"WOW! These were up a lot," a trader exclaimed, seeing the bonds jump to 100½ bid, 100 5/8 offered, well up from recent levels around a 95-96 context.

A market source saw more than $7 million of the bonds having changed hands by mid-afternoon.

Inergy's New York Stock Exchange-traded shares were up by as much as 20% on an intraday basis before going home at $16.84, up $2.67, or 15.86%, for the session. Volume of 7.6 million shares was more than six times the usual turnover.

A trader meantime saw little impact on Suburban Propane's 7 3/8% notes, seeing them at 105¾ bid, 106 offered. He said the notes had not traded on Wednesday, "and there were no round-lot trades in them at all this month."

Wireless credits get whacked

On the downside, the notes and shares of prepaid wireless operators Leap Wireless International and MetroPCS were beaten down on Thursday as each company reported disappointing earnings numbers.

The 7¾% notes due 2020 issued by San Diego-based Leap's Cricket Communications Inc. sank by 3¼ points to end at 94 3/8 bid, a trader said. That was up from their lows for the session of 93¼ bid. On Wednesday, they had traded at 97 5/8 bid.

More than $55 million of the bonds traded, making it the busiest junk issue of the session, a market source said.

"Almost all of the action was in the 2020s," the first trader said, noting that there were only "small pieces" of the company's other bonds trading.

Leap's Nasdaq-traded shares fell by as much as 25% on the day before going out down 20.36%, or $1.57, at $6.14. Volume of 9.9 million shares was almost seven times the norm.

Leap sector peer MetroPCS - which occasionally gets mentioned as a possible potential buyer of Leap, although nothing ever comes of such talk - was little better on Thursday after it too reported disappointing results.

The Dallas-based prepaid wireless company's 6 5/8% notes due 2020 fell by 1¾ points to end at 96½ bid and got as low as below 95½ at one point. Some $20 million of the bonds traded.

MetroPCS' NYSE-traded shares lost 86 cents, or 10.83%, to end at $7.08 on volume of 21.1 million shares, more than four times the usual turnover.

Market measures move up

While those wireless credits were a horror story for investors, the overall junk market firmed for a third consecutive session Thursday. This was reflected in the behavior of statistical measures of junk market performance.

A trader saw the Markit Group CDX North American Series 18 High Yield index up by ½ point to end at 96¼ bid, 96½ offered after having gained 5/8 point on Wednesday.

The KDP High Yield Daily index rose by 6 basis points Thursday to finish at 73.73 after having gained 8 bps on Wednesday. Its yield declined by 2 bps to 6.61% after having come in by 4 bps Wednesday.

And the widely followed Merrill Lynch High Yield Master II index posted its third straight gain, rising by 0.079% on Thursday on top of its 0.25% advance Wednesday.

That lifted the index's year-to-date return to 5.818% on Wednesday, a new peak level for 2012, eclipsing the previous high-water mark of 5.734%, set on Wednesday.

The new year-to-date figure is the index's highest since it hit 5.987% back on Aug. 2, 2011.

© 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.