Bausch Health’s new notes jump, outstanding notes trade down; Alliance Data flat; Intelsat gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 18 – Following an active Tuesday session, the domestic high-yield primary market’s forward calendar was empty on Wednesday with many expecting it to remain that way until the new year.

The secondary space was also growing quiet although recent deals helped add to liquidity, sources said.

Bausch Health Cos. Inc.’s recently priced two tranches of senior notes (B3/B/B) dominated activity in the secondary space with each tranche trading well above its issue price.

While sources questioned the company’s use of proceeds from the offering, others found the deal attractive based on its credit spread.

The new offering sparked activity in Bausch’s capital structure with several other issues trading down due to the new offering.

Alliance Data Systems Corp.’s 4¾% senior notes due 2024 saw a lackluster reception in the secondary space with the notes stuck at their issue price.

Outside of recent issues, Intelsat SA’s junk bonds were in focus with the notes posting gains despite the death of legislation that would have required a 50% payout to the satellite broadcaster from the auction of the C-Band spectrum.

Active calendar clears

The new-issue news stream dried up on Wednesday.

With Tuesday's burst of issuance, which took some market watchers by surprise, the active forward calendar cleared.

The 2019 new issue market has likely run its course, sources said on Wednesday.

Issuance will likely continue apace in January, an investment banker said.

Should market conditions such as the ones that prevailed since late November carry over into the new year, opportunistic issuers capable of tapping the market can be counted upon to take advantage of a chance to lock in medium-or-longer term capital at historically low rates, the source added.

There is still plenty of near- and intermediate-term corporate debt, which companies will want to term out, at today's low rates.

And a mergers and acquisitions pipeline for the first half of 2020 is taking shape, the banker said.

Bausch’s new notes dominate

Bausch Health’s recently priced tranches dominated activity in the secondary space with the notes posting large gains.

The 5% senior notes due 2028 rose to a 102 handle.

They were marked at 102 bid, 102½ offered and stood poised close the day at 102¼, sources said. The bonds saw more than $186 million in reported volume.

The 5¼% senior notes due 2030 rose to a 103 handle and stood poised to close the day at 103.125.

There was more than $171 million of the bonds on the tape shortly before the market close.

While there was heavy demand for the deal in bookbuilding and in the aftermarket, some sources questioned the use of proceeds.

Approximately $1.21 billion of the proceeds will go towards the settlement of a class action lawsuit related to Valeant Pharmaceutical’s share price between 2013 and 2015.

“It doesn’t seem like the best use of funds,” a source said.

However, the deal looked attractive, other sources said. The single B credit priced its 5% notes with a credit spread of 317 and its 5¼% notes with a credit spread of 337.

Those spreads were tighter than the average single B spread and only lagged BB credit spreads by about 100 bps, a market source said.

“That’s not looking too bad,” a market source said.

Bausch doubled the size of its initially announced offering and priced an upsized $2.5 billion over two tranches.

The pharmaceutical company priced a $1.25 billion issue of the 5% notes and a $1.25 billion issue of the 5¼% notes at par in a Thursday drive-by.

Pricing of the 5% notes came at the tight end of the 5% to 5¼% yield talk. Pricing of the 5¼% notes came at the tight end of the 5¼% to 5½% yield talk.

The initial size of the deal was $1.25 billion.

Bausch trades down

While Bausch Health’s new tranches jumped in high-volume activity, its outstanding issues were trading down.

Bausch’s 6 1/8% senior notes due 2025 dropped ½ point to 103½ in active trading. There were about $16 million of the bonds on the tape during Wednesday’s session.

The 9¼% senior notes due 2026 were down ¼ point to 115½ with about $13 million of the bonds on the tape.

While the extra proceeds from the offering are being used to redeem $1.24 billion of the 5 7/8% senior notes due 2023, the new $2.5 billion offering will increase the company’s leverage, a market source said.

Alliance Data flat

While Bausch Health’s new offering jumped, Alliance Data’s newly priced 4¾% senior notes due 2024 saw a lackluster reception in the secondary space with the notes stuck at their issue price.

The notes were marked at 99 7/8 bid, par 1/8 offered and were largely trading at par, sources said.

They were also hovering around par after breaking for trade on Tuesday with most prints between par and par ¼, a market source said.

The note’s lackluster performance was attributed to their tight pricing.

Alliance Data priced an upsized $850 million issue of the 4¾% notes at par.

The yield printed at the tight end of the 4¾% to 5% yield talk. Initial guidance had the deal coming to yield in the 5% area.

The issue size increased from $600 million.

Intelsat jumps

Intelsat’s junk bonds were active on Wednesday with the notes making large gains despite the death of legislation that would have diverted half of the profits from the C-Band auction to the satellite broadcaster.

Intelsat’s 8 1/8% senior notes due 2023 were up more than 4 points to 55½ with more than $35 million in reported volume.

The 5½% senior notes due 2023 were up ½ point to 86½ with more than $32 million in reported volume.

The 9½% senior notes due 2023 jumped more than 6 points to 68¾ with more than $30 million on the tape.

With the legislation now dead, it will be up to the Federal Communications Commission to determine how much Intelsat and other satellite broadcasters will receive from the auction.

$342 million Tuesday inflows

The dedicated high-yield bond funds saw $342 million of daily net inflows on Tuesday, according to a market source.

While the high-yield ETFs saw $367 million of inflows on the day, actively managed junk funds actually sustained $25 million of outflows on Tuesday, the source said.

With only Wednesday's fund flow numbers left to tally for the present week's totals, the combined junk funds are tracking $1.34 billion of inflows for the week to Wednesday's close, the market source added.

Indexes gain

Indexes continued to grind higher on Wednesday.

The KDP High Yield Daily index rose 14 points to close Wednesday at 71.65 with the yield now 4.88%. The index was up 7 bps on Tuesday and 9 bps on Monday.

The ICE BofAML US High Yield index shot past 14% returns on Wednesday.

The index climbed another 24.3 bps with year-to-date returns now 14.156%. The index was up 23.2 bps on Tuesday and 23.1 bps on Monday.

The CDX High Yield 30 index rose 12 bps to close Wednesday at 109.42. The index was up 4 bps on Tuesday and 30 bps on Monday.

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