Hexion, Radio One price; new issues in focus; Rite Aid gains on sales; funds gain $315 million

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., April 2 – New deals remained in focus in the high-yield bond market on Thursday, though traders noted that activity was leveling off early ahead of the long Good Friday weekend.

Hexion Inc. brought $315 million of 10% first-priority notes at par to yield 10%. The deal came at the wide end of talk.

Radio One Inc. priced $350 million of 7 3/8% senior secured notes due 2022. That issue came smack in the middle of talk.

Both issues ended up from their par issue prices.

Among slightly older issues, Rite Aid Corp.’s 6 1/8% notes due 2023 were firming up yet again, according to traders. The gains came as the company released its same-store sales report.

In the commodity space, iron ore producers continued to get hit as fears of declining prices and oversupply grew.

The bond market will close at noon ET on Friday for the holiday.

Interval Leisure upsizes

A busy Thursday session saw three issuers complete single-tranche deal to raise an overall total of $1.02 billion of proceeds.

All three deals priced at the conclusions of roadshows.

One of the three was upsized.

Executions were mixed, with two deals coming in the middle of talk while the third came at the wide end of talk.

Interval Leisure Group priced an upsized $350 million issue of eight-year senior notes (Ba3/BB-) at par to yield 5 5/8%.

The deal was upsized from $300 million.

The yield printed in the middle of the 5½% to 5¾% yield talk and tight to early guidance in the high 5s.

The debt refinancing deal went well, according to a trader who participated and who spotted the new notes up a point in the secondary at par 7/8 bid, 101 1/8 offered.

Wells Fargo was the left bookrunner. BofA Merrill Lynch, PNC and SunTrust were the joint bookrunners.

Radio One comes mid-talk

Radio One priced a $350 million issue of seven-year senior secured notes (B2/B) at par to yield 7 3/8%.

The yield printed in the middle of the 7¼% to 7½% yield talk.

Credit Suisse Securities (USA) LLC as the bookrunner for the acquisition financing.

Hexion at the wide end

Hexion priced a $315 million issue of five-year first-priority senior secured notes (B3/CCC+) at par to yield 10%.

The yield printed at the wide end of the 9¾% to 10% yield talk and wide of initial guidance in the 9¼% area, sources said.

There are also covenant changes.

A special call provision that would have made 10% of the notes callable annually at 103 during the two-year non-call period was eliminated.

The deal came with a good deal more juice than had been forecast when it was launched, according to a trader, who spotted the new notes at par ¾ bid, 101 offered and suggested that the “juice” explained the strong performance in the secondary.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co., UBS Investment Bank, BofA Merrill Lynch, Credit Suisse and Morgan Stanley & Co. LLC were the joint bookrunners.

The Columbus, Ohio-based chemical company plans to use about $40 million of the proceeds to repay or redeem all of its outstanding 8 3/8% sinking-fund debentures due 2016, with any remaining proceeds to be used to repay its ABL facility in full and for general corporate purposes.

Murray Energy

Murray Energy Corp. was also expected to price its $1.55 billion two-part offering of second-lien senior secured notes (B3/B-) on Thursday; however, no deal terms were available at press time, according to sources.

Talk on the long bonds, a tranche of eight-year paper with three years of call protection, widened out to 12% on Thursday, according to market sources.

On Wednesday the eight-year notes were talked to yield 10¾% to 11%.

Although no information was heard on the short bonds, a tranche of five-year notes with two years of call protection, the long bonds had been expected to come about 50 basis points behind the short paper, indicating that talk could have pushed out on the short bonds as well. On Wednesday they were talked to yield 10¼% to 10½%.

Market conditions for coal producers such as Murray Energy lately have been rugged in the extreme, sources say.

The Peabody Energy Corp. 10% senior secured second-lien notes due 2022 (B2/BB+/BB-) were 86 bid, 86½ offered on Thursday, implying yield of 13%, a trader said, adding they were down from 88½ bid, 89 offered on Tuesday, drifting lower in very heavy volume.

The Peabody deal came sized at $1 billion and priced at 97.566 to yield 10½% in early March.

The Murray Energy $1.15 billion two-part deal, also second-lien paper, is being led by Deutsche Bank and Goldman Sachs.

Concordia Healthcare ahead

Looking to the post-Easter week, Concordia Healthcare Corp. plans to come to market with $610 million of senior notes in a deal to be led by RBC.

Proceeds from the notes will be used to help fund the acquisition of Zug, Switzerland-based specialty pharmaceutical company Covis Pharma Holdings Sarl for $1.2 billion in cash and to refinance debt.

The financing also includes $750 million of new bank debt via RBC, Morgan Stanley, GE Capital and TD Securities.

The active forward calendar was thin as Holy Week wound down.

However, there is visibility on a several transactions, most of them small, from various sectors in the week ahead, syndicate sources said on Thursday.

Most of the expected business will surface in the form of drive-bys, but there should also be some roadshow business, a sellside official said.

As the second quarter gets up and running, look for a $6 billion to $8 billion weekly run rate in the primary market, the sellsider added.

“The market has had a good tone in the last few days,” the source noted.

That rate seemed high to an investor who added that people are not presently thought to be sitting on a whole lot of cash.

ETFs see inflows

Dedicated high-yield funds saw $315 million of inflows for the week to Wednesday, according to market sources who were citing a weekly report from Lipper-AMG.

However, the cash went entirely to exchange-traded funds, which saw $318 million of inflows, while actively managed funds actually sustained $3 million of outflows during the period, sources said.

It was the second consecutive weekly inflow, for a total of $1.2 billion of inflows during that two-week period.

This year to date, the dedicated high-yield funds have seen $9.3 billion of inflows, with 43% of that being ETF-related, said a sellside source.

This week's $315 million of net inflows amounted to less than half of what the market had been anticipating, a trader said, adding that the expectation was for net inflows of about $800 million.

The most recent daily flows were mixed, an investor said, adding that on Wednesday, the most recent session for which data was available at press time, ETFs saw $7 million of inflows and actively managed funds saw $65 million of outflows.

Meanwhile, dedicated bank loan funds saw $445 million of outflows for the week to Wednesday, leaving them at negative $3.9 billion this year to date.

Hexion active post-pricing

Hexion paper was trading actively Thursday as the company priced a $315 million offering of 10% first-priority senior secured notes due 2020.

One trader said the new issue ended at par ½ bid, 101½ offered. Another trader pegged the bonds at par ¾ bid, 101 offered.

Among the company’s other issues, the first trader saw the 6 5/8% notes due 2020 unchanged at 90.

“Those traded a ton,” he said.

The 8 7/8% notes due 2018 meantime finished down half a point at 87¾.

Hexion, formerly known as Momentive Specialty Chemicals Inc., provides thermoset technologies, specialty products and technical support for customers in the wood and industrial markets.

In other deals from Thursday business, a trader said Radio One’s $350 million of 7 3/8% notes due 2022 ended at 101.

A second trader placed Interval Leisure Group’s $350 million of 5 5/8% notes due 2023 at par ½ bid, 101 offered.

Rite Aid sales improve

Rite Aid announced its March same-store sales on Thursday, showing a 4.3% gain year over year.

On the news, the company’s $1.8 billion issue of 6 1/8% notes due 2023, a deal that priced March 19, headed upward.

One trader saw the issue at 104, up about half a point. Another said the issue “continues to move up,” placing the paper at 104½.

For the four weeks ended March 28, total sales rose 4.1% to $2.03 billion.

The Camp Hill, Pa.-based drugstore chain is using proceeds from the recent deal to finance the acquisition of Twinsburg, Ohio-based pharmacy benefit management company Envision Pharmaceutical Services. If the acquisition is not completed by Sept. 24, proceeds may be used to refinance certain debt, including the company’s tranche 1 and tranche 2 term loans and the 9¼% notes or the 8% notes.

Iron off, coal mixed

Beaten-down iron ore producers were unchanged to weaker on Thursday as investors remained concerned about a soft pricing market and a decrease in demand.

One trader said FMG Resources was “fading,” seeing the 6% notes due 2017 losing 1½ points to end around 95.

However, he called the 8¼% notes due 2019 unchanged at 80.

The trader also saw sector peer Cliffs Natural Resources Inc.’s 5.95% notes due 2018 dropping 2½ points to 70.

At another desk, FMG’s 6 7/8% notes due 2022 were placed in the high 60s, while the 2017 paper was seen in a 95-to-96 context.

As for Cliffs’ debt, the market source said the 8¼% first-lien notes due 2020 “continued to trade down,” seeing the issue around 90½.

The 7¾% second-lien notes due 2020 meantime ended down about 3 points at 63 bid, 64 offered, the source said.

“That deal has just been a pig,” he said.

The first-lien deal priced March 25 at 93.243 to yield 10%. The company has issued the second-liens as part of a recently concluded tender offer for four series of notes.

A third market source deemed FMG’s 6% notes off 3½ points at 95½.

Elsewhere in the commodity arena, coal names finished the day in mixed fashion.

One trader said Peabody Energy Corp.’s 6¼% notes due 2021 fell half a point to 58.

Another trader said the 10% notes due 2022, a $1 billion issue that came March 5, were unchanged at 86.

The issue priced at 97.566.

Yet another source saw the 6½% notes due 2020 at 59¼ bid, up a quarter-point on the day.

In Alpha Natural Resources Inc. paper, a source called the 6¼% notes due 2021 down 1½ points at 26 bid.

Market ends up

The high-yield market overall ended the week with a firm tone, according to market sources.

One market source reported that the CDX North American High Yield Series 24 index gained just over three-quarters of a point, closing at 107.24 bid, 107.33 offered.

Another source saw the KDP High Yield index edging up to 71.3 with a 5.38% yield.

That compared to Wednesday’s reading of 71.29 with a 5.39% yield.

© 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.