Morning Commentary: New LifePoint bonds trade sharply lower; markets continue to churn

By Paul A. Harris

Portland, Ore., Nov. 15 – The high-yield market was somewhat choppy on Thursday morning, with notable selling on the part of the high-yield ETFs, traders said.

With the Dow Jones industrial average down 200 points at mid-morning, high-yield ETFs were lower. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.58%, or 49 cents, at $83.06 per share.

Traders reported seeing bids-wanted-in-competition (BWIC) lists on Thursday following heavy traffic in BWICs from the ETFs on Wednesday. One trader reported $2.69 billion in BWICs on Wednesday, $2.19 billion of which emanated from the ETFs.

The ETFs sustained $784 million of outflows on Wednesday, according to traders, who expected there would be continued outflows on Thursday. Actively managed high-yield funds saw $21 million of outflows on Wednesday.

Among Thursday’s most actively traded issues, the new RegionalCare Hospital Partners Holdings, Inc./LifePoint Health, Inc. 9¾% senior notes due December 2026 (Caa1/CCC+) were sharply lower at 97 7/8 bid, 98 3/8 offered Thursday morning.

The downsized $1,425,000,000 issue (from $1,575,000,000) priced at par on Wednesday.

The new HC2 Holdings, Inc. 11½% senior secured notes due December 2021 (Caa1/B-) were also below new issue price on Thursday morning, at 97 5/8 bid.

The downsized $470 million issue (from $535 million) priced on Wednesday at 98.75 to yield 12%.

Both of those downsized deals, RegionalCare and HC2, endured prolonged stays in the primary market, during which prices widened and investor friendly covenant changes were piled on.

Away from recent issues, bonds of J.C. Penney Co., Inc. were sharply lower in spite of the company reporting a narrower than expected loss in the most recent quarter, a trader said, marking the J.C. Penney Co., Inc./J.C. Penney Corp., Inc. 8 5/8% second-lien notes due March 2025 down 5 points post earnings.

Avation drive-by

In the new issue market, Avation plc plans to price a $50 million add-on to its 6½% senior notes due May 15, 2021 (expected ratings B+/BB-) in a quick-to-market Thursday trade following a late-morning conference call with investors.

Wells Fargo is the left bookrunner.

Atlantica Yield plc is also in the market with a $300 million offering of senior notes due 2026 (BB/BB+).

As the market awaits official talk, pricing on the deal has widened to the low to mid 7% area from earlier guidance in the low-to-mid 6% area, a trader said.

And Vantage Drilling International is marketing a $300 million offering of five-year senior secured first-lien notes (Caa1) on a roadshow set to run through Thursday.

Early guidance is 9¼% to 9½%, a trader said.

Although Atlantica Yield is possible Thursday business, both Atlantica and Vantage Drilling are more likely to price on Friday, sources say.

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