Medical Properties Trust upsizes drive-by; US Renal Care slips; inflows to asset managers continue

By Paul A. Harris

Portland, Ore., July 17 – Medical Properties Trust Inc. priced an upsized $900 million issue of 4 5/8% 10-year notes at a discount in a Wednesday drive-by.

Recently issued bonds of U.S. Renal Care, Inc. slipped as the market continues to mull recent announcements that the federal government may be reshaping how it pays for care of end-stage renal disease.

And actively managed high-yield funds, lately enjoying a steady stream of positive cash flows, saw a healthy $315 million of inflows on Tuesday.

Medical Properties Trust upsizes

Medical Properties Trust priced an upsized $900 million issue of 4 5/8% 10-year senior notes (existing ratings Ba1/BBB-) at 99.50 to yield 4.688% in a quick-to-market Wednesday trade.

The issue size increased from $750 million.

The yield printed on the tight side of yield talk in the 4¾% area.

Barclays was the lead left bookrunner.

The Birmingham, Ala.-based health care focused real estate investment trust plans to use the proceeds to help fund a $1.55 billion investment in 14 acute care hospitals and two behavioral health facilities from Prospect Medical Holdings, Inc. and for general corporate purposes.

Elsewhere Aberdeen-based Ithaca Energy Ltd. was wrapping up the roadshow on its downsized $500 million offering of five-year senior notes (B3/B/B+).

The deal, which was downsized from $700 million, is guided in the mid 9% area.

There are covenant changes.

Domestic & General prices

U.K.-based Domestic & General Group Ltd. priced a restructured a £635 million equivalent amount of notes in three tranches.

Issuing for the secured tranches (B2/B), Galaxy Bidco Ltd. priced £305 million of seven-year fixed-rate notes at par to yield 6½%. The yield printed at the wide end of the 6¼% to 6½% yield talk.

Galaxy Bidco also priced a €200 million tranche of Euribor plus 500 basis points senior secured floating-rate notes at par. The spread came at the wide end of the Euribor plus 475 bps to 500 bps spread talk. The euro-denominated floating-rate notes replaced a proposed sterling-denominated floater that had been talked with a 550 bps to 575 bps spread to Libor.

Issuing the sole unsecured tranche (Caa1/CCC+) Galaxy Finco Ltd. priced £150 million amount of 9¼% eight-year senior notes at 95.922 to yield 10%. The yield printed in the middle of final yield talk in the 10% area, which was widened from the earlier talk of 8¾% to 9%.

Sole physical bookrunner and global coordinator Barclays will bill and deliver.

Proceeds will be used to fund the acquisition of the Bedworth, England-based home-appliance warranty provider by CVC Fund VII and the Abu Dhabi Investment Authority and to refinance debt.

US Renal Care slips

The broad high-yield market ended flat to slightly lower on Wednesday, with the CDX HY32 index of high-yield credit default swaps down 0.012 points, in the early afternoon, at 107.198 bid, 107.278 offered, a hedge fund manager said.

Recent deals tend to be holding in above issue prices, sources say.

One outlier is U.S. Renal Care, Inc., on news that the government is eyeing big changes in the way it pays for the care of end-stage renal disease.

The U.S. Renal Care (BCPE Cycle Merger Sub II, Inc.) 10 5/8% senior notes due July 2027 (Caa2/CCC+) were trading around 98 on Wednesday, after trading as high as 103, a trader said, adding that there may be a significant downside for this paper.

The $505 million deal priced at par on June 13, at the wide end of price talk after undergoing covenant changes.

Dialysis services providers in the high-yield universe, also including names such as Fresenius Medical Care and DaVita Inc., may be starting to attract the scrutiny of distressed players after the Trump administration recently outlined steps for reshaping how the federal government pays for care of end-stage renal disease, including efforts to encourage kidney transplants and home-based dialysis, said the trader.

Medicare has been providing coverage for end-stage renal disease since 1973. DaVita, in a recent regulatory filing, said that in 2018, 75% of its patients were covered by Medicare.

Away from that situation recently priced bonds were holding in on Wednesday.

Olin Corp.'s 5 5/8% senior notes due August 2029 (Ba1/BB+), which were left for dead on the break, are lately seeing a bid.

Those bonds were 101¾ bid on Wednesday, up 1/8 on the day.

The bonds came at par in a $750 million issue on July 11.

The new Masonite International Corp. 5 3/8% senior notes due February 2028 (Ba3/BB+) were 101¼ bid, 101 ½ offered, unchanged, the trader said.

The $500 million issue priced at par in a July 11 drive-by.

Inflows to asset managers

High-yield actively managed funds, saw a very healthy $315 million of inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

The actively managed funds are running a stream of mostly positive numbers, the source added, noting that those funds saw $55 million of inflows on Monday.

And actively managed funds had estimated inflows totaling $315 million yesterday, which compares to inflows of $55 million on Monday, $5 million of outflows last Friday and $30 million of inflows last Thursday.

Those daily cash flow numbers trail the most recent weekly report that the actively managed funds saw $194 million of inflows in the week to the Wednesday, July 10 close.

High-yield ETFs, which sustained $201 million of outflows on Tuesday, have been volatile by comparison, the source said.

The junk ETFs saw $303 million of inflows on Monday, $57 million of outflows last Friday, and $319 million of outflows last Thursday.

Those daily cash flow numbers follow the most recent weekly report that the high-yield ETFs saw $427 million of inflows in the week to the Wednesday, July 10 close.

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