Communications Sales does downsized deal; Gulfport prices; bonds gain; funds up $791.6 million

By Paul A. Harris and Paul Deckelman

New York, April 16 – The high-yield primary market kept churning out new paper on Wednesday.

Syndicate sources said that Communications Sales & Leasing, Inc., a real estate investment trust, came to market with a $1.51 billion two-part transaction that consisted of secured and unsecured eight-year notes. But the regularly scheduled forward calendar offering was downsized before it priced.

The sources also saw oil and natural gas exploration and production company Gulfport Energy Corp. do a $350 million eight-year issue, also pricing off the calendar.

Traders said that both of those new deals firmed smartly when they were freed for aftermarket action.

They noted that for yet another session, trading in recently priced deals was the dominant feature in the market, seeing brisk activity in new paper from names such as Charter Communications, Inc., Carrols Restaurant Group, Inc., Level 3 Communications Inc. and DaVita HealthCare Partners Inc.

Away from the new deals, Halcon Resources Corp.’s bonds moved up on the news that the energy company, which recently arranged a private debt-for-stock exchange covering some of its notes, had lined up a second, similar deal with some of its other noteholders.

Statistical indicators of junk market performance turned mixed on Thursday after having been higher on Wednesday and mixed over five sessions before that.

High-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends, saw their fourth straight weekly inflow, rising by a net $791.6 million.

Communications Sales downsizes

The Thursday session saw $1.72 billion of proceeds raised by two issuers that brought a combined three tranches of junk.

Of the three tranches, one was upsized and one was downsized.

Both issuers ran roadshows.

Executions were notable, with two tranches pricing at the tight end of talk and one pricing inside of talk.

Communications Sales & Leasing priced a downsized $1.51 billion two-part high-yield notes transaction to fund a spinoff.

A downsized $400 million tranche of eight-year senior secured notes (Ba3/BB) priced at par to yield 6%. The tranche was downsized from $540 million, with $140 million of proceeds shifted to the concurrent term loan. The yield printed 12.5 basis points inside of yield talk in the 6¼% area.

A $1.11 billion of 8¼% 8.5-year senior unsecured notes (B3/B) priced at 97.055 to yield 8¾%. The yield printed at the tight end of the 8¾% to 9% yield talk.

The overall transaction was downsized from $1.65 billion.

BofA Merrill Lynch was the left bookrunner. J.P. Morgan Securities LLC, Barclays, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co., Morgan Stanley & Co. LLC, RBC Capital Markets, SunTrust Robinson Humphrey Inc., Wells Fargo Securities LLC, BNP Paribas Securities Corp., Deutsche Bank Securities Inc. and MUFG were joint bookrunners.

Gulfport Energy upsizes

Gulfport Energy priced an upsized $350 million issue of eight-year senior notes (B2/B) at par to yield 6 5/8%.

The deal was upsized from $300 million.

The yield printed at the tight end of yield talk in the 6¾% area.

Credit Suisse and Scotia Capital (USA) Inc. were the joint bookrunners.

The Oklahoma City-based oil and gas company plans to use the proceeds to fund the acquisition of Paloma Partners II and for general corporate purposes.

NewStar talk 7¼% to 7½%

NewStar Financial, Inc. talked its $300 million offering of five-year senior notes (/BB-/BB-) to yield 7¼% to 7½%.

Official talk came on top of initial guidance.

The deal is expected to price on Friday.

JPMorgan, BofA Merrill Lynch and Wells Fargo are the joint bookrunners.

Abengoa prices tight

In the European market, Abengoa Finance SAU priced a €375 million issue of non-callable 7% five-year senior notes (B2/B/B) at 97.954 to yield 7½%.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

Global coordinator HSBC will bill and deliver. Citigroup was also a global coordinator.

The Seville, Spain-based engineering and clean technology company plans to use the proceeds to partially refinance its notes due in 2016.

IPF taps 5¾% notes

International Personal Finance plc priced a €100 million add-on to its 5¾% senior notes (Fitch BB+) at par to yield 5¾%.

The reoffer price came on top of initial guidance, a market source said.

Joint bookrunner HSBC will bill and deliver. Citigroup was also a joint bookrunner.

New issues move up

In the secondary market, a trader said that Thursday’s session – much like the previous three sessions this week – was a generally quiet one, with most of the focus on the day’s new deals and on the issues that have come to market over the past several sessions.

“It was pretty quiet through the afternoon, with guys waiting for more stuff to price.”

That, he said, produced “limited price action, basically across the board in the secondary.”

Both of the new issues that priced earlier Thursday were seen having notched solid gains when they moved over into the aftermarket.

One of the traders said that “both parts” of the new Communications Sales & Leasing downsized deal had moved up to around a 101½-to-102 bid context, “generically speaking.”

Another trader, meantime, said that the Little Rock, Ark.-based telecommunications-oriented REIT’s 6% senior secured notes due April 2023 and its 8¼% senior unsecured notes due October 2023 were trading between 101½ and 102½, well up from their respective issue prices – par for the 6% notes and 97.055 for the 8¼% notes.

That trader also saw oil and natural gas operator Gulfport Energy’s upsized 6 5/8% notes due 2023 having pushed up to a 101½-to-102½ bid context.

At another desk, those new bonds were seen having gotten as good as 103 bid on the day, versus their par issue price.

Recent deals trade around

Recently priced issues were seen having traded actively, dominating the Most Actives list for yet another day.

A trader said that Charter Communications’ three tranches of new paper had all come off a little from earlier peak levels.

He saw the Stamford, Conn.-based cable, internet and phone service provider’s 5 7/8% notes due 2027 at par bid, 100¼ offered, calling them off by 3/8 point from where they had ended Wednesday after the quick-to-market $800 million issue, upsized from an originally announced $500 million, priced at par.

He meantime saw both halves of its $1.9 billion two-part drive-by deal that had priced on Monday in a 99 7/8 bid, 100 1/8 offered context.

The $1.15 billion of 5 1/8% notes due 2023 and the $750 million of 5 3/8% notes due 2023 had moved up to around a 100½-to-101 bid context after each priced at par.

Another trader saw Monday’s two Charter tranches “wrapped around par,” while Wednesday’s issue traded between par and 100¼ bid.

Also among the new deals, “Level 3 did not move,” he declared, seeing the Broomfield, Colo.-based fiber-optic network operator’s $700 million of 5 1/8% notes due 2023 and $800 million of 5 3/8% notes due 2025 anchored in a par-to-100¼ bid context.

Both had priced at par on Tuesday in a quickly shopped two-part deal that was upped to $1.5 billion from $1.2 billion.

A trader saw Carrols Restaurant Group’s 8% senior secured second-lien notes due 2022 at 103¼ bid, 104 offered.

But as good as that level was – well up from the Syracuse, N.Y.-based Burger King franchisee’s par issue price for the $200 million drive-by deal – it was actually off about ¼ point from where the notes had gone home in their initial aftermarket dealings after Wednesday’s pricing.

Another recent new deal that firmed smartly from its issue price was DaVita Healthcare, the Denver-based kidney dialysis company. Those 5% notes due 2025 were seen trading between 100¾ and 101 bid.

That $1.5 billion quick-to-market offering had priced at par after the deal was upsized from an original $1.25 billion.

Halcon heads higher

Away from the new issues, Halcon Resources said in a regulatory filing on Thursday that it was exchanging nearly $71 million of its 9¾% notes due 2020 for common stock.

The news comes about a week after the company made a similar arrangement with funds managed by Franklin Investments Inc.

Investors took the latest news well, pushing up the company’s debt by nearly 3 points on the day.

A trader saw the 9¾% notes at 84¼, up 2¾ points. The 8 7/8% notes due 2021 put on 2½ points, closing at 82½.

The Houston-based oil and gas company said it had entered into an agreement with funds and accounts managed by Goldman Sachs Asset Management LP to exchange the notes for about 38.8 million shares of common stock, indicating an exchange price of $1.82 per share.

The exchange price was about 4% less than the $1.90 per share closing price of its New York Stock Exchange-traded shares.

On April 7, the company made a similar agreement with Franklin Investments, exchanging $116.5 million of the 9¾% notes for about 65.5 million shares.

The exchange price on that transaction came to $1.78 per share.

Indicators turn mixed

Statistical indicators of junk market performance turned mixed on Thursday after having been higher on Wednesday. The indicators had been mixed for five straight sessions before that.

The KDP High Yield Daily index gained 6 bps on Thursday to end at 71.87, its fifth straight rise, which was also its 12th such advance in the last 13 sessions and its 17th rise in the last 19 sessions. On Wednesday, the index had moved upward by 7 bps.

Its yield declined by 2 bps to 5.12%, its fifth straight narrowing and ninth such tightening in the last 10 sessions. On Tuesday, the yield had eased by 3 bps.

But the Markit Series 24 CDX North American High Yield index showed a loss after having firmed on Wednesday. It was the index’s fourth loss in the last five sessions and its fifth downturn in the previous seven sessions. It lost ¼ point to close at 107 7/16 bid, 107½ offered. On Wednesday, the index had gained 7/32 point.

The Merrill Lynch U.S. High Yield Master II index gained 0.039% on Thursday, its second straight gain and its 13th advance in the last 14 sessions. On Wednesday, it had improved by 0.176% after having suffered a rare loss on Tuesday, breaking an 11-session winning streak.

Thursday’s rise lifted its year-to-date return to 3.74% from Wednesday’s 3.7%, its second consecutive new peak level for the year so far.

High-yield mutual funds and ETFs meanwhile saw their fourth consecutive weekly inflow, market sources said Thursday, as $791.6 million more came into the funds than left them in the week ended Wednesday.

That improvement pushed their already-robust year-to-date net inflow position to a new 2015 high. (See related story elsewhere in this issue.)

Stephanie N. Rotondo contributed to this review

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