Hilton megadeal, Graphic Packaging drive by, split-rated HCA, NXP also; recent Adient stays firm

By Paul Deckelman and Paul A. Harris

New York, Aug. 8 – The recently busy pace in high yield primary activity continued into the new week on Monday, as syndicate sources saw four quickly shopped transactions totaling $3.5 billion get done – $1.2 billion of that purely junk-rated and another $2.2 billion in split-rated paper that attracted interest from junk investors.

In the former category, hotel operator Hilton Worldwide Holdings Inc. priced an upsized $1 billion of new eight-year notes.

A subsidiary of Graphic Packaging Holding Co. came to market with $300 million of notes, also eight-year.

Traders saw those bonds modestly firmer, on active volume, when they were freed for secondary dealings.

The split-rated deals that priced both topped the $1 billion mark.

Hospital giant HCA Holdings, Inc., via a subsidiary, did an upsized $1.2 billion of 10.5-year notes, while computer-chip manufacturer NXP Semiconductors NV – which had just been in the market with a large offering in late July – came back for more on Monday with $1 billion of eight-year paper.

Both were actively traded in the aftermarket, firming modestly.

Among recently priced issues, Friday’s offering of 10-year notes from automotive components maker Adient Global Holdings Ltd. traded actively, holding onto the robust gains it initially saw in the aftermarket.

Statistical market performance measures were higher across the board for a third straight session on Monday; they had improved on Thursday and stayed higher on Friday as well after having been mixed over the previous four consecutive sessions.

Hilton upsizes

High yield dealers, traders and investors watched $3.5 billion of bonds clear the market in four dollar-denominated tranches from four issuers on Monday.

However only $1.3 billion of that amount was straight-out junk.

The other $2.2 billion was split-rated.

All four deals – the junk and the crossovers – came in drive-by transactions.

Two of the four deals, including Hilton Worldwide Holdings Inc.'s junk-rated issue of 4¼% notes due 2024, were upsized.

All four deals were talked junk-style, with yields as opposed to spreads.

All four executions were solid, with two coming on top of talk and two coming at the tight ends.

The highest yield among the four deals was the 4½% print on HCA Holdings, Inc.'s upsized $1.2 billion split-rated issue of 10.5-year paper.

Monday's notably low yields prompted a trader to remark that the so-called high yield market is presently a hot one.

Among the straight-out junk deals, Hilton priced an upsized $1 billion issue of eight-year senior notes (Ba3/BB+) at par to yield 4¼%.

The issue size was increased from $750 million

The yield printed at the tight end of yield talk in the 4 3/8% area, and inside of the 4½% to 4¾% initial guidance.

BofA Merrill Lynch, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and Wells Fargo were the joint bookrunners for the debt refinancing deal.

Graphic Packaging drives by

The only other straight-out junk deal of the day was from another name quite familiar to high yield investors: Graphic Packaging Holding Co. priced a $300 million issue of eight-year senior bullet notes (Ba2/BB+) at par to yield 4 1/8%.

The yield printed on top of yield talk, and at the tight end of the 4 1/8% to 4¼% initial guidance.

BofA Merrill Lynch was the left bookrunner. J.P. Morgan, Rabo, SunTrust, Citigroup, TD and Wells Fargo were the joint bookrunners.

The Marietta, Ga.-based provider of packaging products plans to use the proceeds for general corporate purposes including repayment of short-term or long-term debt, acquisitions of or investments in businesses or assets, and for working capital or capital expenditures.

HCA upsized and tight

Turning to the pair of split-rated deals, HCA priced an upsized $1.2 billion issue of 10.5-year senior secured bullet notes (Ba1/BBB-/BB+) at par to yield 4½%.

The issue size was increased from $1 billion.

The yield printed at the tight end of yield talk in the 4 5/8% area, and inside of initial guidance in the 4¾% area.

J.P. Morgan, BofA Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, RBC, SunTrust, UBS and Wells Fargo were the joint bookrunners.

The Nashville, Tenn.-based health care facilities operator plans to use the proceeds, including those resulting from the $200 million upsizing of the issue, to refinance a portion of its term loan B-4 and for general corporate purposes.

NXP prints 3 7/8%

Semiconductor maker NXP BV, also came with a split-rated drive-by deal, pricing a $1 billion issue of six-year senior notes (Ba1/BBB-) at par to yield 3 7/8%, the lowest yield among the session's four deals.

The yield printed on top of yield talk and in the middle of the 3¾% to 4% initial guidance.

Joint physical bookrunner BofA Merrill Lynch will bill and bill and deliver for the debt refinancing deal. Morgan Stanley was also a joint physical bookrunner. Citigroup, Deutsche Bank and Goldman Sachs &were joint bookrunners.

Big Tex roadshow

Only one deal rolled out toward the high yield road during the Monday session.

Big Tex Trailers plans to start a full roadshow on Tuesday for a $670 million offering of seven-year senior secured notes.

Goldman Sachs is the left bookrunner for the offer, which is set to remain in the market for a week. Barclays is the joint bookrunner.

The Southlake, Texas-based freight container company plans to use the proceeds to finance the acquisition of American Trailer Works (“ATW”) by Bain Capital, refinance ATW’s existing debt including debt incurred in connection with the Big Tex transactions.

Cash flows – ETF tide turns

The cash flows of the dedicated high yield bond funds were positive on Friday, the most recent session for which data was available at press time.

High yield ETFs enjoyed their second consecutive day of substantial inflows, with $286 million flowing in on Friday.

That brings the two-day total – Thursday and Friday – to positive-$525 million a market source said.

Those inflows represent a big turn in the cash tide of the ETFs which saw $2.8 billion of outflows in nine sessions leading up to Thursday.

As reported, Lipper US Fund Flows reported weekly outflows of $2.46 billion from the dedicated high yield bond funds for the week to last Wednesday's close.

Nearly all of that amount, $2.3 billion, came out of the ETFs, sources say.

Meanwhile, actively managed high yield accounts were also positive on Friday, with $30 million of inflows on the day.

Graphic Packaging pops

In the aftermarket, traders saw the new Graphic Packaging 4 1/8% junk bonds due 2024 having pushed upward in busy initial trading after those quickly shopped notes had priced at par.

One trader pegged the new bonds at 100 3/8 bid, 100 7/8 offered, while a second saw them in a 100½ to 100 7/8 bid context.

At another desk, a market source quoted the bonds at 100½ bid, on volume of over $23 million.

Traders did not immediately report any significant initial activity in the new Hilton Worldwide 4¼% notes due 2024 after their pricing.’

HCA seen busy

A trader said that the new HCA Inc. 4½% senior secured notes due 2027 were very active when they hit the secondary market after pricing at par, with over $75 million traded.

He saw the notes budge slightly from their issue price, to around 100 1/8 bid.

HCA “wasn’t doing very much” despite the high volume, a second trader agreed, locating the new notes in a narrow 99 7/8 to 100 1/8 bid range.

HCA’s existing 5¼% notes due 2026 were likewise quite active, firming slightly to 106¼ bid, with over $12 million having changed hands.

NXP comes back

The new NXP 3 7/8% notes due 2022 were seen by a trader having moved up to around 100½ bid in initial aftermarket dealings, with around $10 million having traded.

It was the Eindhoven, Netherlands-based semiconductor maker’s second foray into the bond market in less than two weeks; on July 28, the company had priced a $500 million add-on to its existing 4 1/8% notes due 2021 at 101.875 to yield 3.697%.

New Adient holds gains

Among recently priced issues, the new Adient Global Holdings 4 7/8% notes due 2026 were actively traded on Monday, a market source said, with turnover of more than $44 million, topping the Most Actives list among purely junk-rated credits.

The notes were seen by one trader little changed at 101¾ bid, while a second had them between 101¾ and 102 bid, essentially holding on to the hefty gains notched in the aftermarket on Friday, when more than $61 million traded after the $900 million offering had priced at par.

That was part of a two-part deal that also included a €1 billion offering of 3½% notes due 2024.

Indictors firm again

A trader said that outside of the new issues, activity was fairly restrained, calling the session “a typical summer Monday.”

Statistical market performance measures were higher across the board for a third straight session on Monday; they had improved on Thursday and stayed higher on Friday as well after having been mixed over the previous four consecutive sessions.

The KDP High Yield Index was up by 9 basis points on Monday to end at 69.59, its third straight gain and fifth upturn in the last six sessions; it had also zoomed by a full 20 bps on Thursday, and climbed another 18 bps on Friday.

Its yield narrowed on Monday by 3 bps, to 5.53%, its third straight narrowing, after having come in by 6 bps on Thursday and another 10 bps on Friday.

The Markit Series 26 CDX index posted its fourth straight gain on Monday, edging up by 1/32 point to close at 104 17/32 bid, 104 19/32 offered, after having improved by 3/8 point on Friday. It was the fifth upturn in the last seven sessions.

The Merrill Lynch High Yield index was also up for a fourth straight session, firming by 0.254%, on top of Friday’s 0.342% gain.

The gains of the last four sessions had broken a six-session slump.

Monday’s advance brought the index’s year-to-date return up to 12.957% – its second consecutive new peak level for the year, eclipsing the former mark of 12.671% which had been set on Friday.

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