Upsized CalAtlantic drives by, firms in aftermarket; new Tenet megadeal busy; Hertz, PetSmart retreat

By Paul Deckelman and Paul A. Harris

New York, June 6 – Fresh off one of its biggest sessions ever on Monday, the high-yield primary market took a step back to catch its collective breath on Tuesday, pricing one new deal worth $350 million, from homebuilder CalAtlantic Group, Inc.

That was well down from the more than $5 billion which got done in seven tranches on Monday – the second busiest primary session so far this year, according to data compiled by Prospect News.

Monday’s signature deal – hospital operator Tenet Healthcare Corp.’s nearly $4 billion four-part behemoth of a bond sale – topped Tuesday’s Most Actives list, with all four tranches seen having firmed modestly.

The new CalAtlantic notes were also active and also moved up a little from their issue price.

Recently priced new issues from car-rental giant Hertz Corp. and from specialty retailer PetSmart, Inc., on the other hand, were both down more than 1 point on the day

Statistical market performance measures were trending lower on Tuesday after having turned mixed on Monday; the indicators had been higher across the board for a second consecutive session on Friday.

KIRS prices £800 million

Two issuers priced single tranches of dollar-denominated high-yield bonds on Tuesday.

One came from KIRS Group, which priced £800 million equivalent of six-year senior secured notes (B3//B-) in a restructured deal.

It included £400 million of notes which priced at par to yield 8 3/8%. The yield printed at the tight end of yield talk in the 8½%.

In addition the company priced $520 million of notes at par to yield 8 5/8%, at the tight end of yield talk in the 8¾% area.

A restructuring saw the withdrawal of a proposed floating-rate notes tranche. The tenor of the remaining fixed-rate notes was increased to six years from five years. Call protection was increased to three years from two years.

Global coordinator BofA Merrill Lynch was the physical bookrunner. Barclays, Credit Suisse, Goldman Sachs and KKR were bookrunners.

The Kent, England-based insurance group plans to use the proceeds to refinance debt, as well as to finance the acquisitions of Ryan Direct Group1 and Chase Templeton, and to overfund cash on the balance sheet.

CalAtlantic upsizes

CalAtlantic Group, Inc. priced an upsized $350 million issue of 10-year senior bullet notes (Ba2/BB) at par to yield 5%.

The issue, which was priced on the investment-grade syndicate desk, was increased in size from $300 million.

The yield printed tight to the 5 1/8% yield talk. Initial guidance was 5% to 5¼%.

Citigroup was the lead bookrunner. JP Morgan, Mizuho, Credit Suisse, BofA Merrill Lynch and Wells Fargo were the joint bookrunners.

The Irvine, Calif.-based homebuilder plans to use the proceeds for general corporate purposes which may include the repayment of its convertible notes due 2032.

Elsewhere there were deal announcements.

Albertsons Companies LLC plans to use proceeds from the sale of new guaranteed senior notes to fund $500 million of tender offers that it announced on Monday.

Dealer manager BofA Merrill Lynch is expected to lead the notes offering, which has yet to be launched into the market, a trader said on Tuesday morning.

And Oppenheimer Holdings Inc. plans to sell $200 million of senior secured notes due 2022.

Oppenheimer is the bookrunner, a market source said.

The New York-based financial institution plans to use the proceeds to redeem its 8¾% senior secured notes due April 15, 2018 in full, with the remaining proceeds to be used for general corporate purposes which may include acquisitions.

Monday outflows

The daily cash flows of the dedicated high-yield bond funds were modestly negative on Monday, the most recent session for which data was available at press time, according to the trader.

High-yield ETFs saw $47 million of outflows on the day.

Actively managed funds sustained $45 million of outflows on Monday.

Cash flows of the dedicated bank loan funds were positive on Monday, the trader said.

The loan funds saw $75 million of inflows on the day.

Cal Atlantic seen firmer

In the secondary sphere, traders saw active dealings at slightly higher levels in the new CalAtlantic 5% notes due 2027, which had priced at par in a quick-to-market transaction after the deal was upsized.

One trader saw the notes at 100¼ bid, 100¾ offered, while a second saw them in that same bid range.

Yet another trader pegged the new bonds at 100½ bid going home, on volume of more than $20 million.

Tenet four-parter tops actives

But the busiest name of the day was easily that of Dallas-based hospital operator Tenet Healthcare, which had priced $3.78 billion of new junk paper at par in four quickly shopped tranches on Monday – the biggest junk bond deal of the year so far, according to data compiled by Prospect News.

Tenet “surely was busy today,” a trader said, seeing more than $240 million of its 5 1/8% second-lien senior secured notes due 2024 having changed hands during the session, far and away the busiest single credit.

Those notes were seen going home around 100 1/8 bid.

The 4 5/8% first-lien senior secured notes due 2024 issued by Tenet subsidiary THC Escrow Corp. and an identical tranche listing parent Tenet Healthcare as its issuer each moved up to 100½ bid, with over $101 million of the former and $77 million of the latter traded.

Several traders mused that having two identical tranches of notes in the same deal “was weird,” as one of them put it.

Tenet’s 7% senior unsecured notes due 2025 were seen by one trader to have spent much of the day under the par level, although a second saw levels get as high as almost 101 bid.

More than $60 million of those unsecured notes traded.

PetSmart ‘under pressure’

The traders said that most of investors’ attention was taken up by new or recently priced offerings – and several noted that San Diego-based specialty retailer PetSmart’s $2 billion two-part offering, which had priced on May 25, was struggling.

“That one is really dogging it,” one trader quipped seeing the pet food and supplies seller’s 5 7/8% senior secured notes due 2025 at 98½ bid, down from its par issue price, while the other part of that megadeal – the company’s 8 7/8% unsecured notes due 2025 – were doing even worse, at 96 bid.

A second trader saw the secured issue at 98 5/8 bid, down more than 1 point on the day, with over $28 million traded, while the unsecureds were down 1½ points at 95¾ bid, on volume of $23 million.

Hertz skids lower

Another recent issue seen struggling to get in gear was Estero, Fla.-based car-rental giant Hertz Corp.’s new 7 5/8% senior secured second-lien notes due 2022, which were seen having lost 1 full point on the day to close at 99 bid, with over $47 million traded.

Hertz priced an upsized $1.25 billion of the notes at par on May 31.

Indicators trend lower

Statistical market performance measures were trending lower on Tuesday after having turned mixed on Monday; the indicators had been higher across the board for a second consecutive session on Friday.

The KDP High Yield Daily index posted its first loss after four consecutive gains, finishing Tuesday down 1 basis point at 72.68; it had risen by 1 bp on Monday.

Its yield was unchanged at 4.87%, its second unchanged finish in three trading days. It had come in by 1 bp on Monday, after having been unchanged at 4.88% on Friday.

The Merrill Lynch North American High Yield index finally eased on Tuesday after posting six consecutive upturns, including Monday’s advance of 0.046%, which followed Friday’s 0.101% gain.

The latest loss cut the index’s year-to-date return to 5.054% from 5.074% on Monday, which had been its sixth straight new 2017 peak cumulative return.

© 2015 Prospect News.
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