HCA, Virgin Media, SunCoke Energy price, head higher; energy names off as oil slides again

By Paul Deckelman and Paul A. Harris

New York, Jan. 13 – The high-yield primary sphere got busier than the day before for a third consecutive session on Tuesday, syndicate sources said.

When the dust had settled, participants saw $1.6 billion of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country issuers had priced in three tranches, versus the $1.3 billion that got done in two tranches on Monday.

Tuesday saw Junkbondland’s first authentic megadeal of the year, as giant hospital concern HCA Holdings, Inc. brought an upsized and quickly shopped $1 billion issue of 10-year notes via a funding subsidiary. Those bonds traded up solidly when they hit the aftermarket and were the single busiest credit of the day. The company’s existing bonds also firmed on the news of the upcoming deal.

Virgin Media, Inc. priced $400 million of 10-year notes as part of a three-part offering denominated in dollars, euros and sterling. Those notes, sold as a regularly scheduled forward calendar offering, also headed higher when they were freed to trade.

And metallurgical coke company SunCoke Energy Partners, LP did a quick-to-market $200 million add-on to its existing 2020 notes, which were also quoted higher when they hit the aftermarket.

Traders also saw dealings in offerings that had priced on Friday and Monday from NCI Building Systems, Inc., Centene Corp., Open Text Corp. and Aircastle Ltd.

Away from the new deals, it was yet another tough day in the energy space for credits such as Linn Energy, LLC, Swift Energy Co. and California Resources Corp., as oil prices continued to fall for most of the day – although crude did come off its lows to post a small gain.

Statistical market performance measures turned mixed across the board on Tuesday after having been lower on Monday.

HCA upsizes to $1 billion

Tuesday's primary market saw issuers price three dollar-denominated tranches.

Executions appeared steady.

Two of the three deals were drive-bys. One was upsized. One came at the rich end of talk. One came on top of downwardly revised talk. And one came in the middle of talk.

HCA priced an upsized $1 billion issue of non-callable 10-year senior notes (B2/B+/BB-) at par to yield 5 3/8%.

The quick-to-market deal was upsized from $750 million.

The yield printed in the middle of the 5¼% to 5½% yield talk.

Wells Fargo was the left bookrunner.

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

The Nashville-based health-care services provider plans to use the proceeds to repay the $750 million of its 6 3/8% senior notes due 2015 and for general corporate purposes.

The additional $250 million resulting from the upsizing of the deal will be used to increase cash to the balance sheet to be used for general corporate purposes.

Virgin Media atop revised talk

Virgin Media priced £925 million equivalent of 10-year notes in three tranches, all of which came on top of downwardly revised talk.

Virgin Media Secured Finance plc priced £300 million of senior secured notes (Ba3/BB-) at par to yield 5 1/8%. The yield printed on top of final yield talk, which had been revised from earlier talk in the 5¼% area.

Virgin Media Finance plc, meanwhile, priced £625 million equivalent of senior unsecured notes (B2/B) in two tranches.

A €460 million tranche priced at par to yield 4½%, on top of final yield talk that was revised from earlier talk in the 4¾% area.

A $400 million tranche priced at par to yield 5¾% on top of final talk that was revised from earlier talk in the 5 7/8% area.

Joint bookrunner Deutsche Bank will bill and deliver. Barclays, BNP, Credit Suisse and HSBC were also joint bookrunners.

Proceeds will be used for general corporate purposes, including the acquisition of UPC Ireland.

SunCoke taps 7 3/8% notes

SunCoke Energy Partners and SunCoke Energy Partners Finance Corp. priced a $200 million add-on to their 7 3/8% senior notes due Feb. 1, 2020 (B1/BB-) at 102 to yield 6.799%.

The reoffer price came at the rich end of the 101.5 to 102 price talk; initial guidance was 101 to 102.

Barclays was the lead left bookrunner. Citigroup, Credit Suisse, Goldman Sachs, JPMorgan and RBS were the joint bookrunners.

The Lisle, Ill.-based producer of metallurgical coke plans to use the proceeds to fund the assumption and redemption of the SunCoke Energy, Inc. 2019 notes, to pre-fund certain environmental liabilities related to the Gateway facility and for general corporate purposes.

Ziggo sets talk

Looking to the Wednesday session, Ziggo Bond Finance BV set talk for its €730 million equivalent offering of 10-year senior notes.

Notes in the dollar-denominated tranche are talked to yield in the 6% area.

Notes in the euro-denominated tranche are talked to yield in the 4¾% area.

Tranche sizes remain to be determined.

The deal is set to price on Wednesday.

Credit Suisse is the lead left bookrunner. BofA Merrill Lynch, Deutsche Bank, ING and Morgan Stanley are the joint bookrunners.

Platform Specialty roadshow

Platform Specialty Products Corp. plans to start a roadshow on Wednesday in Europe for a $920 million equivalent offering of seven-year senior notes (B2/BB-), according to a syndicate source.

The deal is targeted to come in tranches sized at $500 million and €350 million.

A roadshow in the United States is scheduled to get underway on Tuesday, Jan. 20.

The deal is set to price late in the Jan. 19 week.

Credit Suisse, Barclays, Nomura and UBS are the joint bookrunners for the acquisition financing.

Altice to follow vote

Altice International and Altice SA were expected to show up with $6 billion equivalent of junk bonds to market on Tuesday, following a Monday vote by Portugal Telecom SGPS shareholders.

That vote to decide on Altice's planned acquisition of Portuguese operations from Brazil's Oi for €7.4 billion, has been put off for another 10 days.

The bond deal now is expected to follow that vote, according to a London-based sellside source.

Tracking inflows

Cash flows to the dedicated high-yield funds are tracking positive for the present week, a trader said shortly after the Tuesday close.

On Monday, the most recent day for which numbers were available at press time, high-yield exchange-traded funds saw $57 million of daily inflows, while actively managed funds saw $85 million of inflows.

Thus far the funds are tracking $299 million of aggregate inflows for the week, the trader said.

HCA heads higher

In the secondary market, HCA’s 5 3/8% notes due 2025 that priced fairly late in the session still saw considerable aftermarket activity, with one market source seeing more than $46 million of the hospital operator’s bonds trading hands, topping the high-yield Most Actives list.

He saw those bonds having firmed smartly to 101¾ bid from their par issue price.

A second trader saw two-sided markets in the notes at 101¾ bid, 102¼ offered, while a third pegged them in a 101 5/8-to-101¾ bid context.

The upsized $1 billion offering was the first genuinely junk-rated megadeal of the year; last week’s $2.25 three-part transaction from General Motors Financial Co. was technically split-rated (Ba1/BBB-/BB+), priced off the investment-grade desks and saw only limited junk investor participation.

HCA’s existing bonds, meantime, moved up in anticipation of that big new deal, with its 5% notes due 2024 having pushed up by 1½ points on the day to 104¾ bid on volume of more than $15 million, while its 6½% notes due 2020 were higher by 1 point, at 112 bid, on volume of over $12 million.

Another market source saw the 5% notes having firmed to 105 bid, up 1 7/8 points on the day.

Virgin, SunCoke gain

The day’s other two issues – Virgin Media and SunCoke Energy Partners – did not see that same volume of activity as HCA did, even though they each priced earlier, probably due to their smaller sizes.

However, each was seen solidly higher.

A trader saw Virgin Media’s dollar-denominated 5¾% notes due 2025 at 100½ bid, 101 offering, up from the par level at which the provider of cable and broadband service in the United Kingdom had priced its three-part offering, which also included 10-year euro and sterling tranches.

Another trader later on saw the bonds doing better, at 101¼ bid, 101½ offered.

SunCoke’s add-on to its 7 3/8% notes due 2020 were seen by one trader at 102½ bid, a little up from their 102 pricing level.

But a second market source saw those bonds having moved up to 103¼ bid, 103¾ offered.

Recent deals trade around

Among recently priced junk issues, a trader saw Aircastle Ltd.’s 5 ½% notes due 2022 up ¼ point on the session at 101 3/8 bid. A second trader saw the bonds at 101 1/8 bid, 101 5/8 offered.

The Stamford, Conn.-based aircraft leasing company had priced $500 million of the notes at par on Monday, after upsizing that drive-by offering from an originally announced $400 million. The new bonds had traded at 101 bid in initial aftermarket dealings.

Monday’s other transaction – an upsized $800 million of 5 5/8% notes due 2023 from Open Text – were trading about ¼ point lower, a trader said, locating the bonds at 102 bid.

A second trader saw the bonds moving between 101 7/8 and 102 3/8 bid, but a third had them going home at 102 1/8 bid, 102 5/8 offered.

The Waterloo, Ontario-based business software provider priced its regularly scheduled forward calendar offering at par, after enlarging it from the originally shopped $600 million; the new bonds initially traded in a 102-to-102¼ bid context.

NCI Building Systems’ 8¼% notes due 2023 continued to lose ground after a strong initial surge; two separate traders saw them on Tuesday at 101½ bid, 102 offered.

The Houston-based manufacturer of non-residential construction metal products had priced them at par off the forward calendar on Friday, and they had quickly moved up to a 102½-to-103 context, but then started to come in on Monday, finishing around 102.

Friday’s other deal – the $200 million quick-to-market Centene add-on to its existing 4¾% notes due 2022 – were trading at 100¾ bid, 101¾ offered, a trader said.

The St. Louis-based health-care services provider priced the quickly shopped issue at par, and they had moved up by about 1 point after that. They added another ¼ point or so on Monday, before starting to come off those peak levels on Tuesday.

Energy angst continues

Away from the new deals, gyrating crude oil prices were matched by roller-coaster action in some oil and natural gas exploration and production company bonds on Tuesday.

The benchmark U.S. crude grade, West Texas Intermediate, fell more than $2 per barrel in initial dealings on Tuesday, reaching its lowest levels in over six years as it fell below $45 per barrel. However, by the end of the day, it had bounced off those lows, with the forward month contract settling at settling at $46.52, actually up 45 cents on the day.

A trader said that California Resources’ 6% notes due 2024 “were definitely softer in the morning, down almost 2 points – but now [in the late afternoon], they’re about unchanged.”

A second market source saw those bonds finishing the day down just 3/16 point, at 79½ bid, on volume of more than $41 million.

But not all energy credits were able to make that kind of a comeback.

A trader saw Swift Energy’s 7 7/8% notes due 2022 finishing the day down 9 points, at 36¼ bid, on volume of around $6 million.

He saw Samson Investment Co.’s 9¾% notes due 2020 off by 3¾ points on the day at 32¼ bid, with over $20 million traded.

Linn Energy’s 6½% notes due 2019 closed down 1¼ point at 83¾ bid on volume of more than $25 million.

Ocwen falls on license threat

Outside of the energy realm, Ocwen Financial Corp.’s 5 5/8% notes due 2019 “took a big hit” Tuesday, a trader said, on reports that the California state Department of Business Oversight (DBO) was taking measures to suspend the company’s mortgage license.

A second trader said the debt dropped nearly 6 points to 86, adding that the stock was also “getting hammered.”

The company’s common stock declined $4.41, or 36.18%, to $7.78 on well-above average trading. Altisource Portfolio Solutions SA (Nasdaq: ASPS), a company associated with Ocwen, also weakened, losing $10.45, or 38.79%, to close at $16.49.

For its part, Altisource has scheduled an 11 a.m. ET conference call for Friday “to discuss recent events and strategy,” according to a press release.

At a second desk, a trader said Ocwen’s debt “traded in a wide range between 86 and 89,” which compared to previous trades around 92.

“So they were clearly weakened on that news,” he said.

According to various news reports, DBO has been asking Ocwen for information tied to its compliance with the state’s Homeowners Bill of Rights since October. The company has reportedly failed to provide the necessary documents, leaving the DBO to move to suspend its mortgage servicing license.

An administrative settlement hearing will be held in February. A hearing on the license suspension has been scheduled for July.

Ocwen said it is cooperating with the DBO and believes the situation will be resolved.

KB trades off

Elsewhere, KB Home’s 7% notes due 2021 ended down ¾ point at 104½ bid on volume of more than $10 million, in line with a fall in the Los Angeles-based homebuilder’s shares, which ended at $13.87, down $2.70, or 16.29%, after it missed its gross margin and profit goals for the fourth quarter.

While the company reported a sharp increase in net earnings from a year ago, most of that was due to a one-off accounting maneuver (see related story elsewhere in this issue).

Indicators turn mixed

Statistical indicators of junk market performance turned mixed on Tuesday after having been lower on Monday. They had also been mixed on Friday and higher across the board for two consecutive sessions before that.

The KDP High Yield Daily index rose by 5 basis points to 70.78 after having lost 2 bps on Monday, thus breaking a string of three straight gains before that.

Its yield came in by 2 bps to 5.57% after having been unchanged at 5.59% on Monday. It was the fourth narrowing in the last five sessions.

However, the Markit Series 23 CDX North American High Yield index lost 9/32 point on Tuesday, its third straight loss, as it finished at 105¼ bid, 105 3/8 offered. It had edged downward by 1/32 point on the day Monday.

But the Merrill Lynch U.S. High Yield Master II index resumed its winning ways for the fourth time in the last five sessions, inching up by 0.002%. On Monday it had dropped by 0.039%, its first retreat after three successive advances before that.

Tuesday’s gain raised its year-to-date return to 0.197% from Monday’s 0.194%, although it remained down from 0.234% on Friday, its high point for the year so far. Its low for the year has been a 0.59% cumulative loss, the biggest since October of 2011 recorded last Tuesday.

The Finra/Bloomberg U.S .High Yield index volume rose to $4.492 billion on Tuesday from $3.687 billion at the close on Monday.

Stephanie N. Rotondo contributed to this review.

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