Hologic megadeal prices, gains in aftermarket; new Tribune up, busy; funds plunge $2.89 billion

By Paul Deckelman

New York, June 18 – The high-yield primary sphere saw its second consecutive billion-dollar-plus megadeal price on Thursday, as Hologic, Inc., a developer of medical systems and products, brought a quick-to-market $1 billion offering of five-year notes to market. Traders said they firmed smartly on brisk volume when they hit the aftermarket.

The traders saw even more activity in Wednesday’s $1.1 billion of seven-year notes from Tribune Media Co., which were easily the busiest bonds in Junkbondland. The broadcasting and digital media company’s notes pushed upward from their par issue price.

Apart from the deals that have already priced, the high-yield forward calendar saw several additions.

Univar Inc., a distributor of specialty chemicals, was heard by syndicate sources to be getting ready to hit the road Friday with a $400 million offering of eight-year notes that is expected to price around the middle of the coming week.

Summit Materials LLC, a producer of construction materials, unveiled plans for a new $275 million of unsecured notes as part of a larger financing plan for the purchase of cement-making assets from a competitor.

Charter Communications Inc. started syndicating $13.8 billion of bridge loan financing backing the Stamford, Conn.-based cable operator’s pending acquisition of Time Warner Cable Inc. and Bright House Networks, which backs and will eventually be replaced with new high-yield debt.

Away from actual or prospective new deals, Rite Aid Corp.’s bonds rose as the drugstore chain operator reported earnings.

Statistical measures of market performance rose across the board after having been mixed for two straight sessions and lower twice in a row before that.

But flows of money into or out of high-yield mutual funds and exchange-traded funds, considered a trustworthy barometer of market liquidity trends, posted their biggest weekly loss of the year so far and their second straight sizable downturn.

Hologic drives by

For a third consecutive session, the junk market saw just one deal price – but for a second day in a row, it was a giant-sized offering, as Hologic priced $1 billion of new seven-year senior notes (B1/BB) at par to yield 5¼%. Price talk on the issue had been in the 5 3/8% area.

The quickly shopped Rule 144A/Regulation S for life offering was brought to market via joint bookrunning managers Goldman Sachs & Co., J.P. Morgan Securities LLC, BofA Merrill Lynch, Citigroup Global Markets Inc. and MUFG.

DnB NOR Markets Inc., HSBC Securities (USA) Inc. and SMBC Nikko Securities America Inc. were senior co-managers on the deal.

Fifth Third Securities Inc., Morgan Stanley & Co. LLC, Wells Fargo Securities LLC, KeyBanc Capital Markets Inc., RBS Securities Inc., Scotia Capital (USA) Inc. and TD Securities (USA) LLC were co-managers.

Hologic, a Bedford, Mass.-based developer, manufacturer and supplier of premium diagnostic products, medical imaging systems and surgical products, plans to use the proceeds from the bond offering plus available cash to redeem all of its outstanding $1 billion of 6¼% senior notes due 2020.

New Hologic heads higher

Although the Hologic offering priced fairly late in the session, traders did see the new bonds making the rounds.

One quoted the notes in a 100½-to-101½ bid range.

At another desk, they were seen going out around 101 3/8 bid, with over $33 million having traded.

New Tribune trades around

But the volume champ on the day was Tribune Media’s 5 7/8% notes due 2022, with over $84 million of the notes seen having changed hands.

A trader saw the notes during the morning having reached the 101½ bid level – well up from par, where the Chicago-based broadcasting and digital media company had priced its $1.1 billion regularly scheduled forward calendar offering on Wednesday.

“Tribune was busy,” a second trader allowed, quoting the notes up at least 1 point on the day at 101 1/8 bid, 101½ offered.

Those bonds had priced after the issue was both restructured and upsized.

The offering had originally been announced last week as a prospective $1 billion two-part transaction that would have consisted of a tranche of seven-year notes carrying three years of call protection and a tranche of 10-year notes with five years of call protection.

However, on Wednesday morning, word circulated in the market that the 10-year piece of paper had been eliminated, with the full size of the deal shifted into the remaining seven-year notes.

On Wednesday afternoon, market participants heard that the offering had been upsized to $1.1 billion.

It was the first transaction of $1 billion or more seen in Junkbondland since XPO Logistics Inc., a Greenwich, Conn,-based provider of transportation and logistics services, priced $1.6 billion of 6½% notes due 2022 at par back on June 4 as part of a broader two-part deal that also included a tranche of six-year euro-denominated notes.

Radian around issue price

Radian Group Inc.’s 5¼% notes due 2020 saw more than $13 million traded Thursday, a trader said, quoting them at 100 1/8 bid, which he called up ¼ point on the day.

A second trader said that “Radian wasn’t going anywhere,” with the notes in a 100-to-100¼ bid context.

That was right around the par level at which the Philadelphia-based mortgage insurance company priced its $350 million offering on Tuesday after the regularly scheduled forward calendar issue was upsized from an originally announced $300 million.

Univar hits the road

Away from the deals that have actually priced, the forward calendar continued to build on Thursday.

Univar was heard by high-yield syndicate sources to be readying a roadshow for the company’s planned $400 million offering of eight-year senior notes.

That roadshow is scheduled to begin on Friday in New Jersey, with additional presentations on Monday in New York and Tuesday in Boston. It will also be marketed to potential investors via Netroadshow.

The Rule 144A/Regulation S for life notes will carry three years of call protection.

There will also be an equity clawback for up to 40% of the notes during the first three years after issue, and holders will be able to put the notes back to the company at a price of 101% of principal plus accrued interest on a change-of-control event.

BofA Merrill Lynch heads a syndicate of joint bookrunners, the other members of which were not immediately identified.

Univar, a Downers Grove, Ill.-based distributor of industrial and specialty chemicals, plans to use the proceeds from the bond offering, together with borrowings under new bank credit facilities and cash on hand, to refinance some debt under its existing senior secured credit facilities.

Summit slates bond deal

Summit Materials announced plans Thursday for a $275 million offering of senior notes.

The Denver-based construction materials company said in an 8-K filing with the Securities and Exchange Commission that the notes would be part of the anticipated financing for Summit’s previously announced acquisition of Lafarge North America Inc.’s Davenport, Iowa, cement plant and seven cement distribution terminals. Summit will pay Lafarge $450 million plus a Bettendorf, Iowa, cement distribution terminal currently operated by Summit’s Continental Cement Co. LLC subsidiary.

Information on the timing of the bond deal, its structure, how it will be marketed to potential investors and the investment banks involved was not immediately available Thursday.

Besides the note offering, the financing for the Lafarge deal will also include a new $650 million term loan B due in 2022, which Summit plans to launch with a lender call on Friday.

BofA Merrill Lynch, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Citigroup Global Markets Inc., Barclays and RBC Capital Markets are the arrangers on the bank deal. Blackstone is a co-manager.

Charter launches bridge loan

Familiar junk issuer Charter Communications has started syndicating $13.8 billion of bridge loan financing backing the Stamford, Conn.-based cable operator’s pending acquisition of Time Warner Cable Inc. and Bright House Networks, high-yield syndicate sources said Thursday.

The borrowing entities will be Charter Communications Operating, LLC and CCO Holdings, LLC.

The bridge facility will consist of a $6 billion secured bridge loan, a $3.5 billion unsecured loan from Charter Communications Operating and a $4.3 billion unsecured loan from CCO Holdings.

Credit Suisse Securities (USA) LLC, Goldman Sachs & Co., BofA Merrill Lynch, Deutsche Bank Securities Inc. and UBS Securities LLC are the underwriters for the financing. Goldman Sachs and Credit Suisse are the joint physical bookrunners.

Commitments are due at noon ET next Wednesday. Bridge commitments will be sold as a strip.

Charter said in a May 29 8-K filing with the SEC that it had lined up $30.5 billion of debt financing to pay for the cash portions of the Time Warner Telecom and Bright House acquisitions.

The expected debt structure includes a $1.7 billion incremental senior secured revolving credit facility and $15 billion of incremental senior secured term loans.

It will also include $6 billion of senior secured first-lien notes, $3.5 billion of senior unsecured notes to be issued by Charter Communications Operating and $4.3 billion of senior unsecured notes to be issued by CCO Holdings. The three note tranches will be backed by the bridge loan facilities currently being syndicated and will eventually replace them in the company’s capital structure.

Rite Aid rallies

Away from the primary sphere, Rite Aid’s 6 1/8% notes due 2023 gained 1 point to finish at 103¼ bid, a trader said, seeing over $14 million having traded.

“All of RAD’s paper was bid for,” another trader said, also seeing the 2023 bonds having moved up past the 103 mark versus the previous session’s closing levels around 102.

The Camp Hill, Pa. drugstore chain operator’s bonds rose even as it reported that first-quarter profits beat analysts’ estimates, even though same-store sales came in weaker than expected.

Indicators turn higher

Statistical indicators of junk market performance were better across the board on Thursday after having been mixed over the previous two sessions and higher for two straight trading days before that.

The KDP High Yield Daily index rose by 4 basis points on Thursday to end at 70.59, its second straight gain; on Wednesday, it had been up by 5 bps – its first gain after three consecutive losses, including Tuesday’s 12 bps nosedive and Monday’s 13 bps plunge. Before Wednesday, losses had been recorded in 10 out of the previous 11 sessions.

Its yield came in by 2 bps, ending Thursday at 5.66%. It was the second straight narrowing, with the yield having eased by 1 bp on Wednesday after having risen over the previous three sessions, including Tuesday’s 5 bps widening, which had also been its ninth rise in the previous 10 sessions.

The Markit Series 24 CDX North American High Yield index was up by 11/32 point on Thursday after having fallen by the same amount on Wednesday. It finished at 106 bid, 106 1/32 offered. Thursday’s gain was its second in three sessions – though Wednesday’s loss had been its third in the previous four sessions and ninth in the last 12 sessions.

The Merrill Lynch North American Master II High Yield index improved by 0.102% Thursday, on top of a 0.132% rise in on Wednesday, which had been its first gain after three straight setbacks and after the index had lost in 10 out of the previous 12 sessions.

Thursday’s advance lifted its year-to-date return to 2.999% from 2.894% on Wednesday, although it remained well down from the 4.062% reading, the index’s peak level for the year so far, recorded on May 29.

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