AMN, Donnelley, LSC price to cap $4.7 billion week; new Alcoa bonds firm smartly

By Paul Deckelman and Paul A. Harris

New York, Sept. 23 – For a second straight session, the high-yield market saw a trio of new deals.

Friday’s issues, all regularly scheduled forward calendar transactions, added up to $1.08 billion, bringing the week’s total of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers to $4.7 billion in 10 tranches, according to data compiled by Prospect News.

The day’s big deal was an upsized $450 million of seven-year secured paper from LSC Communications, Inc., a publishing, print services and office products company.

AMN Healthcare, Inc., a healthcare staffing company, priced an upsized $325 million of eight-year notes, which firmed modestly in aftermarket dealings.

And Donnelley Financial Solutions, a financial communications services company and, like LSC Communications, a spin-off from R.R. Donnelley & Sons Co., did $300 million of eight-year notes, which were also quoted higher.

Thursday’s big new two-part offering from aluminum giant Alcoa, Inc. was the standout performer of the day in secondary, with both Alcoa tranches seen having firmed smartly in heavy trading.

There was also active trading in the new two-part deal from oil and natural gas operator Targa Resources Corp., although those bonds were off from Thursday’s initial trading levels.

Statistical market performance measures turned mixed on Friday after being firmer across the board on Wednesday and also on Thursday. It was the second mixed session in the last four trading days.

For the week, the indicators were higher all around versus last Friday, when they had been lower for two straight weeks following one mixed week.

LSC Communications upsized, restructured

In Friday’s primary market LSC Communications priced an upsized, restructured $450 million issue of seven-year senior secured notes (Ba3/B) at par to yield 8¾%.

The issue size was increased from $400 million.

The maturity was decreased to seven years from eight years.

The yield printed at the wide end of the 8½% to 8¾% yield talk and well wide of initial guidance that was set in the high 7% context.

There were also covenant changes.

BofA Merrill Lynch, JP Morgan, Citigroup, Capital One, Fifth Third, ING, MUFG, PNC, SunTrust, US Bancorp and Wells Fargo were the joint bookrunners for the spinoff deal.

AMN Healthcare upsized, tight

AMN Healthcare priced an upsized $325 million issue of eight-year senior notes (Ba3/B+) at par to yield 5 1/8%.

The issue size was increased from $300 million.

The yield came at the tight end of yield talk in the 5¼% area.

The deal appeared to go well, according to a bond trader who had the new AMN Healthcare 5 1/8% notes due 2024 trading either side of 101 late Friday afternoon.

SunTrust was the left bookrunner for the debt refinancing deal.

Donnelley spinoff deal

Donnelley Financial Solutions priced a $300 million issue of eight-year senior notes (B3/B) at par to yield 8¼%.

The yield printed at the tight end of the 8¼% to 8½% yield talk. However pricing backed up significantly from early guidance in the mid-7% area, sources said.

There were also covenant changes.

J.P. Morgan, BofA Merrill Lynch, Citigroup, US Bancorp, Wells Fargo, MUFG, PNC, Capital One, SunTrust and ING were the joint bookrunners for the spinoff deal.

Telcom Italia’s 3% print

In Europe, Telecom Italia SpA priced €1 billion of 3% nine-year senior notes (Ba1/BB+/BBB-) at a 283 basis points spread to mid-swaps.

The spread came on top of final spread talk which had tightened from earlier talk of 300 bps.

The bond were sold at a reoffer price of 99.806 to yield 3.025%

The quick-to-market deal, which was priced on the investment grade desk, played to over €4 billion of orders, an informed source said.

Accounts were almost certainly playing Telecom Italia for yield, the source added, noting that two straight high-grade plays that were in the market saw far less subscription: BASF played to a €1.7 billion book and Gecina played to €1 billion of orders, compared to the €4 billion-plus in the Telecom Italia book.

Banca IMI, Deutsche Bank, Mediobanca and Morgan Stanley were the active bookrunners.

Deutsche Bank will bill and deliver.

NH Hotels secured deal

In euro drive-by action, NH Hotels Group priced a €285 million issue of seven-year senior secured notes (expected Ba3/existing BB-) at par to yield 3¾% on Friday.

The yield printed at the tight end of the 3¾% to 4% yield talk.

Global coordinator Deutsche Bank will bill and deliver. Goldman Sachs, BBVA and Santander were also global coordinators.

The Spanish hotel chain, which is headquartered in Madrid, plans to use the proceeds to refinance bank debt.

Schoeller sets roadshow

Schoeller Allibert Group BV plans to roadshow a €210 million offering of five-year senior secured notes in what promises to be a big week in the European high-yield new issue market, sources said.

Citigroup is the lead bookrunner.

The Hoofddorp, Netherlands-based plastic packaging company plans to use the proceeds to repay debt.

A London-based debt capital markets banker had visibility on five deals for the week ahead.

A syndicate banker in the United States had a similar count of dollar-denominated deals to be announced, but said that the final week of September likely won’t be huge.

Look for an industrial issuer to show up with a deal sized $500 million to $750 million, the source said.

The week is set to get underway with at least four dollar-denominated deals totaling $2.23 billion on the road.

Issuance off on the week

Friday’s $1.08 billion of new notes brought the week’s total new issuance to $4.7 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers in 10 tranches, according to data compiled by Prospect News.

But that was down from the $9.85 billion which had priced in 12 tranches last week, ended Sept. 16.

Traders said that issuance fell off during the front part of the week as market participants waited to see what the Federal Reserve would do about interest rates and only picked up towards the back end of the week after the central bank announced that there would be no change for the moment in interest rates. Some observers had anticipated a rate boost at the meeting.

This week’s new deals brought the year-to-date issuance total up to $175.14 billion in 263 tranches.

That was running 19.5% behind the new-deal pace seen at this time last year, when $217.64 billion had priced in 347 tranches by this point on the calendar, the Prospect News data indicated.

That was a narrowing of the 22.3% gap between this year’s and last year’s issuance seen last week.

AMN trades actively

Among the day’s new issues, traders saw fairly active trading in the new AMN Healthcare 5 1/8% notes due 2024.

A trader said that more than $46 million of the San Diego-based healthcare staffing company’s new paper changed hands after pricing at par earlier in the session.

One trader saw the notes at 100 5/8 bid on the break.

Several others saw that paper firm to around the 101 bid level by the day’s end.

Chicago-based financial communications services company Donnelley Financial Solutions’ 8¼% notes were seen by one trader in a par to 101 bid context, up from their par issue price.

A second pegged the new notes between 101 and 101 1/8 bid.

Alcoa ‘outperforms’

A trader said that Thursday’s new deal from New York-based aluminum processing and products giant Alcoa “outperformed all of the other deals.”

He saw its 6¾% notes due 2024 trading above 102 bid, versus the par level at which those $750 million of new notes had come to market.

And he saw its $500 million of 7% notes due 2026 in a 101½ to 102 bid context, also up from a par issue price.

At another shop, the 6¾% notes were seen having gotten as good as 102 5/8 bid. A trader said that more than $160 million of that paper changed hands, making it the day’s busiest credit in Junkbondland.

He also saw more than $130 million of the 7% notes moving around, finally ending at 101 7/8 bid.

Targa trades off

A trader said that Thursday’s other big new issue, from Houston-based oil and natural gas operator Targa Resources, “kind of leaked lower” on Friday, ending below its Thursday aftermarket levels and ultimately “closing near their issue price.

Targa’s 5 1/8% notes due 2025 were being quoted off more than ½ point, ending slightly below par, on volume of more than $35 million.

And its 5 3/8% notes due 2027 likewise lost 3/8 point on the day, a trader said, closing at 100 1/8 bid with some $29 million of turnover.

Indicators turn mixed

Statistical market performance measures turned mixed on Friday, after having been firmer across the board on Wednesday and again on Thursday. It was the second mixed session in the last four trading days.

For the week, the indicators were higher all around versus last Friday. Before that they had been lower for two straight weeks, which in turn followed one mixed week.

The KDP High Yield Index gained 2 basis points on Friday to end at 70.58, its fifth straight gain after six consecutive losses. On Thursday, the index had jumped by 41 bps.

Its yield came in by 1 bp on Friday to 5.28%, its fourth successive narrowing; on Thursday, it had tightened by 12 bps. The yield has been coming in this week after widening out for seven straight sessions before that.

Friday’s levels compared favorably to the 70.06 index reading and 5.42% yield seen last Friday.

The Markit Series 26 CDX Index lost 7/32 point on Friday, ending at 104 5/8 bid, 104 21/32 offered, after rising 13/32 on Thursday, its second gain in a row.

It was up, though, from 103 21/32 bid, 103 11/16 offered last Friday.

The Merrill Lynch High Yield Index rose by 0.021%, its fifth straight gain, after Thursday’s 0.553% improvement.

That lifted its year-to-date return to 14.842% Friday from Thursday’s 14.818%, which left its return for the year not far off from the 14.992% cumulative return set on Sept. 8, its peak level for 2016 so far.

For the week, the index gained 0.902%.

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