Icahn, Team Health, Zayo, MEG Energy lead $4.3 billion session; new issues jump

By Paul Deckelman and Paul A. Harris

New York, Jan. 12 – The high yield primary machine was firing on all cylinders on Thursday, as Junkbondland saw its biggest new issue day in five months.

Syndicate sources said that an amazing $4.26 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers came to market in six deals totaling seven tranches.

The big deal of the session was diversified holding company Icahn Enterprises LP’s upsized $1.20 billion offering of five- and seven-year notes – the junk market’s first mega-deal sized offering of over $1 billion this year.

Physician service organization Team Health Holdings, Inc. had been shopping a $1 billion-plus deal around to potential investors, but ended up reducing its transaction to $865 million of eight-year notes.

Both of those deals were regularly scheduled forward calendar offerings.

In contrast, the rest of the day’s action came in quickly marketed, opportunistically timed drive-by deals.

Communications infrastructure company Zayo Group, LLC brought in an $800 million issue of 10-year notes.

Canadian oil-sands operator MEG Energy Corp. priced $750 million of eight-year secured paper – the day’s lone deal from the energy sector.

Casino and racetrack operator Penn National Gaming Inc. put down a $450 million bet in the form of 10-year notes.

Truck and bus maker Navistar International Corp. drove by with an upsized $1250 million add-on to its existing $1.3 billion of 2021 notes.

In the secondary market, traders said that there was intense activity in the new paper, particularly the Team Health, Penn National, and Icahn Enterprises issues, as well as Wednesday’s eight-year deal from packaging maker Novolex Holdings, Inc.

Away from the new deals, Sprint Corp. paper was up after the wireless company received a rating upgrade.

Statistical market performance measures turned lower across the board for a second session Thursday following Wednesday’s drop – the first all-around negative performance since Dec. 14. Before that, the indicators had been mixed for four straight sessions, and higher for four sessions before that.

High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – continued 2017 on a positive note on Thursday, reporting a second straight weekly net inflow of the year, against no outflows so far, and a third consecutive cash gain, as $564 million more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday (see related story elsewhere in this issue).

Icahn upsizes

The dollar-denominated primary market saw its biggest day in five months on Thursday.

Six issuers brought a combined seven tranches to raise a total of $4.26 billion.

Four of the six issuers came with drive-bys.

Two of the six upsized their offerings, while one downsized.

Executions appeared solid, with one tranche pricing inside of talk, two at the tight or rich ends, and the remaining four on top of talk.

It was the biggest day in the primary market since last Sept. 8 which saw $4.37 billion nine tranches

Icahn Enterprises LP and Icahn Enterprises Finance Corp. priced an upsized $1,195,000,000 of senior notes (Ba3/BB+) in two tranches on Thursday.

The deal included $695 million of five-year notes which priced at par to yield 6¼%. The yield printed on top of yield talk and initial guidance.

In addition Icahn Enterprises priced $500 million of seven-year notes at par to yield 6¾%. The yield on the seven-year notes also came on top of both price talk and initial guidance.

Jefferies LLC was the sole bookrunner for the debt refinancing.

Team Health inside of talk

In a deal that has commandeered much of the market’s attention during the past week, Team Health Holdings launched and priced a downsized $865 million issue of eight-year senior notes (Caa1/CCC+/CCC+) at par to yield 6 3/8%.

The deal size was decreased from $1,015,000,000 as $150 million of proceeds were shifted to the concurrent bank loan.

The yield printed 12.5 basis points inside the 6½% to 6¾% yield talk. During the time that the deal was in the market, pricing ratcheted down from initial thoughts around 7%, a buyside source said.

The deal was said to be playing to an order book that was at least four times oversubscribed.

Accounts participating in the syndication of the bridge loan backing the bonds were said to have markers in for a big portion of the bonds, sources said.

Barclays was the lead left bookrunner for the LBO deal. J.P. Morgan, BofA Merrill Lynch, Morgan Stanley and RBC were the joint bookrunners.

Zayo’s 10-year deal

In quick-to-market action, Zayo Group, LLC and Zayo Capital, Inc. priced an $800 million issue of 10-year senior notes (B3/B) at par to yield 5¾%.

The yield printed on top of yield talk that was set in the 5¾% area. Early guidance had the deal coming with a yield in the high 5% range, a trader said.

Morgan Stanley, Barclays, SunTrust, RBC, Citigroup, Goldman Sachs and JPMorgan were the joint bookrunners for the acquisition financing.

MEG brings secured deal

MEG Energy priced a $750 million issue of 6½% eight-year senior secured second lien notes (Caa1//BB) at par to yield 6.501%.

The yield printed in line with yield talk in the 6½% area.

Lead left bookrunner Barclays will bill and deliver for the debt refinancing deal. BMO and RBC were the joint bookrunners.

Penn prices tight

Another of Thursday’s drive-by issuers, Penn National Gaming, priced a $400 million issue of 10-year senior notes (B2/B+) at par to yield 5 5/8%.

The yield printed at the tight end of yield talk that was fixed in the 5¾% area and tight to the high 5% to 6% initial guidance.

JP Morgan, BofA Merrill Lynch, Citizens, Fifth Third, US Bancorp, Wells Fargo, SunTrust, Goldman Sachs, TD and UBS were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Navistar upsizes

Navistar International priced an upsized $250 million add-on to its 8¼% senior notes due Nov. 1, 2021 (Caa1/CCC) at par to yield 8.223%.

The issue was increased from $200 million.

The reoffer price came at the rich end of the 99.75 to par price talk.

BofA Merrill Lynch, Goldman Sachs and J.P. Morgan were the joint bookrunners for the quick-to-market deal.

The Warrensville, Ill.-based truck-maker plans to use the proceeds for general corporate purposes, including working capital and capital expenditures.

Telecom Italia’s €1 billion

In the European primary market, Telecom Italia SpA priced €1 billion of 2½% notes due July 19, 2023 (Ba1/BB+/BBB-) at mid-swaps plus 237 basis points.

The spread came tight to the mid-swaps plus 240 bps spread talk. Initial guidance was mid-swaps plus 255 to 260 bps.

The notes were sold at a reoffer price of 99.288 to yield 2.622%.

Joint bookrunner Banca IMI will bill and deliver. BNP Paribas, Mediobanca, SG CIB and UniCredit were also joint bookrunners.

Big book for Jaguar Land Rover

Jaguar Land Rover Automotive plc priced an upsized €650 million issue of seven-year senior notes (Ba1/BB+) at par to yield 2.2% on Thursday, according to a market source.

The yield printed inside yield talk set in the 2½% area.

The deal, which was upsized from €500 million, played to €4 billion of orders, a market source said.

Goldman Sachs, BNP Paribas, Credit Agricole, Deutsche Bank, SG, ING, Lloyds, Mizuho, NatWest and UniCredit were the joint bookrunners.

Elsewhere Madrid, Spain-based Cellnex Telecom, SA announced that it priced €335 million of fixed-rate bonds due April 2025.

The deal was upsized from €300 million.

BNP Paribas, Goldman Sachs, ING, Mediobanca, UniCredit, Banca IMI, CaixaBank and Morgan Stanley were the stabilization managers.

TalkTalk upsized, beats talk

In the sterling-denominated primary market TalkTalk Telecom Group plc priced an upsized £400 million issue of five-year senior notes (BB-/BB-) at par to yield 5 3/8%.

The issue was increased from £300 million.

The yield printed 12.5 basis points inside of the 5½% to 5¾% yield talk.

Joint global coordinator Barclays will bill and deliver. HSBC and NatWest Markets were also joint global coordinators.

The London-based provider of pay television, telecommunications, internet and mobile network services plans to use the proceeds to repay its revolving credit facility. The additional proceeds resulting from the £100 million upsizing of the deal will be used to repay its 2014 revolver.

New deals dominate trading

In the secondary realm, “it was all new-deals, all the time” on Thursday, as one trader put it.

He saw intense activity among a number of the issues which had come to market during the session, with Team Health’s scheduled deal leading the way in that category. Over $94 million of its 6 3/8% notes traded.

He pegged the Knoxville, Tenn.-based healthcare credit – officially known as Tennessee Merger Sub, Inc. – right at its par issue price.

A second trader said the bonds had initially traded in a 100¼ to 100¾ bid context, but then had dropped back to a 99¾ to 100¼ bid range.

Penn National Gaming’s 5 5/8% notes due 2027 edged up to 100½ bid, a trader said, while at another shop, the Wyomissing, Pa.-based racetrack and casino operator’s deal was being quoted between 100½ and 101 bid.

More than $61 million of those bonds changed hands.

Icahn Enterprises’ 6¾% notes due 2024 firmed to about 100¼ bid, a trader said, seeing more than $27 million of the New York-based diversified holding company’s paper traded.

There was considerably less activity in the other half of that big deal, the 6¼% notes due 2022.

Both tranches had priced at par, and a trader said that both were trading in a par to 100½ bid context.

A second trader saw the five-years in a 100¼ to 100½ bid context, and the seven-year piece at 99¾ to par bid.

Novolex deal heavily traded

Wednesday’s new offering from Flex Acquisition Co. Inc. – the issuing vehicle for Novolex Holding, Inc. – was the most actively traded junk issue for a second consecutive session Thursday.

A market source said that more than $95 million of those 6 7/8% notes due 2025 changed hands on Thursday on top of the more than $62 million that traded in initial aftermarket dealings on Wednesday following the pricing of the $625 million forward-calendar deal at par.

On Wednesday, the bonds had zoomed to 101½ bid right out of the chute, a trader said.

Thursday’s activity was centered right around that same price, with one trader seeing them unchanged, another picturing them having backed off from that high, but only marginally.

Sprint gains after upgrade

Away from the new-deal realm, a trader said that Sprint bonds got a boost after the Overland Park, Kan.-based wireless company got favorable ratings news from Moody’s Investors Service.

“They got upgraded to B2 from B3,” he noted, seeing the notes “up anywhere from ½ point to 1 point or so across the capital structure.”

Another trader saw the bonds doing even better, with the company’s 7 7/8% notes due 2023 up better than 1¼ points at 108¾ bid. Over $19 million traded.

Sprint’s 7 1/8% notes due 2024 gained 1½ points, he said, to end at 104¾ bid, with over $16 million of volume.

Indicators stay lower

Statistical market performance measures turned lower across the board for a second straight session Thursday following Wednesday’s drop – the first all-around negative performance since Dec. 14. Before that, they had been mixed for four sessions and higher for four sessions before that.

The KDP High Yield Index lost 5 basis points on Thursday, the same as on Wednesday, to close at 72.02 – its fourth straight loss after seven sessions on the upside.

Its yield, however, atypically came in by 2 bps to 5.14%, after having widened on Wednesday by 3 bps; the yield usually rises as the index reading falls and vice versa.

The Markit Series 27 CDX Index stayed on the downside for a sixth day in a row on Thursday, ending down by 1/16 point on the day at 106¼ bid, 106 9/32 offered. It had eased by 1/32 point on Wednesday.

And the Merrill Lynch High Yield Index – which had finally weakened on Wednesday after posting its 15th successive advance before that – was down for a second day in a row on Thursday.

It retreated by 0.027%, on top of Wednesday’s 0.05% retreat, which had been its first downturn since mid-December.

Thursday’s loss cut its year-to-date return to 1.004% from 1.031% on Wednesday and down as well from its 1.081% finish Tuesday, which had been its fifth consecutive new high for the new year and its first time over 1% so far this year.

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