Cable One prices; Consolidated Communications and PaperWorks add on; Tuesday deals busy

By Paul A. Harris and Paul Deckelman

New York, June 3 – The high-yield primary market – fresh off one of its busiest sessions of the year so far – took a step backward on Wednesday, dialing down the pace of new-issue activity considerably and pricing just three new offerings.

The big deal of the day was Cable ONE, Inc.’s $450 million issue of seven-year paper, a regularly scheduled forward calendar offering. Traders said the new bonds firmed in initial aftermarket dealings.

There was also a pair of quickly shopped add-ons to existing bonds.

Consolidated Communications, Inc. did a $300 million addition to its 2022 notes, while PaperWorks Industries, Inc. brought a $90 million tap of its 2019 secured notes to market.

The day’s new issuance came to just $834 million of new U.S.-dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers – a drop in the bucket versus the $5.54 billion of such bonds from five issuers that got done in seven tranches on Tuesday, the fourth-busiest primary session seen so far this year, according to data compiled by Prospect News.

Traders meantime saw brisk aftermarket activity in Tuesday’s various issues, none more so than hospital operator Tenet Healthcare Corp.’s giant-sized two-part offering, which racked up giant-sized trading volume for the two tranches totaling more than $400 million, easily the busiest credits of the day in Junkbondland; both were seen having moved up on the session.

There was also respectably active trading volume – though nowhere remotely near that of the Tenet tranches – in the new deals from AMC Entertainment Inc., Informatica Corp., NXP BV and Ferrellgas Partners, LP.

Statistical indicators of junk market performance were lower across the board for a second consecutive session on Wednesday. They had turned southward on Tuesday after having been mixed for three consecutive sessions before that.

Cable ONE comes atop talk

Three issuers completed single-tranche dollar-denominated deals during Wednesday's primary market session in the high yield, raising a combined total of $834 million.

Two of the three came as drive-bys.

None were upsized.

Two priced on top of talk, while the third came cheap to price talk.

In the only roadshow deal to clear during the session Cable ONE priced a $450 million issue of seven-year senior notes (B1/BB) at par to yield 5¾%.

The yield printed on top of yield talk.

J.P. Morgan and Wells Fargo were the joint bookrunners.

Proceeds, together with cash on hand, will be used to pay a special one-time cash dividend to Graham Holdings Co. in connection with the spinoff of Cable ONE from Graham Holdings.

Consolidated Communications tap

Consolidated Communications priced a $300 million add-on to its 6½% senior notes due Oct. 1, 2022 (B3/B-) at 98.26 to yield 6.804%.

The reoffer price came cheap to the 98.5 to 99 price talk.

Morgan Stanley and Wells Fargo were the joint bookrunners for the debt refinancing.

PaperWorks taps 9½% notes

PaperWorks Industries priced a $90 million add-on to its 9½% senior secured notes due Aug. 15, 2019 (B3/B-) at 99.01 to yield 9.786%.

The reoffer price came on top of price talk.

Jefferies was the left bookrunner for the acquisition financing. Macquarie was the joint bookrunner.

Life Time Fitness downsizes

Looking ahead to Thursday's session, Life Time Fitness Inc. downsized its offering of eight-year senior notes (Caa1/CCC+) to $450 million from $600 million, and upsized its bank loan.

The notes are talked to price in the 8¼% area.

Goldman Sachs is the left bookrunner. Deutsche Bank, Jefferies, BMO, RBC, Macquarie, Nomura and Mizuho are the joint bookrunners.

XPO restructures, sets talk

XPO Logistics, Inc. put out price talk on a revised offering of senior notes (B1/B) that is coming in three fixed-rate tranches, according to market sources.

The acquisition financing deal size was announced at $2 billion equivalent earlier in the week.

However, talk surfaced Wednesday on a minimum amount of about $1.46 billion equivalent.

The revised deal includes a £300 million tranche of five-year fixed-rate notes with two years of call protection, talked to yield 6¾% to 7%.

A $500 million equivalent minimum tranche of euro-denominated six-year fixed-rate notes with 2.5 years of call protection is talked to yield 5¾% to 6%.

For the sterling- and euro-denominated tranches, JPMorgan is the left bookrunner and will bill and deliver.

A $500 million minimum tranche of seven-year fixed-rate notes with three years of call protection is talked to yield 6½% to 6¾%.

Morgan Stanley is the left bookrunner for the dollar-denominated tranche, for which it will bill and deliver.

A proposed euro-denominated tranche of floating-rate notes has been withdrawn.

Were the deal to price with final tranche sizes at their minimum amounts, it would represent a downsize of more than $500 million equivalent to the overall deal. But market sources cite the specifications that the euro- and dollar-denominated tranches are coming sized at $500 million equivalent minimum, and add that the deal could thus grow back to $2 billion equivalent or beyond.

Harsco sets talk

Harsco Corp. talked its $250 million offering of five-year senior notes (Ba1/BB/BBB-) to yield 6% to 6¼%.

Books closed late Wednesday, and the deal is set to price mid-morning Thursday, New York time.

Citigroup, Credit Suisse, HSBC, JPMorgan, MUFG, RBC and U.S. Bancorp are the joint bookrunners.

CMA CGM downsizes, restructures

In the European primary market, France-based container shipping services company CMA CGM priced a downsized, restructured €550 million issue of 7¾% senior notes due Jan. 15, 2021 (B3/B-) at 98.871 to yield 8%.

The debt refinancing deal was downsized by about $180 million equivalent, from $800 million equivalent, along with the elimination of a proposed dollar-denominated tranche of five-year notes.

The yield printed on top of yield talk.

Joint global coordinator and bookrunner BNP Paribas will bill and deliver. Morgan Stanley is also a joint global coordinator and bookrunner.

Chop in the primary

Citing Wednesday's news of downsizings and restructurings, a debt capital markets banker allowed that there is presently a bit of chop in the primary market.

Substantial upward moves in the yields of 10-year Treasuries and bunds have created headwinds for higher-quality issuers, the banker noted.

For the highest-quality high-yield issuers, it will now be difficult to realize coupons in the 4s, given the Treasury moves, the source said.

Issuers with slightly lower-quality ratings are going to see some pushback if they try to price a deal with a coupon in the 5s.

Those issuers with ratings that are lower still might be OK, so long as the market is open to the deal, the banker said.

Ditto for the European primary, a London-based banker said earlier on Wednesday.

The 10-year bund was yielding 88 basis points on Wednesday, up from 48 bps on Monday, said the banker, adding that it is a big move.

Inflows

Meanwhile dedicated high-yield funds saw inflows on Tuesday, the most recent session for which data was available at press time, according to a portfolio manager.

High-yield exchange-traded funds saw $750 million of daily inflows on Tuesday.

Actively managed funds saw $515 million of inflows.

Meanwhile, bank loan funds saw $20 million of inflows.

Cable ONE moves up

In the secondary realm, a trader said that Cable ONE’s 5¾% notes due 2022 “were very busy,” estimating volume in the Phoenix-based cable operator’s new deal at some $45 million.

He said that after pricing at par, the notes started trading as low as 100 1/8 bid – but by the end of the day, he said, “most of the last trades have been above 101.”

He said the most-recent prints had been in a 101½-to-102 bid context.

A little earlier, another trader had quoted the bonds trading between 101¼ and 101½ bid.

A market source at another desk meantime saw Philadelphia-based cardboard packaging producer PaperWorks Industries’ 9½% senior secured notes due 2019 having firmed to a range of 100¼-to-101¼, after its $90 million add-on tranche priced at 99.01 to yield 9.786%.

Given the lateness of the hour at which it priced – with final terms not circulating in the market until almost 6 p.m. ET – traders did not see any initial aftermarket dealings in the 6½% add-on notes due 2022 from Consolidated Communications, a Mattoon, Ill.-based provider of advanced communications services. The $300 million issue priced at 98.26 to yield 6.804%.

Flextronics deal firmer

One of the junk traders also noted robust activity in the new split-rated (Ba1/BBB-/BBB-) 4¾% notes due 2025 from Singapore-based contract electronics manufacturer Flextronics International Ltd.

That $600 million issue priced on Wednesday off the high-grade desks at Treasuries plus 250 bps, equivalent to a price of 99.213, after the offering was upsized from an initially shopped $500 million.

Attracting some notice from junk, high-grade and emerging-markets investors, more than $36 million of the notes changed hands, moving up to just under par bid.

Tenet tops Most Actives

Back among the purely junk-rated names, traders said that there was no doubt in anyone’s mind as to what the most notable issue of the day was.

They pointed to the huge volume in Dallas-based hospital operator Tenet Healthcare’s equally huge new issue, which had come to market on Tuesday in two quickly shopped tranches.

“They were easily the two leaders in volume,” one said, noting the more than $277 million of 6¾% notes due 2023 that traded, as well as the more than $143 million of senior secured floating-rate notes due 2020 changing hands.

He saw the secured floaters at 100¾ bid and the unsecured fixed-rate notes around the 101 bid level.

A second trader said that Tenet “traded a lot last night” after the upsized $2.8 billion behemoth had come to market, “and a lot today as well.”

He pegged the floaters between 100½ and 100¾ bid and the fixed-rate notes between 100¾ and 101.

Another market source called the 6¾% notes up 5/8 point on the day, at 100 7/8 bid, while the floating-rate notes – whose Libor plus 350 bps coupon worked out to about 3.783% – were at 100¾ bid, up ½ point on the day.

Tenet priced $900 million of the floating-rate notes at 99.5 on Tuesday after upsizing that portion of the deal from an originally planned $500 million, thus raising the overall size of the issue to $2.8 billion from an originally announced $2.4 billion.

It meantime priced $1.9 billion of the 6¾% notes via its THC Escrow Corp. subsidiary at 99.5 to yield 6.832%.

Although the issue priced late in the session on Tuesday, the two tranches were seen to have firmed to about the 100¼ bid area in initial aftermarket dealings.

Tenet’s existing 8 1/8% notes due 2022 – which had lost 3/8 point on Tuesday in active dealings of over $12 million on news of the huge new deal – including the big secured tranche going into the capital structure above the existing unsecured bonds – continued to give up ground on Wednesday. A trader quoted them down another 3/16 point, to 109 7/16 bid, on volume of over $32 million.

Tuesday deals keep busy

Aside from Tenet’s monster megadeal, traders also saw considerable activity in the other new issues that had come to market on Tuesday.

For instance, two traders at separate shops described AMC Entertainment’s 5¾% senior subordinated notes due 2025 as being “wrapped around par,” the level at which the Leawood, Kan.-based movie theater operator’s quickly shopped $600 million issue had priced.

One of the traders saw the bonds offered at 100¼ late in the session.

Another market source located the notes at 100 1/8 bid, which he called a gain of 1/8 point, on volume of more than $37 million, on top of the more than $50 million that traded on Tuesday after the issue had priced.

Informatica’s 7 1/8% notes due 2023 were trading around 100¼ bid, two traders said, about unchanged on the session.

Another source saw two-sided markets in the notes between 100 1/8 and 100 3/8, which he called down ¼ point on the day.

More than $27 million of the notes were trading on Wednesday, although that was off from the more than $85 million of turnover seen on Tuesday after that $650 million issue priced at par as a regularly scheduled forward calendar deal. The notes priced via the company’s Italics Merger Sub, Inc. subsidiary – part of the funding for the pending leveraged buyout of the Redwood City, Calif.-based business software provider – after the deal was downsized from an originally shopped $750 million.

Dutch semiconductor manufacturer NXP BV’s 4 1/8% notes due 2020 were seen up about 3/16 point on Wednesday, at 100¾ bid, on volume of over $22 million.

The company, along with its NXP Funding LLC financing subsidiary, had priced $600 million of those notes at par on Tuesday, upsized from $500 million originally, as part of a quick-to-market $1 billion two-part transaction.

The other half of that deal – the $400 million of 4 5/8% notes due 2022 – were seen marginally lower at 100 1/16 bid, with over $15 million of turnover.

Those notes had also priced at par on Tuesday, after the seven-year tranche had been downsized from an originally shopped $500 million.

Overland Park, Kan.-based propane distributor Ferrellgas Partners’ 6¾% notes due 2023 were quoted by a trader on Wednesday around the 101 bid level, up about 5/8 point on the day, with more than $15 million traded.

The company, via its Ferrellgas, LP operating subsidiary and its Ferrellgas Finance Corp. funding subsidiary, had priced $500 million of those notes at par late in the session on Tuesday in a drive-by offering that was upsized from an originally announced $400 million.

Indicators remain lower

Statistical indicators of junk market performance were lower across the board for a second consecutive session on Wednesday. They had turned southward on Tuesday after having been mixed for three consecutive sessions before that, and for six sessions in the previous seven trading days.

The KDP High Yield Daily index lost 5 bps on Wednesday to end at 71.41, its second straight loss and third setback in the last four sessions. On Tuesday it had been down by 4 bps after having risen by 1 bp on Monday.

Its yield moved up by 1 bp to 5.32% after having been unchanged on Tuesday – its second such steady reading in the previous three sessions – and having come in by 1 bp on Monday.

The Markit Series 24 CDX North American High Yield index dropped by 7/32 point on Wednesday, its second loss in a row, ending at 106 27/32 bid, 106 29/32 offered. On Tuesday it had eased by 1/32 point after having been up by the same 1/32 point on Monday and having been unchanged on Friday.

The Merrill Lynch North American Master II High Yield index meanwhile registered its third successive loss on Wednesday after six consecutive gains. It declined by 0.155%, after Tuesday’s 0.092% downturn.

Wednesday’s setback lowered the index’s year-to-date return to 3.793% from 3.954% on Tuesday. Those levels, in turn, were down from Friday’s 4.062%, the index’s peak level for the year so far.

© 2015 Prospect News.
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