In-demand AssuredPartners, United Rentals cap nearly $3.5 billion week, new issues move up

By Paul Deckelman and Paul A. Harris

New York, July 28 – The high-yield primary market stepped on the gas on Friday, pricing a pair of new dollar-denominated and fully junk-rated deals totaling $1.43 billion.

Insurance brokerage services provider AssuredPartners Inc. brought an upsized $500 million of eight-year notes to market as a regularly scheduled forward calendar pricing.

Construction equipment rental and leasing company United Rentals, Inc. meantime drove by with a quickly shopped $925 million of 10.5-year notes.

Primaryside sources said that both of those new deals played to brisk investor demand and both moved solidly higher in active trading when they hit the secondary market, with AssuredPartners topping the day’s Most Actives list.

Those two deals raised the week’s new-issuance total to $3.48 billion in six tranches, according to data compiled by Prospect News, well exceeding the more relaxed new deal pace seen over the past several weeks.

In the secondary market, besides Friday’s new issues, traders saw sizable activity in other recent pricings such as Vivint, Inc. and the two-part megadeal from NGPL PipeCo LLC, which were both seen continuing to add to the already hefty aftermarket gains they have notched since pricing.

Away from the new issues, traders saw continued gains in Intelsat SA’s notes, which have gained altitude over the past several sessions as the satellite communications company posted better-than-expected results.

Goodyear Tire & Rubber Co.’s bonds were seen on the downside, after the giant tire manufacturer reduced its fiscal 2017 earnings guidance.

Statistical market performance measures turned mixed on Friday after moving moved lower on Thursday for the first time since July 6.

But the indicators ended the week up all around from where they had closed last Friday, July 21 – their third consecutive week-over-week gain, following one lower week and going back a little further, one mixed week before that.

United Rentals drives through

An active Friday session saw two deals – both said to have played to massive demand – clear the high-yield primary market.

One of the two came upsized, one came as a drive-by, and both priced at the tight end of talk.

United Rentals priced a $925 million issue of 10.5-year senior notes (S&P: BB-) at par to yield 4 7/8% in a drive-by.

The yield printed at the tight end of talk for a yield in the 5% area and inside the 5% to 5¼% initial guidance.

BofA Merrill Lynch, Barclays, Citigroup, J.P. Morgan, MUFG, Morgan Stanley, Scotia and Wells Fargo were the joint bookrunners for the debt refinancing deal.

AssuredPartners upsizes

AssuredPartners priced an upsized $500 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 7%.

The amount was increased from $450 million.

The yield printed at the tight end of the 7% to 7¼% talk.

The deal, which was marketed by means of a roadshow, played to demand in excess of $3 billion, with over 100 accounts in the order books, sources say.

Morgan Stanley, BofA Merrill Lynch, Barclays, RBC, BMO and Macquarie were the joint bookrunners.

The week ahead

Cornerstone Chemical Co. is on the road with the only deal to cross the weekend on the active forward calendar, a $430 million offering of seven-year senior secured notes (B2/B) backing the buyout of the company by Littlejohn & Co. LLC from H.I.G. Capital.

Initial talk has it coming to yield in the low-to-mid 7% area, an investor said.

The roadshow is scheduled to wrap up on Wednesday.

At least three other deals were visible to sources canvassed on Friday afternoon.

A moderate deal pace is anticipated into mid-August, after which the run-up to Labor Day is expected to be the good old Dog Days in the junk bond new issue market, sources say.

Thursday outflows

Daily cash flows for dedicated high-yield bond funds were flat to negative on Thursday, the most recent session for which data was available at press time, according to a trader.

High-yield ETFs sustained $75 million of outflows on the day.

Actively managed high yield fund flows were just below the balk line, Thursday, at negative $1 million.

The news followed the closely watched weekly report from Lipper US Fund Flows that dedicated high-yield funds sustained $21 million of outflows on the week to last Wednesday’s close.

Dedicated bank loan funds were also negative on Thursday, sustaining $26 million of outflows on the day.

Week’s issuance picks up

Friday’s two new deals raised the amount of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers to $3.48 billion in six tranches, according to data compiled by Prospect News,

That was up from the $2.53 billion which priced the week before, ended July 21, also in six tranches.

The previous week’s issuance was roughly in line with the week before that, ended July 14, when issuance totaled $2.24 billion in seven tranches.

This week’s deals lifted year-to-date issuance for 2017 to $154.44 billion in 290 tranches, running about 20.3% ahead of the $128.29 billion which had priced in 188 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Day’s deals trade higher

In the secondary market, traders said the day’s two new issues were well received, both moving up in active dealings.

A market source said that the new AssuredPartners 7% notes due 2025 were the most actively traded issue in Junkbondland on Friday, with over $65 million changing hands during the session.

The source said that the Lake Mary, Fla.-based insurance brokerage services provider’s new notes had jumped to 101 3/8 bid from their par issue price.

A second trader also quoted the notes at that price.

The day’s big deal – Stamford, Conn.-based equipment rental and leasing company United Rentals’ new 4 7/8% notes due in January 2028 – saw somewhat less trading on the session after pricing later on in the day.

More than $18 million of those notes traded, pushing up from their par issue price to close around 100 5/16

bid.

A second trader pegged the notes in a 100¼ to 100½ bid context.

Existing United Rentals firm

United Rentals plans to use the proceeds from the new bond deal to fund an early redemption of its $925 million of existing 6 1/8% notes due 2023.

The company said that those notes will be redeemed on Aug. 27 at a make-whole redemption price of 104.371% of par plus accrued interest up to but excluding the redemption date.

That pushed those existing bonds up slightly to around 104 11/16 bid, from prior levels around 104, with about $6 million traded.

Recent issues show gains

Among some of the recently priced new issues, traders said that Thursday’s offering from Vivint was trading higher in morning dealings, pegging the bonds at 100½ bid, 100¾ offered versus the par level at which that $400 million transaction had priced.

Later in the session, a trader said that the Provo, Utah-based security alarm and home automation services provider’s 7 5/8% notes due 2023 – reworked to a six-year offering from the originally announced seven-year tenor – was going home at 101¾ bid, which he called about unchanged on the day.

Another trader also saw the bonds ending there, but said that they had moved up by around 7/8 point on the day. More than 40 million of the notes traded.

Tuesday’s big new deal from NGPL PipeCo “was active again,” a trader said, seeing its 4 3/8% notes due 2022 at 102 7/8 bid, with more than $10 million traded, and its 4 7/8% notes due 2027 better by ¼ point on the day at 103 bid, on volume of more than $13 million.

NGPL, a Houston-based owner and operator of natural gas pipelines, compression facilities and storage reservoirs, brought a quickly shopped $1.4 billion of new paper to market in two equally sized $700 million tranches, which priced at par very late in the session on Tuesday and then jumped to levels near 103 bid in heavy trading on Wednesday.

Intelsat issues up

Away from the new deal realm, traders saw continued gains in Intelsat’s notes on Friday after the Luxembourg-based communications satellite company had reported better-than-expected quarterly results.

Its Intelsat Jackson Holdings SA 9¾% notes due 2025 jumped by 1 1/8 points on Friday to end at 103¼ bid while its 5½% notes due 2023 moved up by ¾ point to 86¼ bid, both on volume of more than $20 million.

Another trader saw the company’s 7¼% notes due 2020 firming by ¼ point to go home at 96¼ bid.

On Thursday, Intelsat reported second quarter revenues of $533 million, down slightly from market expectations – but its 20 cents per share adjusted net loss was considerably smaller than the 30 to 35 cents of red ink most analysts were forecasting.

During the company’s conference call, its chief financial officer expressed confidence in the company’s ability to meet its several billion dollars of junk bond and term loan maturities that will be coming due within the next three years.

Goodyear skids on numbers

Bad numbers from Goodyear caused the Akron, Ohio-based tire-making giant’s bonds to head lower during the session.

A market source saw its 4 7/8% notes due 2027 ending at 101½ bid, calling that a 1½ point loss on the session, with around $10 million traded.

A second trader also saw the fall in those bonds and said the company’s 5 1/8% notes due 2023 retreated by 5/8 point to end at 104½ bid.

Goodyear said that its earnings for the June 30 quarter slid to $147 million, or 58 cents per share, from $202 million, or 75 cents a year, in the year-earlier period, and also released lower guidance for the full year.

Energy mixed

A trader said that energy names were something of a mixed bag on Friday, despite a fifth straight rise in world crude oil prices.

“Some of the names have been under pressure, but failed to respond” when crude strengthened.

He said that exploration and production company California Resources Corp.’s 8% notes due 2022 fell by ¾ point to 64¼ bid, although he saw drilling contractor Noble Energy’s 7¾% notes due 2024 at 80 bid, calling that up ½ point on the day.

He said that Whiting Petroleum Corp.’s paper was “about unchanged, holding steady,” including its 5% notes due 2019 at 98 3/8 bid.

On the commodities markets, September-delivery West Texas Intermediate crude gained 67 cents per barrel on the NYMEX to end at $49.71, while North Sea Brent crude jumped by $1.03 per barrel to end London trading at $52.52.

Hospital names still ailing

The apparent end of legislative efforts to repeal the U.S. Affordable Care Act – a so-called “skinny” repeal measure narrowly failed in the Senate – and the resultant lessening of uncertainty about the law’s future did little for recently beleaguered hospital sector bonds on Friday.

While Community Health Systems Inc.’s 6 7/8% notes due 2022 “appeared to stabilize” around the 86 bid mark on volume of about $16 million, a trader said, Tenet Healthcare Corp.’s 6% notes due 2020 ended down ½ point at 107¼ bid. Community Health’s notes had started the week up around 90 bid.

HCA Inc.’s 5 7/8% notes due 2022 ended at 111 bid, down ¼ point on the day.

Indicators turn mixed

Statistical market performance measures turned mixed on Friday after moving lower on Thursday for the first time since July 6. The indicators had been higher across the board on Tuesday and Wednesday, and mixed for two straight sessions before that.

But the indicators were also ending the week up all around from where they had closed last Friday, July 21 – their third consecutive week-over-week gain, following one lower week and, going back a little further, one mixed week before that.

The KDP High Yield Daily Index fell by 4 basis points on Friday to end at 72.62, after being unchanged on Thursday trailing gains on Tuesday and Wednesday.

Its yield rose by 1 bp to 4.93%, its second straight widening, after coming in during the two sessions before that.

The index reading was up from last Friday’s 72.59 while the yield was unchanged week-over-week.

The Markit CDX Series 28 High Yield Index ended down 1/32 point on Friday, its second straight loss. It had also retreated by 1/8 point on Thursday after posting gains on Tuesday and Wednesday. The index closed Friday at 107 9/16 bid, 107 5/8 offered.

But it was up from last Friday’s 107½ bid, 107 9/16 offered finish.

The Merrill Lynch North American High Yield Index firmed by 0.014% on Friday, after easing 0.007% on Thursday, its first loss after three straight sessions on the upside.

Friday’s upturn raised the index’s year-to-date return to 6.125% from 6.109% on Thursday. That established a new 2017 peak level, topping the former mark of 6.117%, set on Wednesday.

For the week, it was up by 0.213%, its third straight weekly gain. It had risen 0.595% the week before.

© 2015 Prospect News.
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