United Rentals closes $5.6 billion week; new deals busy; Toys, hospitals, grocers off

By Paul Deckelman and Paul A. Harris

New York, Sept. 8 – The high-yield primary market – after reviving from its traditional late-summer lull – closed out the week in fine fashion on Friday as construction and industrial equipment rental and leasing company United Rentals (North America) Inc. priced a quickly shopped $1.5 billion two-part offering, consisting of new eight-year notes and an add-on to its recently priced 10-year paper.

Traders said that both tranches firmed when they hit the aftermarket, although initial trading volume was limited.

But the company’s existing paper was quoted lower.

The United Rentals deal raised the week’s new-issuance total of dollar-denominated and fully junk-rated paper to $5.6 billion – in contrast to the complete lack of any new paper over the preceding two weeks. Year-to-date volume remained robustly ahead of last year’s pace.

Looking ahead, high-yield syndicate sources said that coming week will likely be a very busy on in the primary arena, with possibly as much as $10 billion of new paper on tap, according to some estimates.

Junk bond traders meanwhile saw brisk activity in some of the deals that made their debut this week, including Station Casinos LLC – the day’s volume leader – ViaSat, Inc. and MGM Growth Properties, LLC.

Away from the new deals, the traders said that Toys ‘R’ Us Inc. bonds remained under pressure on investor concerns about a possible future bankruptcy filing as the retailer looks to restructure its nearest upcoming debt maturity.

They also saw bonds of supermarket operators such as Fresh Market Inc. and Albertsons Cos. LLC struggling.

And hospital operators Tenet Healthcare Corp. and Community Health Systems Inc. were lower on worries that their Florida facilities may face damage as Hurricane Irma bears down upon the not-so-Sunshine State this weekend.

Statistical market performance measures turned lower across the board on Friday after being mixed on Thursday and better on Wednesday – their first lower session since mid-August.

The indicators were meanwhile mixed on the week versus where they had closed last Friday.

United Rentals prices

In the only deal to clear the dollar-denominated primary market on Friday, United Rentals priced $1.5 billion of senior notes (Ba3/BB-) in two tranches.

The offering included $750 million of new eight-year senior notes which priced at par to yield 4 5/8%.

The yield printed on top of yield talk that was announced in the 4 5/8% area. Initial guidance was also in the 4 5/8% area.

The deal also included a $750 million add-on to the company’s 4 7/8% senior notes due Jan. 15, 2028 which priced at 100.25 to yield 4.844%. The add-on priced on top of talk for a price in the 100.25 area and rich to initial guidance in the par area.

The United Rentals deal was well telegraphed to a receptive market, an investor remarked.

Morgan Stanley, Barclays, BofA Merrill Lynch, Citigroup, Deutsche Bank, JP Morgan, MUFG, Scotia and Wells Fargo were the joint bookrunners for the public offer.

The Stamford, Conn.-based equipment rental company plans to use the proceeds to help fund the acquisition of Neff Corp.

The week ahead

The new issue market could be in store for a big week starting Sept. 11, sources said Friday.

As much as $10 billion could price in the week ahead, a syndicate official said.

A lot of the business at hand will be debt refinancing, the source added.

September still appears poised to turn out $25 billion to $30 billion of issuance, the official said.

Even were September to hit the top of that range, it would come in significantly below the average issuance for September of $36.6 billion over the past years, according to Prospect News data.

Delphi Powertrain to roadshow

Delphi Powertrain plans to start a roadshow on Monday for a $750 million offering of non-callable eight-year senior notes (expected ratings B1/BB/BB).

Joint global coordinator and joint bookrunner Barclays is lead left. Goldman Sachs is also a joint global coordinator and joint bookrunner. BofA Merrill Lynch, Citigroup, Deutsche Bank and JP Morgan are also joint bookrunners.

Proceeds, together with a $750 million term loan, will be used to fund operating cash, pay taxes, fees and expenses related to Delphi Automotive plc’s spin-off of its Powertrain Systems segment, and distribute a dividend to Delphi Automotive.

Wabash to start roadshow

Wabash National Corp. plans to start a roadshow on Monday in New York for a $325 million offering of eight-year senior notes.

Morgan Stanley and Wells Fargo are the joint bookrunners.

The Lafayette, Ind.-based diversified industrial manufacturer plans to use the proceeds to help fund its acquisition of Goshen, Ind.-based Supreme Industries, Inc., a manufacturer of truck bodies.

Mixed Thursday flows

Daily cash flows for high-yield mutual funds were moderate and mixed on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $39 million of outflows on the day.

Asset managers saw $80 million of inflows.

The news follows a Thursday report from Lipper US Fund Flows that dedicated high-yield bond funds saw $641 million of inflows in the week to last Wednesday’s close.

Meanwhile dedicated bank loan funds also put up negative daily numbers on Thursday. They sustained $40 million of outflows on the day, the source said.

Issuance picks up

According to data compiled by Prospect News, the new United Rentals deal brought the week’s total ne-issuance volume of new dollar-denominated and fully junk-rated paper to $5.61 billion in eight tranches – and this in a week which was one trading day shorter than usual with the market closed this past Monday in observance of the Labor Day holiday in the United States.

That contrasted with the two previous weeks, ended Aug. 25 and Sept. 1, which saw no such bonds from either domestic or industrialized-country borrowers price in either of those weeks.

The last previous week which had seen any pricing activity had been the week ended Aug. 18, when $4.98 billion had gotten done in 11 tranches.

The week’s new deals raised year-to-date issuance for 2017 to $180.14 billion in 334 tranches, running about 15% ahead of the $155.09 billion which had priced in 233 tranches by this point on the 2016 calendar, the Prospect News data indicated.

New United Rentals firmer

Traders said that the new United Rentals bonds got a good reception when they moved into the aftermarket, although volume was somewhat limited because the issue had priced relatively late in the day on a Friday afternoon, when many players have already customarily headed for the exits.

A trader said that the new stand-alone 4 5/8% notes due 2025 firmed to a 101 to 101½ bid context after having priced at par.

And the add-on to the existing 4 7/8% notes due Jan. 15, 2028, which priced at 100.25, moved up to a 100 5/8 to 101½ bid range.

The existing notes themselves are practically new bonds, with $925 million of them having priced at par in a quick-to-market transaction not so very long ago, on July 28.

Old United Rentals retreats

News that the equipment rental company was bringing a big new issue to market caused the company’s existing paper to fall back, although not on a lot of volume, traders said.

United Rentals’ 5¾% notes due 2024 were seen going home at 107 bid, down 1 7/8 points on the session.

At another desk, its 5½% notes due 2025 were quoted down ½ point at 107¼ bid.

Recent issues busy

Away from the United Rentals paper, a trader said that “the day was focused on the new issues” which have come to market this week and they dominated the Most Actives list.

Chief among these was the new Station Casinos 5% notes due 2025, seen by a trader in a 100¼ to 100 5/8 bid context, while another trader pegged them at 100 5/8 bid at the close, about unchanged from where they had closed on Thursday.

More than $51 million of the Las Vegas-based regional gaming casino operator’s new issue traded, making it the most active junk name of the day. Station priced $550 million at par in a quickly shopped issue on Thursday.

The traders saw ViaSat’s new 5 5/8% notes due 2025 trading at 100 3/8 bid, which a trader said was unchanged from initial trading levels on Thursday, when the Carlsbad, Calif.-based communications technology company had priced its $700 million forward calendar deal at par, after upsizing the offering from an originally announced $600 million.

More than $49 million of the new notes were heard to have traded on Friday.

And the traders saw MGM Growth Properties’ new 4½% notes due 2027 at 101 bid, calling that a ¼ point gain on the day, on volume of around $25 million.

The Las Vegas-based gaming and hospitality-oriented real estate investment trust had priced $350 million of the notes at par on Thursday in a quick-to-market transaction, and the new bonds had gained about ¾ point in initial aftermarket dealings.

Toys again trades off

For a third straight session, Toys ‘R’ Us remained notable as its 7 3/8% notes due 2018 continued to tumble.

A trader said the bonds fell “almost 5 points” to 72. A second source echoed that level but deemed the debt down a full 5 points.

The Wayne, N.J.-based toy retailer announced on Wednesday that it had hired Kirkland & Ellis as legal advisers.

The firm is well known in bankruptcy circles, leaving many to wonder if the struggling toy retail chain is planning to enter Chapter 11. Toys has about $400 million in debt that will come due in 2018. The hiring of the legal advisor could indicate a bankruptcy is imminent or it could just be that the company is trying to restructure its debt.

Investors will be hoping to hear more about the hiring of the law firm, as well as the company’s plan to deal with its debt burden, when the company issues its second-quarter results on Sept. 26.

Grocers struggle continues

Also on the softer side were Fresh Market’s 9¾% notes due 2023, which fell 1½ points to 70½, according to a trader.

The name – along with other grocers – has been steadily declining of late, due in large part to Amazon’s recent acquisition of Whole Foods and its immediate slashing of prices.

Hospitals get hit

For a second straight session, Tenet Healthcare’s notes were moving lower as investors apparently expressed concern about the company’s Florida exposure, with Hurricane Irma set to hit Florida this weekend.

The Dallas-based hospital operator has 10 of its 77 healthcare properties there.

Its 8 1/8% notes due 2022 were seen down by 1¼ points at 102½ bid, on top of Thursday’s loss of 1 1/8 points, with over $27 million traded on Friday.

Sector peer Community Health’s 6 7/8% notes due 2022 lost 1¼ points to end at 79½ bid on around $10 million of volume.

Indicators turn lower

Statistical market performance measures turned lower across the board on Friday after being mixed on Thursday and better on Wednesday. It was their first lower session since mid-August.

The indicators were meanwhile mixed on the week versus where they had closed last Friday, their first mixed week after two weeks on the upside.

The KDP Daily High Yield Index lost 3 basis points on Friday to end at 72.24, its first loss after 11 straight gains. In contrast, it had risen by 2 bps on Thursday and by 5 bps on Wednesday.

For a third session in a row, its yield was unchanged at 5.16%. Before that it had come in by 3 bps on Tuesday, its sixth straight narrowing.

Those levels compared favorably to the 72.12 index reading and 5.19% yield seen last Friday, Sept. 1.

The Markit CDX Series 28 High Yield Index lost 7/32 point Friday to end at 106 25/32 bid, 106 27/32 offered, its second loss in a row. It had also eased by around 1/16 point Thursday after having edged up marginally on Wednesday.

The index finished down from last Friday’s 107 3/8 bid, 107 7/16 offered close.

The Merrill Lynch North American High Yield Index was also lower after seven straight sessions on the upside. It was off by 0.072% on Friday after Thursday’s 0.019% gain.

That loss dropped the index’s year-to-date return to 6.266% from Thursday’s 6.343% close, which had been the second consecutive new year-to-date peak level.

For the week, the index was up by 0.112%, its fourth straight weekly gain. It rose 0.405% the previous week.

© 2015 Prospect News.
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