First Quantum, Sprint price in post-holiday market, existing Sprint trades off; Rite Aid jumps on Albertsons deal

Paul Deckelman and Paul A. Harris

New York, Feb. 20 – The high-yield market got back to work on Tuesday after the long Presidents Day holiday weekend, which included Monday’s full market close, and lost no time in putting up what turned out to be its heaviest new-deal volume numbers for the year so far.

Two issuers combined for three quick-to-market tranches totaling $3.35 billion of new dollar-denominated and fully junk-rated paper.

Canadian mining concern First Quantum Minerals Ltd. priced an upsized $1.85 billion of new paper, split into tranches of six-year and eight-year notes.

And wireless telecommunications company Sprint Corp. also did an upsized offering of $1.5 billion of new eight-year paper.

Despite having priced late in the session, the new Sprint notes saw some active aftermarket action, traders said, pushing up slightly from their par issue price.

However, the company’s various existing note issues were seen mostly lower in busy dealings.

Away from the new-deal realm and trading in related bonds, the big name of the day was Rite Aid Corp., some of whose notes shot up by more than 7 points on the day on the news that supermarkets giant Albertsons Cos. will buy the remnants of the No. 3 U.S. drugstore chain operator, which is currently in the process of selling more than half of its existing stores to larger pharmacy industry rival Walgreens Boots Alliance.

Albertsons bonds were also busily traded, ending unchanged to slightly higher.

Statistical market performance measures turned mixed on Tuesday, after having been higher across the board on Thursday and again on Friday. They had also been mixed last Wednesday.

First Quantum upsizes

The primary market regained some of its vigor on Tuesday, as sources returned from the extended Presidents Day weekend.

Two issuers brought a total of three tranches of junk.

Executions were replete with indications of strong demand, as both issuers came quick-to-market and upsized from their announced offering amounts.

Price talk cascaded throughout the session.

And order books were heard to be significantly oversubscribed.

First Quantum Minerals Ltd. priced $1.85 billion amount of senior notes (S&P: B) in two tranches.

The deal, which came as a drive-by, featured $850 million of six-year notes that priced at par to yield 6½%. The yield printed on top of price talk that had tightened to 6½%.

In addition First Quantum Minerals priced $1 billion of eight-year notes at par to yield 6 7/8%. The yield priced on top of yield talk, which had tightened from earlier talk in the 7% area.

The overall size of the two-part deal was increased from $1.5 billion

It was said to have played to $2.5 billion of demand across both tranches, the source said.

JP Morgan, BNP Paribas, Credit Agricole and Credit Suisse were the joint bookrunners.

The Vancouver, B.C.-based copper producer plans to use the proceeds to repay amounts outstanding under the revolving credit facility and term loan it entered into on Oct. 19, 2017, with a view to providing liquidity sufficient to fund the company's share of remaining capital expenditures relating to the Cobre Panama project. Proceeds will also be used for general corporate purposes.

Sprint oversubscribed

Sprint Corp. priced an upsized $1.5 billion issue of non-callable eight-year senior notes (B3//B+) at par to yield 7 5/8%.

The issue size was increased from $1 billion.

The yield printed at the tight end of yield talk in the 7¾% area. Initial guidance had the deal coming with a yield in the 8% area.

The book was heard to contain $3.5 billion of orders at 7¾%, a trader said.

J.P. Morgan, Goldman Sachs, Deutsche Bank and Mizuho were the joint bookrunners.

The Overland Park, Kan.-based wireless telecommunications services and internet carrier holding company plans to use the proceeds for general corporate purposes.

Bristow Group roadshow

There was also one roadshow announcement on Tuesday.

Bristow Group Inc. plans to start a roadshow on Wednesday in New York for a $300 million offering of senior secured notes due March 1, 2023.

The deal is set to price Friday afternoon.

Credit Suisse is the lead left bookrunner. Barclays is the joint bookrunner.

The Houston-based provider of helicopter services to the offshore energy industry plans to use the proceeds to repay its term loan and fund cash on its balance sheet.

Biggest deal volume so far

Tuesday’s two new issues broke a recent primary market drought in Junkbondland, which last saw a new deal get done more than a week earlier, on Feb. 12, when Austin, Texas-based oil and natural gas exploration and production operator Jones Energy Holdings LLC and co-issuer Jones Energy Finance Corp. priced $450 million of 9¼% senior secured first-lien notes due 2023. That regularly scheduled forward calendar deal – floated off from the previous week – priced at 97.526 to yield 9 7/8%.

Tuesday’s new $3.35 billion of new paper meanwhile was the largest new-volume of dollar-denominated and purely junk-rated paper from domestic or industrialized-country borrowers seen so far this year, according to data compiled by Prospect News.

It topped the $2.5 billion that got done in two previous sessions this year – four tranches which came to market on Jan. 9, led by Dallas-based gasoline and petroleum products distributor Sunoco LP’s three-part, $2.2 billion offering, and two more tranches that priced on Jan. 22 from Bellevue, Wash.-based wireless provider T-Mobile USA, Inc.

The day’s new issuance was the most seen in the high yield market since Dec. 5, when six issuers each brought a single-tranche offering to market for a combined total of $3.445 billion.

New Sprint paper moves up

In the secondary market, a trader noted that “even though the issue came pretty late in the day,” the new Sprint 7 5/8% notes due 2026 generated considerable volume, with over $53 million having changed hands.

He saw the notes firm to 100 3/16 bid from their par issue price.

At another desk, a trader located those bonds in a 99 7/8-to-100 1/8 bid context.

Existing Sprint paper trades off

While the new Sprint notes were firming, the wireless company’s “existing structure was weaker in general,” a trader said, seeing its 7 /8% notes due 2024 “pretty active,” down 1¼ points on the day, on turnover of more than $23 million.

He said that the company’s paper was mostly down anywhere from 1 point to 1½ points.

Sprint’s 7 7/8% notes due 2023 were down 7/8 point on the day to 105 bid, while its 6% notes due 2022 dropped 1 1/8 points, to 99½ bid, with volume on both of those issues over $18 million.

Sprint’s 7 5/8% notes due 2025 retreated by 1½ points, closing at 101½ bid, with over $14 million having traded.

Rite Aid rallies

Away from the new deals and the action in Sprint paper, Rite Aid was clearly the standout performer, as its 6 1/8% notes due 2023 shot up by more than 7 points on the session to close at 101 15/16 bid, on astounding volume of some $260 million.

The Camp Hill, Pa.-based drugstore chain operator’s 7.7% notes due 2027 were also 7-point gainers on the day, ending at 97 bid, but round-lot volume in that issue was only around $9 million, though with numerous smaller odd-lot trades also recorded.

Its 6¾% notes due 2021 were up around 1 point on the day, to 102¾ bid, on about $14 million of volume.

The bonds shot up on the news that Rite Aid has agreed to be bought by Boise, Idaho-based supermarket operator Albertsons in a cash and stock deal that will leave Rite Aid shareholders with around 29% of the stock of the newly combined companies, and closely held Albertsons’ shareholders with the rest.

Albertsons will be buying more than 2,000 Rite Aid stores that will be left after the company completes its sale of an approximately equal number of its current outlets to Walgreens.

Albertson’s 6 5/8% notes due 2024 were unchanged on the day at 95 bid, with over $22 million traded.

Its 5¾% notes due 2025 gained 5/8 point to close at 90 5/8 bid, with over $16 million of volume.

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday, after having been higher across the board on Thursday and again on Friday. They had also been mixed last Wednesday.

The KDP High Yield Daily Index rose by 12 basis points on Tuesday to end at 70.78, its fourth consecutive gain. The index had edged up by 1 bp last Wednesday, then zoomed ahead by 24 bps on Thursday, followed by a 20 bps jump on Friday. The index was not published on Monday, when the high yield market was closed for Presidents Day.

Its yield meanwhile came in by 5 bps on Tuesday to 5.62%, its third straight narrowing, having also tightened by 6 bps on Friday and by 10 bps on Thursday, its first such narrowing after two successive wider sessions.

However the Markit CDX Series 29 High Yield Index lost more than 3/8 point on Tuesday to close at 107 3/32 bid, 107 1/8 offered, its second straight loss after three straight gains, including Friday’s nearly ¼ point firming. One Monday, the index was published despite the market’s holiday close, and finished marginally lower versus its Friday closing level.

The Merrill Lynch High Yield Index, though, showed its fourth consecutive improvement, rising by 0.039%. It had also moved up by 0.486% on Thursday after two straight declines before that, and then firmed by 0.309% on Friday and by 0.052% on Monday, when the index was published despite the market’s holiday close.

Tuesday’s advance cut the index’s year-to-date deficit to 0.328% from 0.367% on Monday and 0.419% on Friday.

Those loss levels were in from the 1.248% cumulative loss posted on Feb. 9, its second straight new widest deficit level for the year.

Its peak cumulative gain for the year so far was 0.936%, established on Jan. 26.

© 2015 Prospect News.
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