HCA, Quintile, TransDigm lead $4 billion session; Chemtours busy; overall market heavier

By Paul A. Harris and Paul Deckelman

New York, May 6 – It was a downer of a day on Wednesday in Junkbondland, as the high-yield market traded off, in line with a slide in both equities and Treasuries.

But that bad vibe didn’t stop a half-dozen issuers from bringing some $4 billion of new U.S. dollar-denominated, fully junk-rated paper to market.

Hospital operator HCA Inc.’s $1.6 billion add-on to its existing 10-year notes was the big deal of the day. Traders said the quickly shopped bonds were among the most active aftermarket credits – but while they were up a little from issue, they were well down from where the existing paper had been trading.

Aircraft components manufacturer TransDigm Inc. and risk management solutions company Constellis Holdings LLC also each did an opportunistically timed $450 million drive-by deal, with TransDigm’s a 10-year subordinated offering and Constellis’ transaction a five-year secured issue. TransDigm’s new paper firmed when it was freed to trade, but Constellis’ late-arriving deal was not immediately seen.

Among the regularly scheduled deals coming off the forward calendar, biopharmaceutical company Quintiles Transnational Holdings Inc. priced $800 million of eight-year notes, which moved higher in very active dealings.

Canadian land developer and homebuilder Brookfield Residential Properties Inc. did $350 million of 10-year notes as part of a larger two-part offering that also included a Canadian dollar-denominated eight-year tranche, and Channel Islands-based precious stones miner Petra Diamonds Ltd. came to market with a $300 million offering of five-year secured notes; neither was initially seen in the aftermarket.

The $4 billion of new notes was the most seen in any one specific day in the junk precincts since April 24, when about $4.31 billion got done in six tranches, according to data compiled by Prospect News.

Statistical measures of market performance were lower for a second consecutive session on Wednesday; they had turned down on Tuesday after having turned mixed on Monday from Friday’s higher-across-the-board showing.

HCA $1.6 billion add-on

A busy Wednesday session in the primary market saw six issuers bring dollar-denominated tranches, raising a combined total of $4 billion of proceeds.

Three of the six issuers came with drive-by deals.

None of the deals was upsized.

HCA priced a $1.6 billion add-on to its 5 3/8% non-callable senior notes due Feb. 1, 2025 (B2/B+/BB-) at 103 to yield 4.98%.

The reoffer price came at the cheap end of the 103 to 103.25 price talk.

Citigroup was the left bookrunner for the drive-by debt refinancing deal. Barclays, BofA Merrill Lynch, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley, RBC, SunTrust, UBS and Wells Fargo were the joint bookrunners.

Quintiles prices tight

Quintiles Transnational Holdings priced an $800 million issue of eight-year senior notes (Ba3/BB) at par to yield 4 7/8%.

The yield printed at the tight end of yield talk in the 5% area.

Joint bookrunner Barclays will bill and deliver. JPMorgan, Morgan Stanley, Citigroup, Goldman Sachs and Wells Fargo were also joint bookrunners.

The company, a Research Triangle Park, N.C.-based provider of biopharmaceutical development and commercial outsourcing services, plans to use the proceeds to repay its existing credit facility and for general corporate purposes, including corporate transactions and share repurchases.

TransDigm at the tight end

TransDigm priced a $450 million issue of 10-year senior subordinated notes (Caa1/CCC+) at par to yield 6½%.

The yield printed at the tight end of the 6½% to 6 5/8% yield talk.

Citigroup, Credit Suisse, Morgan Stanley, UBS, Barclays, RBC, Credit Agricole and HSBC were the joint bookrunners.

The Cleveland-based designer, producer and supplier of highly engineered aircraft components plans to use the proceeds to help fund the acquisition of Pexco LLC’s aerospace business and for general corporate purposes.

Constellis drive-by

Constellis priced a $450 million issue of 9¾% five-year senior secured notes (B3/B) at 99.513 to yield 9 7/8%.

The yield printed on top of yield talk. The reoffer price came at the rich end of price talk that specified half a point to one whole point of original issue discount.

Jefferies was the sole bookrunner.

Proceeds will be used to fund the acquisition of Olive Group, as well as to refinance debt and fund a distribution to shareholders.

Brookfield dual-currency deal

Brookfield Residential Properties priced $350 million and C$250 million offerings of senior notes (B1/BB-).

A $350 million tranche of 10-year notes priced at par to yield 6 3/8%.

The yield printed in the middle of the 6¼% to 6½% yield talk, and on top of initial guidance.

The dollar tranche was managed by joint bookrunners JPMorgan, Citigroup, Credit Suisse, Deutsche Bank and Wells Fargo.

A C$250 million tranche of eight-year notes price at par to yield 6 1/8%.

The yield printed on top of talk that had the Canadian dollar-denominated notes pricing 25 basis points inside of the yield on the dollar-denominated notes.

The yield was cheap to earlier guidance that had the Canadian dollar-denominated notes pricing 50 bps inside of the dollar notes.

The Canadian dollar-denominated tranche was managed by joint bookrunners Scotia, CIBC and TD.

The Calgary, Alta.-based land developer and homebuilder plans to use the proceeds to refinance debt and for general corporate purposes.

Petra tight to revised talk

Petra Diamonds launched and priced a $300 million issue of five-year senior secured second-lien notes (B2/B+) at par to yield 8¼%.

The yield printed at the tight end of final price talk in the 8 3/8% area. That talk was tightened from initial price talk in the 8½% area.

Initially the deal was guided in the mid 8s, according to market sources.

Joint global coordinator and active bookrunner RBC will bill and deliver. Barclays was also a joint global coordinator and active bookrunner. Rand Merchant Bank was a passive bookrunner.

The Jersey, Channel Islands-based diamond mining group plans to use the proceeds to repay bank debt and for general corporate purposes, including funding a new plant at the Cullinan mine. The company’s main mining operations are in South Africa and Tanzania.

PBF upsizes, sets talk

Looking toward Thursday's session, PBF Logistics LP upsized its offering of eight-year senior notes (B3/B+) to $350 million from $300 million, and talked the notes to price with a yield in the 6 7/8% area.

The deal is set to price Thursday.

Joint global coordinator Deutsche Bank is the left bookrunner. Citigroup is a joint global coordinator and bookrunner.

BofA Merrill Lynch, MUFG, RBC and Wells Fargo are joint bookrunners.

Sterigenics roadshow

Sterigenics-Nordion Holdings LLC began a roadshow on Wednesday for a $450 million offering of eight-year senior notes (expected Caa1/confirmed CCC+).

The deal is set to price late in the present week or early in the week ahead.

JPMorgan, Barclays, Jefferies and RBC are the joint bookrunners.

The Oak Brook, Ill.-based company plans to use the proceeds to help fund its recapitalization with Warburg Pincus and GTCR.

Alliance Automotive upsizes

Alliance Automotive Group (B1/B+) priced an upsized €65 million add-on to its 6¼% senior secured notes due Dec. 1, 2021 at 103.5.

The deal was upsized from €50 million.

The reoffer price came on top of price talk.

Credit Suisse was the left bookrunner. UBS and Royal Bank of Scotland were the joint bookrunners.

The Greny, France-based automotive parts supplier and repair services provider plans to use the proceeds for general corporate purposes, including future acquisitions, and to repay bank debt.

Condotte downsizes

Italian construction company Societa Italiana per Condotte d'Acqua SpA downsized its offering of seven-year senior notes (B2/expected B+) to €200 million from €300 million.

The notes are talked to yield in the 8½% area and are expected to price Thursday.

Global coordinator Credit Suisse will bill and deliver. UniCredit is also a global coordinator.

Banca IMI, Banca Akros and Barclays are joint bookrunners.

New HCA, Quintiles active

In the secondary market, a trader quoted the new HCA 5 3/8% add-on notes due 2025 in a 103 1/8-to-103¼ offered, up from their pricing level at 103.

At another desk, a trader saw the Nashville-based hospital operator’s paper at 103 1/8, on heavy volume of more than $84 million, but noted that was down a good 1 5/8 points from the 104-to-105 context in which the existing bonds had been trading.

The trader also saw huge volume in the new Quintiles Transnational 4 7/8% notes due 2023, pegging the bonds at 100 3/8 bid, up from their par issue price.

He said that over $97 million of the notes had changed hands, tops in Wednesday’s junk space.

A second trader saw the notes at 100½ bid.

Among the day’s other new deals, a trader located the TransDigm 6½% senior subordinated notes due 2025 at 100 3/8 bid, 100 7/8 offered, up from their par issue price.

Chemours bonds stay busy

For a second consecutive session, there was considerable activity in the new Chemours Co. 6 5/8% notes due 2023.

A trader said that the Wilmington, Del.-based chemical manufacturer’s notes were in retreat, backtracking to 99 5/8 from around 100¼ on Tuesday.

He also saw the company’s new 7% notes due 2025 at 100½ bid, though that was off a little from 100 7/8 on Tuesday.

At another desk, a trader saw the 6 5/8s having dipped by 5/8 point to 99 5/8, with more than $94 million having changed hands, up from Tuesday’s already substantial volume of over $54 million.

The trader saw the 7% notes down ½ point to 100 5/8 bid, on turnover of more than $34 million.

On Tuesday, the company had priced $1.35 billion of the 6 5/8s at par, after the tranche was upsized from an originally announced $1,125,000,000.

It priced $750 million of the 7% notes at par after downsizing that tranche from $1 billion.

Those two tranches of dollar-denominated bonds were part of a larger $2.5 billion equivalent dual-currency offering, which also included €360 million of 6 1/8% notes due 2023, upsized from €350 million originally.

Heavier tone seen

A trader said that overall, “the market was heavy today, as Treasuries and equities sold off.”

High yield followed along at a distance, with credits off by ¼ to ½ point, “generically, at least – some lost more than that.”

But he said that “it didn’t seem like anything was standing out.”

While oil prices “were higher all day long, it didn’t really do too much for the bonds” of oil and natural gas operators, such as California Resources Corp.’s 6% notes due 2024.

He said the bonds finished around 95¼ bid, 95½ offered, which he said was “kind of where they had been” on Tuesday.”

Little Halcon movement

Another energy credit that saw a sizable amount of trading – but no real price movement – was Houston-based E&P operator Halcon Resources Corp.

Its 8 7/8% notes due 2021 were among the day’s most active issues, with over $19 million having changed hands, “but they didn’t really move,” a trader said, seeing the notes around 80½ bid, “about where they were [Tuesday].

A second trader also called them unchanged at 80¼ bid.

Halcon reported first-quarter earnings Wednesday, and while its executives noted the impact that continued depressed oil prices were having on the company’s finances, they were upbeat about its balance sheet and liquidity position, touting the positive impact of a series of recent capital market transactions that included an upsized secured junk bond offering, an amendment to its revolving credit facility and several stock-for-debt exchanges with selected bondholders (see related story elsewhere in this issue).

Indicators stay weak

For a second straight session, statistical measures of market performance were lower on Wednesday; they had first fallen on Tuesday, after having turned mixed on Monday from Friday’s higher-across-the-board showing.

The KDP High Yield Daily index lost 10 bps Wednesday to finish at 74.58, after having been unchanged on Tuesday. The index had edged up by 1 bp on Friday and again on Monday, gains that had followed three straight losses last week.

Its yield rose by 1 bp to 5.22%, after having been unchanged on Tuesday. It was the second widening over the past three sessions.

The Markit Series 24 CDX North American High Yield index dropped by 3/8 point on Wednesday to end at 106 5/8 bid, 106 11/16 offered, its second straight decline. It had lost ¼ point on Tuesday after having been unchanged on Monday.

The Merrill Lynch North American Master II High Yield index suffered a second straight setback, losing 0.176%, on top of easing by 0.013% on Tuesday. It had risen by 0.099% on Monday.

Wednesday’s retreat lowered its year-to-date return to 3.697% from 3.88% on Tuesday. It remained below its peak level for the year, 3.952%, set last Monday.

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