Upsized GFL five-year notes price; recent deals firm; Sprint jumps on results; energy muted despite crude surge

By Paul Deckelman and Paul A. Harris

New York, Jan. 26 – Primaryside players kept the ball rolling on Tuesday, with the high yield market seeing its fourth new deal in as many sessions.

Canadian waste management company GFL Environmental Corp. came to market with an upsized $300 million offering of five-year notes, a day after that prospective new-deal first surfaced in the market.

Traders meantime saw recently priced issues continuing to move around at firmer levels, with particular activity in Monday’s offering from Lamar Advertising Co. and in Thursday’s bond deal from TreeHouse Foods, Inc.

Friday’s bond issue from GCP Applied Technologies, Inc. moved up, but on greatly reduced volume versus Monday’s busy session.

Away from the new or recently priced issues, traders said that Sprint Corp.’s various bond issues firmed smartly across the wireless communications company’s capital structure after it posted a narrower fiscal third-quarter loss versus a year earlier and raised its full-year guidance, and also reported ample liquidity to address all of its near-term debt maturities.

Oil prices surged on investor hopes of possible output cuts – but that did not produce any great corresponding rise in energy bonds. While Energy Transfer Equity, LP and Memorial Production Partners, LP’s notes gained, Chesapeake Energy Corp. was off on the day.

Statistical measures of junk market performance turned higher across the board on Tuesday after having been mixed on Monday. It was their third higher session in the last four trading days.

GFL Environmental upsizes

GFL Environmental Corp. priced Tuesday’s sole deal, an upsized $300 million issue of five-year senior notes (B3/B) that came at par to yield 9 7/8%.

The issue size was increased from $250 million.

The yield printed at the wide end of yield talk in the 9¾% area.

Credit Suisse, BMO and Barclays were the joint bookrunners.

The Vaughan, Ont.-based solid and liquid waste management company plans to use the proceeds to fund the acquisition of the Matrec solid waste division of TransForce Inc.

Centene brings $2.27 billion

Centene Corp. scheduled an investor call at 12:30 p.m. ET on Wednesday to launch a $2.27 billion two-part offering of senior notes (expected ratings Ba2/BB).

The deal features five-year notes, which come with two years of call protection, and eight-year notes, which come with three years of call protection.

Tranche sizes remain to be determined.

The deal is set to price later this week.

Wells Fargo is the left bookrunner. Barclays, Citigroup and SunTrust are the joint bookrunners.

The St. Louis-based managed care and specialty health care services provider plans to use the proceeds to fund the acquisition of Health Net Inc. and to refinance certain debt.

Recent issues holding gains

In the secondary arena, traders did not report any initial aftermarket dealings in the new GFL Environmental Corp. 9 7/8% notes due 2021 following their par pricing.

They did, however, see some activity in other deals that have come to market over the past few days.

Monday’s quick-to-market offering of 5¾% notes due 2026 from Lamar Advertising Co. was seen on Tuesday morning trading on either side of 102 bid.

Later on, a trader said that the bonds were finishing at 102 1/8 bid, up 5/8 point on the day, on volume of more than $29 million, landing it among the day’s most active junk credits.

The Baton Rouge, La.-based billboard company priced $400 million of the notes at par late Monday; they were seen having firmed in initial aftermarket dealings, rising to around 101 5/8 bid, 102 1/8 offered context.

Another relatively busy recently priced offering was TreeHouse Foods’ 6% notes due 2024; a trader on Tuesday saw the bonds active but unchanged at 102¼ bid, 103 offered, while a second had the notes at 102 1/8 bid, which he also said was unchanged, on volume of over $13 million.

The Oak Brook, Ill.-based packaged food and beverage manufacturer priced $775 million of the notes at par in a quick-to-market transaction on Thursday – the biggest junk bond deal seen so far this year.

The bonds initially traded around 101½ bid when they were freed after pricing, but had moved as high as a 103 to 103½ bid context by Friday, before coming off those peaks and settling around 102 bid.

GCP Applied Technologies Inc.’s 9½% notes due 2023 were seen by a trader having moved up by 5/8 point in Tuesday dealings, ending at 103¾ bid, although he said that this only represented around $7 million of round-lot activity.

That was well down from Monday, when over $34 million of the notes had changed hands, making it the busiest issue in Junkbondland that day.

The bonds had gone up by 1/8 point on the day on Monday, going home at 103 1/8 bid.

The Columbia, Md.-based producer of specialty construction chemicals, building materials and packaging technologies – being spun off by chemicals giant W.R. Grace & Co. – priced $525 million of the notes at par on Friday, the junk bond market’s first regularly scheduled forward calendar deal of the year.

The new bonds had firmed solidly to a 102¾ bid, 103¼ offered level in Friday’s aftermarket, before continuing to gain on Monday.

A trader said of the recent new deals that “they’re all trading pretty well.”

He noted that since the start of the new year “there have only been five [offerings] for the month, $2.5 billion in total. Everything has been priced on the tights and everything has generally been from three to five times oversubscribed.

“So, it’s been better quality paper that’s come out – the only thing that’s going to have a bid and probably get priced in this market.”

He continued that “everything’s been trading fairly well at this point, being that it’s been so anemic to start the year in the new-issuance space.”

In contrast, by this time last year – with January nearly completed – total new-issuance at that time came to $13.156 billion in 20 tranches, according to data compiled by Prospect News.

Sprint surges on numbers

Away from the new issues, a trader said that “Sprint definitely led the charge as far as where the activity was,” after the Overland Park, Kan.-based No. 3 U.S. wireless carrier released its results for the 2015 fiscal third quarter ended Dec. 31 and issued guidance for the current fiscal fourth quarter and for the full year, both of which will end on March 31.

He said that “depending on where they were on the curve, I saw bonds up anywhere from 2 to 4 points.”

He said that the paper had “come in slightly” from their peak levels earlier in the day, but were still up as “earnings were better, subscriptions were up and cash levels were a little bit better than anticipated, which is a big positive for anyone looking at their debt and their liquidity stance at this point.”

Sprint’s most active issue was its 7% notes due 2020, which gained 3½ points on the day to end at 71 bid, with market-leading volume of over $44 million.

Its 7 5/8% notes due 2025 gained nearly 1½ points, ending at 65 15/16 bid, with over $36 million traded.

The Sprint 6% notes due 2022 gained 2¼ points to end at 65 bid, with over $30 million traded.

One of its shortest-duration bonds – the 8 3/8% notes due 2017 – finished the day at 95½ bid, up by 3¾ points, on more than $18 million traded.

Sprint reported that for the quarter ended Dec. 31, operating losses came to $197 million, well below the $2.5 billion posted during the same quarter last year.

On a net-loss basis, Sprint was in the red to the tune of 21 cents per share for the most recent quarter, an improvement from net loss a year ago of 60 cents per share. The deficit was also less than the 25 cents per share of red ink analysts had expected.

Even though Sprint missed expectations on revenues, which fell by 9.7% to $8.11 billion, down from $8.97 billion during the 2014 fiscal third quarter, its New York Stock Exchange-traded shares zoomed by 47 cents, or 18.65%, ending at $2.99, on volume of over 62 million – more than three times the norm.

Sprint’s bonds and shares got a boost from its improved guidance – it raised its full-year fiscal 2015 revenue forecasts to a $7.7 billion to $8 billion context from $6.8 billion to $7.1 billion previously.

The company also forecast fiscal year 2016 revenue as high as $10 billion.

On its conference call, the company’s chief financial officer, Tarek Robbiati, told analysts that Sprint ended the third quarter with a total of some $6 billion of liquidity from various sources, which it expects to augment thanks to two new initiatives.

He declared that “we expect that we will have adequate sources to provide all the capital necessary to fund the business and address the debt maturities between now and the end of fiscal year 2016.” (See related story elsewhere in this issue).

Oil surge has limited impact

Elsewhere, oil prices were strongly higher on investor hopes that producers might start curbing output – the March contract for the benchmark U.S. crude grade, West Texas Intermediate, jumped as high as $32.41 per barrel in intraday trading on the New York Mercantile Exchange before settling up $1.11 per barrel, or 3.7%, ending at $31.45.

Even so, a trader said, oil and natural gas credits ended the day “relatively muted.”

He saw Oasis Petroleum Inc.’s 6 7/8% notes due 2028 up by perhaps ½ to ¾ point, which he said was “really not much of a move with oil up that way.”

While Energy Transfer Equity’s 5 7/8% notes due 2024 gained 2 points to end at 74 5/8 bid, and Memorial Production Partners’ 7 5/8% notes due 2021 were up ¼ points at 29 7/8, Chesapeake Energy’s 6½% notes due 2017 fell by 2¼ points to close at 50¾ bid.

Indicators turn higher

Statistical measures of junk market performance turned higher across the board on Tuesday after having been mixed on Monday. It was their third higher session in the last four trading days.

The KDP High Yield Daily Index rose by 14 basis points on Tuesday to end at 62.71, its fourth straight gain and fifth such advance in the last 12 sessions, a stretch that included a seven-session losing streak; on Monday, it had been up by 13 bps.

Its yield, meantime, came in by 7 bps on Tuesday, closing at 7.31%, its fourth consecutive narrowing and fifth such tightening over the last 12 sessions. It had declined by 3 bps on Monday.

The Markit Series 25 CDX North American High Yield Index improved by ½ point on Tuesday, rising to 99 1/32 bid, 99 3/32 offered – its first gain after one loss and third rise in the last four sessions. On Monday, the index had declined by 7/16 point.

The Merrill Lynch North American High Yield Master II Index posted its fourth consecutive gain and sixth gain in the last seven sessions, turning upward by 0.126%, on top of Monday’s 0.225% rise.

Tuesday’s advance cut the index’s year-to-date loss to 2.337% from 2.46% on Monday and from 4.095% last Wednesday – its worst level for the year so far.

© 2015 Prospect News.
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