Lennar drive-by caps $2 billion primary week; Solera reduced, delayed; Intelsat extends rebound

By Paul Deckelman and Paul A. Harris

New York, Feb. 26 – Junkbondland closed out a busier primary week on Friday with a quickly shopped and upsized $500 million offering of five-year notes from homebuilder Lennar Corp.

High-yield syndicate sources said the Lennar deal was the only issue heard to have priced during the session.

Insurance software provider Solera, LLC’s planned dual-currency offering of eight-year notes, which had originally been expected to price at the conclusion of its roadshow for the deal earlier in the week and then was expected on Friday, was delayed once more, pushed off until Monday, and wider price talk emerged. It was also downsized to $1.73 billion equivalent.

With Solera a no-show during the session, the Lennar deal lifted the week’s new issuance to a shade over $2 billion in five tranches, according to data compiled by Prospect News. That was up from the $350 million which had priced in one tranche last week, ended Feb. 19.

The week’s new issuance, in turn, raised the year-to-date issuance figure for strictly junk-rated, dollar-denominated offerings from domestic or industrialized-country borrowers to $12.38 billion in 23 tranches – although that was running 72.9% behind the new-deal pace seen last year, when some $45.77 billion had priced in 69 tranches by this point on the 2015 calendar, the data indicated.

When the new Lennar notes hit the aftermarket, traders saw the bonds trade right around their issue price.

The traders said that both tranches of Thursday’s offering from fellow homebuilder PulteGroup Inc. continued to trade well.

Away from the new-deal arena, Intelsat SA extended its rebound from losses posted earlier in the week to a third straight session, with volume in the communications satellite company’s paper remaining active.

Whiting Petroleum Corp.’s bonds were also once again better, building on Thursday’s snapback from losses seen earlier in the week, but volume was only moderate.

Statistical market performance measures were higher across the board for a second consecutive session on Friday; they had improved on Thursday after having been lower on Wednesday. Friday marked their third higher session in the last five trading days.

Those indicators were also higher all around from where they had finished last Friday. It was the second straight week of stronger indicators, following two straight weeks on the downside, and the fourth higher week in the last six.

Lennar upsizes

Lennar priced Friday’s sole junk deal, an upsized $500 million issue of five-year senior notes (Ba2/BB/BB+) that came at par to yield 4¾%.

The deal size was increased from $300 million. The yield printed on top of talk.

It appeared to go well, a New York-based trader remarked, adding that the deal came on the back of a significant amount of reverse inquiry and was trading in low volume at par bid, par ½ offered.

Citigroup, Wells Fargo, BofA Merrill Lynch, Deutsche Bank, J.P. Morgan, Mizuho, Goldman Sachs and RBC were joint bookrunners for the deal which was run on the investment-grade desk.

The Miami-based homebuilder plans to use the proceeds for general corporate purposes, including debt repayment which may include the repayment or repurchase of its 6½% senior notes due 2016.

Solera downsizes, revises talk

Solera, LLC and Solera Finance, Inc. downsized their offering of eight-year senior notes (Caa1/B-) to $1.73 billion equivalent from $2.03 billion equivalent as they shifted $300 million of proceeds to the concurrent term loan on Friday.

The notes offer now includes $1.28 billion talked at 94 to 95 and to yield 11.47% to 11.67%. That talk was upwardly revised from earlier yield talk of 10¾% to 11%.

In addition, the company plans to sell $450 million equivalent of euro-denominated notes. Price talk updates on the euro-denominated notes, if any, were not available from the source who spoke to Prospect News late Friday. Earlier in the week talk on the euro-denominated notes had them pricing 25 basis points inside of the dollar-denominated notes.

In addition to the downsizing and price talk revision there were covenant changes.

Books close at noon ET on Monday and the LBO deal is also set to price on Monday.

Goldman Sachs is the left bookrunner. Citigroup, Jefferies, Macquarie, Nomura and UBS are the joint bookrunners.

Higher deal-volume expected

Apart from Solera, there is reason for prospective high-yield issuers to take heart, syndicate sources said on Friday.

The Lennar deal, upsized and pricing on top of talk, received a good execution, a debt capital markets banker said.

Also deals done earlier in the week by PulteGroup Inc. and Realogy Group LLC appeared to go well, sources said.

Look for deal volume to pick up in the February-March crossover week.

Watch for a big deal from the health care sector to surface. BofA Merrill Lynch will be the lead.

Also look for a deal in the retail sector, not necessarily a big one, also to be led by BofA Merrill Lynch.

And Western Digital Corp. could show up with an expected $5.1 billion of investment-grade secured notes and junk-rated unsecured notes at the conclusion of-, or even during the J.P. Morgan Global High Yield & Leveraged Finance Conference, set to run Feb. 29 to March 2, a portfolio manager said.

Thursday inflows

Dedicated high-yield funds saw cash inflows on Thursday, the most recent session for which data was available at press time, a trader said.

High yield ETFs saw $179 million of inflows on the day. Asset managers saw $175 million of inflows on Thursday.

The Thursday daily flows come on the heels of a Thursday afternoon report from Lipper-AMG that high-yield funds saw $2.74 billion of inflows for the week to Wednesday’s close, the biggest weekly inflow since last October.

Meanwhile the drain continues from the retail bank loan accounts and bank loan ETFs, the trader said, referring to data also reported on Thursday by Lipper AMG.

The loan funds saw $218 million of outflows on the week to last Wednesday’s close, the source said.

New Lennars gain

In the secondary market, a trader saw some activity in the new Lennar 4¾% notes due 2021, but said that there had not been much movement in the issue.

He said that after pricing at par, “nothing went higher than 100¼.

“Some bonds went to account there, people started hitting those bids, then they traded down to par.”

Pulte 10-years hang onto gains

Tranders saw the new 10-year notes from PulteGroup continuing to trade at robust levels a day after the Atlanta-based homebuilder brought its quickly shopped $1 billion offering to market.

“The 10-year has done pretty well,” one of them said, quoting those 5½% notes due 2026 in a 101 to 101½ bid context.

At another desk, a trader said that the bonds were about unchanged at 101¼ bid, with over $24 million traded – although that activity level was well down from the market-topping $55 million-plus that changed hands on Thursday when the new deal was freed to trade.

A third trader saw the levels tightening a bit to a 100¾ to 101¼ bid context from Thursday’s initial 100½ to 101½ range.

The $700 million issue had moved up to that area after pricing at par.

However, one of the traders added, the other half of the deal – the company’s $300 million of 4¼% notes due 2021 – “traded down a lot closer to the issue price.”

He said the bonds were going home in a 100¼ to 100 3/8 neighborhood.

At another shop, a trader saw them ending down ¼ point right at their par issue price, with about $10 million traded, well down from Thursday’s initial $34 million-plus turnover.

Intelsat gains continue

Away from the new deals, traders saw a continued resurgence in the bonds of Luxembourg-based communications satellite operator Intelsat – whose bonds had gotten beaten down in heavy trading on Monday and again on Tuesday after the company released disappointing preliminary fourth-quarter and full-year revenue numbers and other operating metrics, put out 2016 guidance below what some in the market were looking for and announced the hiring of Guggenheim Securities to help it assess possible balance sheet transactions.

A trader saw the company’s Intelsat Jackson Holdings SA 7¼% notes due 2020 up 3 points on the day, going home at 70½ bid, with about $30 million traded.

He saw its 7¼% notes due 2019 pushing up to 79 bid, calling that a gain of 6 points, with over $24 million traded, while its Intelsat Luxembourg SA 7¾% notes due 2021 were 5 points better on the day at 30 bid, with over $20 million having changed hands.

“Intelsat rallied a bunch again,” a second trader opined, seeing the Intelsat Jackson 2019s as 5 points better at 79 and the Intelsat Luxembourg 2021s up 5 points to 30 bid, “so they staged a nice little rally.”

“The Jackson ’19s were at 87 last Friday. They were down about 15 to 20 points at their lows. They’re still down 8 points on the week – but they clawed their way back from their lows by about a dozen points.”

He meantime said that “the LuxCo bonds managed to come back by around 8 points from their lows.”

Whiting rebound continues

Another comeback story seen this week was Whiting Petroleum; the Denver-based oil and natural gas exploration and production operator’s bonds were hammered down by more than 5 points on Tuesday and continued to erode on Wednesday, before finally turning the corner on Thursday and starting to bounce back,

A trader saw its 5% notes due 2019 going out at 46½ bid, calling it a 3½ point gain on the day, with around $9 million traded.

He said that its 5¾% notes due 2021 were likewise 3½ points better at 46 bid, with about $10 million traded.

Its 6½% notes due 2018 were 3 point gainers on the day, ending at 36 bid, though on only $3 million of volume.

“There was more pounding on the way down,” he noted.

Whiting had a good day on the rebound – but on not as much volume.”

A second trader saw the 6½s go to 36 bid on Friday from 32 on Thursday and 28 on Wednesday, “so they had a little bit of a rally.”

Penney pops up

A trader said that “J.C. Penney [Co. Inc.] bonds had a nice rally,” after Moody’s Investors Service lifted the Plano, Texas-based department store operator’s corporate family rating to B3 from Caa1 previously.

Standard & Poor’s meantime put the company’s CCC+ corporate credit rating on CreditWatch with positive implications.

He saw the 6 3/8% notes trading around 73 bid, calling that an 8 or 9 point jump.

Another market source saw the company’s 5.65% notes due 2020 at 91½ bid, up 6¼ points on the day

Firmer tone to market

Generally, one of the traders said, “the market felt better.

“We saw that big inflow number on Thursday” – some $2.74 billion in the latest week – “and that probably helped.

He said that “a few things were creeping back, and felt better.

“I guess people would rather end the week on that note – the customers would rather mark things up going into the month’s end [on Monday] as opposed to taking more pain.”

Indicators stay strong

Statistical market performance measures were higher across the board for a second consecutive session on Friday; they had improved on Thursday after having been lower on Wednesday. Friday marked their third higher session in the last five trading days.

Those indicators were also higher all around from where they had finished last Friday. It was the second straight week of stronger indicators, following two straight weeks on the downside, and the fourth higher week in the last six.

The KDP High Yield Daily Index jumped by 68 basis points on Friday to finish at 63.43, on top of the 33 bps gain seen on Thursday, its first upturn after two straight losses. Friday was index’s third gain in the last five sessions.

Its yield came in by 12 bps, ending at 7.24%, after having tightened by 7 bps on Thursday – its first narrowing after four straight sessions in which the yield widened out. It had tightened in the previous four sessions before that.

Those levels compared favorably with last Friday’s 62.43 index reading and 7.28% yield.

The Markit Series 25 CDX North American High Yield Index gained 15/32 point on Friday, adding to its 7/16 point advance on Thursday. It closed Friday at 98 25/32 bid, 98 13/16 offered. Those gains followed two consecutive losses,

The index was also better on the week from last Friday’s 97 13/16 bid, 97 7/8 offered finish.

The Merrill Lynch North American High Yield Master II Index rose by 0.709% on Friday, its second straight upturn. It had also firmed by 0.565% on Thursday, more than offsetting Wednesday’s 0.265% downturn.

Friday’s gain cut the index’s year-to-date deficit to 1.687% from 2.38% on Thursday. It was the first time that deficit has been under 2% since Feb. 1, when it ended down 1.768% for the year. The year-to-date red ink total also remains well short of the 5.142% loss seen on Feb. 11, the worst cumulative deficit for the year so far and the index’s worst level since the 30% plunge recorded at the end of 2008.

For the week, the index gained 1.522%, its second straight weekly gain after two weekly losses before that. Last week, it was up by a nearly identical 1.519%, with a year-to-date loss of 3.161%

© 2015 Prospect News.
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