Drive-by parade continues with Summit Midstream, upsized Sinclair deals; new Calpine bonds busy

By Paul Deckelman and Paul A. Harris

New York, July 9 – Opportunistically timed and quickly shopped bond offerings with same-day transactions from issuers looking to take advantage of market conditions continued to dominate the Junkbondland primary sphere for a third consecutive session on Wednesday.

High-yield syndicate sources saw two such deals totaling $850 million of dollar-denominated and fully junk-rated new paper come to market during the session from Sinclair Broadcast Group, Inc. and Summit Midstream Partners, LP.

Hunt Valley, Md.-based television station ownership group Sinclair did an upsized $550 million issue of 10-year notes via an operating subsidiary. Those bonds were quoted slightly higher when they hit the aftermarket.

Summit, a Dallas-based energy limited partnership that owns various midstream infrastructure assets, priced $300 million of eight-year notes, which were not seen trading around subsequently.

Tuesday’s big deal from Calpine Corp. easily dominated the Most Actives list on Wednesday as both tranches of the Houston-based power-generating company – its 8.5-year and 10.5-year notes – each racked up more than $100 million of trades at levels a little above their respective par issue prices.

There was also brisk trading seen in Walter Energy, Inc.’s 2019 bonds a day after the Birmingham, Ala.-based metallurgical coal producer priced an add-on to that issue.

Away from the new issues, for a third consecutive session there were busy dealings in the bonds of the company formerly known as Radiation Therapy Services Inc. Both of its outstanding issues were on the upside, in contrast to Monday and Tuesday, when the bonds had slid on investor angst over the levels of Medicare and Medicaid reimbursement the medical services provider – now known as 21st Century Oncology Holdings, Inc. – will receive from the government.

Statistical market-performance indicators turned mixed on Wednesday after having been lower across the board on Tuesday and mixed over four consecutive sessions before that.

Sinclair Television upsizes

Two issuers brought single-tranche dollar-denominated drive-by deals during Wednesday's high-yield primary market session.

They raised a total of $850 million.

Both came at the tight end of price talk.

Sinclair Television Group, Inc. (STG), a wholly-owned subsidiary of Sinclair Broadcast Group, priced an upsized $550 million issue of 10-year senior notes (B1/B+) at par to yield 5 5/8%.

The deal was upsized from $450 million.

The yield printed at the tight end of yield talk in the 5¾% area.

J.P. Morgan Securities LLC, RBC, Wells Fargo and SunTrust were joint bookrunners for the acquisition and debt refinancing deal.

Summit Midstream prices tight

Summit Midstream Partners priced a $300 million issue of eight-year senior notes (B3/B) at par to yield 5½%, at the tight end of yield talk in the 5 5/8% area.

Deutsche Bank, RBC, RBS and Wells Fargo were the joint bookrunners for the debt refinancing.

Triangle to sell $350 million

Triangle USA Petroleum Corp. (TUSA), the wholly owned exploration and production subsidiary of Triangle Petroleum Corp. (Triangle), plans to price a $350 million offering of eight-year senior notes (expected ratings Caa1/CCC+) during the week ahead, according to a market source.

JPMorgan, Credit Suisse Securities (USA) LLC and BofA Merrill Lynch are underwriters.

The Denver-based energy company plans to use the proceeds to pay down and terminate its second-lien credit facility, to reimburse Triangle for capital contributions to TUSA in connection with closing the acquisitions of Williston Basin properties previously announced on May 14, to repay a portion of outstanding debt under TUSA's senior credit facility and for other general corporate purposes.

Northwest Hardwoods investor call

Northwest Hardwoods, Inc. plans to participate in an investor call and a New York investor lunch beginning at noon ET Thursday to discuss its proposed $300 million offering of seven-year senior secured notes, according to a syndicate source.

The deal is expected to price during the week ahead.

Morgan Stanley & Co., LLC, Credit Suisse Securities and Jefferies LLC are the joint bookrunners for the Rule 144A for life offer.

The notes come with three years of call protection.

Proceeds will be used to finance the acquisition of Northwest Hardwoods, a Coos Bay, Ore.-based manufacturer and distributor of hardwood lumber, by Littlejohn & Co., LLC and to refinance debt.

Ipreo starts roadshow

Ipreo Holdings LLC began a roadshow on Wednesday for a $200 million offering of eight-year senior notes (Caa2/CCC+), according to a market source.

The deal is expected to price on July 16.

BofA Merrill Lynch, Goldman Sachs & Co., Credit Suisse Securities, Deutsche Bank Securities, Morgan Stanley and RBC are the joint bookrunners.

The notes come with three years of call protection.

Proceeds will be used to help fund the buyout of the company by Blackstone and Goldman Sachs Merchant Banking Division from Kohlberg Kravis Roberts & Co. LP.

Ipreo is a New York-based provider of new issuance software solutions across the equity, fixed-income, municipal and syndicated-loan markets.

Twin Set starts roadshow

In the European primary, Italy-based women's apparel marketer Twin Set – Simona Barbieri SpA began a roadshow on Wednesday for a €150 million offering of five-year senior secured floating-rate notes, according to a market source.

The roadshow wraps up on July 15.

Sole physical bookrunner UBS will bill and deliver. Banca IMI and UniCredit are joint bookrunners.

The company, based in Capri, Italy, plans to use the proceeds to repay debt as well as to fund a distribution to shareholders and for general corporate purposes.

Sinclair seen better

In the secondary market, traders said that, as had been the case on both Monday and again on Tuesday, the main focus of Wednesday’s market was, as one of them put it, “waiting for the new deals to price” – primarily Sinclair on Wednesday, more so than Summit Midstream; on Tuesday, everyone had awaited Calpine’s huge new offering, while on Monday, General Motors Financial Co. was the main object of everyone’s attention.

When the new Sinclair Television Group 5 5/8% notes due 2024 hit the aftermarket, a trader heard the bonds quoted at 100½ bid, 101 offered, up from their par issue price.

There was no immediate aftermarket activity seen in Summit Midstream’s $300 million of 5½% notes due 2022 after their late-afternoon par pricing.

Calpine tops actives list

Calpine’s giant-sized new deal was easily the busiest name in the junk space on Wednesday, with both tranches of that offering topping the $100 million mark.

A trader called the two tranches “the big volume movers” on the day.

He saw both its 5 3/8% notes due in January 2023 and its 5¾% notes due in January of 2025 staying “pretty much inside” of a 100 1/8 to 100 3/8 range for most of the day.

There were “fairly tight markets in it,” he said, “one-eighth of a point, if not trading for 1/16 of a point. There’s really not a lot of spread in there.”

Even so, he saw over $120 million of the 5 3/8% paper having traded, and over $110 million of the 5¾% notes.

Calpine had priced its quickly shopped $1.25 billion of the 8.5-year bonds and $1.55 billion of the 10.5-year bonds on Tuesday, both at par.

A second trader saw both Calpine tranches trading in a 100 to 100½ context.

A market source at another shop pegged the 2023 notes up by 5/16 point on the day at 100 9/16 bid, although he saw the 2025 notes off by ¼ point at 100 3/8 bid, with over $100 million of each having changed hands.

Existing Calpine paper trades

Some of Calpine’s existing bonds were also among the more-active issues on the day, one of the traders said.

He saw its 7½% notes due 2021 gain about 3/8 point to end just above the 111½ bid mark on volume of more than $14 million.

He saw Calpine’s 7 5/8% notes due 2020 at 110 11/16 bid, up 3/16 point on the day, with over $12 million having changed hands.

Those two issues of secured paper are among the bonds Calpine will be redeeming or taking out via a tender offer that began on Tuesday using the bond-sale proceeds.

Calpine’s 7 7/8% notes due 2023 lost ¼ point to end at an even 113 bid on volume of over $10 million.

Its 5 7/8% notes due 2024, though, gained 1 3/8 points to end at 108 bid on over $8 million of turnover.

Walter Energy moves up

Walter Energy’s 9½% notes due 2019 were quoted by two separate traders as hovering in a 100 1/8 to 100 3/8 context on Wednesday.

Over $24 million of those notes were heard to have traded, putting Walter high on the Most Actives list, although nowhere close to the volume generated by the two new tranches of Calpine’s megadeal.

The coal producer had priced $320 million of those notes on Tuesday as a quick-to-market add-on to its existing $650 million of the notes originally sold in two tranches – $450 million last September and $200 million this past March.

The latest add-on priced at 99 to yield 9.741%.

Radiation Therapy recovers

Away from the new deals, Radiation Therapy Services remained in the spotlight for a third consecutive session on Wednesday – only this time, the company’s bonds were seen rebounding in brisk trading after two straight sessions on the downside.

A trader saw its 9 7/8% notes due 2017 up ½ point, at 77½ bid, on volume of more than $15 million.

He saw its 8 7/8% notes due 2017 gain 1 full point to go home at 98½ bid on $16 million.

A second trader also saw the 9 7/8% notes up ½ point at 77½ but said that the 8 7/8% notes had gained 2 points on the day, moving to the 99 3/8 bid level.

The bonds have been gyrating around, traders said, on investor fears that Medicare and Medicaid reimbursement rates for companies such as Radiation Therapy – the Fort Meyers, Fla.-based radiation oncology services company now officially known as 21st Century Oncology Holdings – will likely be cut for the upcoming fiscal year, which begins Oct. 1.

The 9 7/8% notes had gone home at the end of last week trading in a 91-92 context. But after opening around those same levels Monday morning, they began dropping into the 80s, hammered down to as low as 83 bid in a series of smallish odd-lot dealings.

Then on Monday afternoon, there were several big round-lot trades that left the bonds bid at 80½.

They lost an additional 3½ points on Tuesday to close the session at 77 bid, although again, most of the activity was in smallish odd-lot trades, with only one significantly sized round-lot trade during the day, at 77 bid.

The 8 7/8% notes had started on Monday at 102¾ bid, then fell 1½ points to 101¼, with over $6 million traded Monday, setting the stage for Tuesday’s continued downturn, as the bonds slid another 3 7/8 points to 97 3/8 bid on volume of more than $11 million, making it one of the busiest names on Tuesday.

A trader suggested on Wednesday that the bonds were bouncing because the steep downturn of the previous two sessions “had been overdone.”

Market indicators turn mixed

Statistical indicators of junk market performance were mixed on Wednesday after having turned down across the board on Tuesday, which in turn followed four consecutive sessions before that on the upside.

The KDP High Yield Daily index was down by 2 basis points on Wednesday to end at 74.81 – its fifth consecutive loss. It had declined by 5 bps on Thursday.

Its yield rose by 1 bp for a third straight day, ending at an even 5%. It was the fourth consecutive widening.

However, the Markit CDX Series 22 index rose by 6 bps on Wednesday to go home at 108¾ bid, 108 25/32, its first gain after three straight losses, including Tuesday’s 19-bps slide.

But the widely followed and usually robust Merrill Lynch High Yield Master II index ended the day on the downside for a second consecutive session, dropping by 0.032%. That followed Tuesday’s 0.026% retreat, which had broken a string of six consecutive sessions before that in positive territory.

Wednesday’s loss left its year-to-date return at 5.69%, down from Tuesday’s 5.723%, and down as well from the 5.751% return recorded on Monday, the peak level for 2014.

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