Mallinckrodt, upsized Paper Works price; Level 3 stays busy; First Data off after numbers

By Paul Deckelman and Paul A. Harris

New York, July 30 – The high-yield primary market quieted down on Wednesday after Tuesday’s robust session, syndicate sources said.

There were just two deals totaling $1.175 billion that got done versus Tuesday’s session, when more than twice that amount of dollar-denominated and fully junk-rated paper – $2.5 billion – got priced in six tranches.

Wednesday’s big deal – a $900 million offering of eight-year notes from Dublin-based pharmaceutical company Mallinckrodt plc via two financing subsidiaries – was not seen trading around in the aftermarket.

However, traders did see some levels in the new bonds of Paper Works Industries, Inc., which did an upsized $275 million of five-year secured notes. One trader quoted the bonds up several points on the day.

Also among the new or recently priced issues, Level 3 Communications, Inc.’s new eight-year notes that had priced on Tuesday were seen being heavily traded for a second consecutive session.

There were also fairly busy dealings seen for some of the other recently priced credits, including Universal Health Services, Inc., Compressco Partners LP and Regency Energy Partners, LP.

Away from the new deals, First Data Corp. bonds were seen easier after the electronic transaction processor reported second-quarter numbers, including a smaller net loss from a year ago.

Radiation Therapy Services Inc.’s bonds were better for a second consecutive session after the health-care company now known as 21st Century Oncology Holdings, Inc. reached agreements with its noteholders on support for a recapitalization plan.

Statistical market performance indicators were down across the board for a fourth consecutive session on Wednesday.

Mallinckrodt’s $900 million

The Wednesday high-yield primary market session produced a steady stream of news.

Two issuers completed single-tranche deals at the conclusions of roadshows to raise a combined total of $1.18 billion.

Mallinckrodt International Finance SA and Mallinckrodt CB LLC priced a $900 million issue of eight-year senior notes (B1/BB-) at par to yield 5¾%.

The yield printed at the wide end of the 5½% to 5¾% yield talk.

Joint bookrunner Barclays will bill and deliver. Deutsche Bank, Citigroup and Wells Fargo were also joint bookrunners for the acquisition financing.

PaperWorks upsizes again

PaperWorks Industries priced an upsized $275 million issue of five-year senior secured notes (B3/B-) at par to yield 9½%.

The deal was upsized from $270 million, which was already a $20 million increase from the announced size of $250 million.

The yield printed on top of yield talk.

Jefferies and Macquarie were the joint bookrunners.

The Philadelphia-based integrated coated recycled board and folding carton company plans to use the proceeds to refinance debt and fund a small equity distribution to the stockholders of SPG Holding Corp. The additional proceeds resulting from the $25 million upsizing of the deal will be used to increase the distribution by $15 million and to pay down an additional $10 million under the senior ABL facility.

Talking the deals

Looking ahead, NRG Yield Operating LLC, an indirect subsidiary of NRG Yield, Inc., talked its $400 million offering of 10-year senior notes (Ba1/BB+) to yield in the 5¼% area.

The deal is set to price Thursday.

BofA Merrill Lynch, Citigroup, Goldman Sachs and RBC are managing the sale.

And Warren Resources, Inc. talked a $300 million offering of eight-year senior notes (Caa1/B-) to yield in the 8¼% area.

Books close Thursday except for accounts on the west coast of the United States, for which they close at 11 a.m. ET on Friday.

BMO is the left bookrunner. Jefferies and Wells Fargo are the joint bookrunners.

William Lyon two-part deal

Also on Thursday, William Lyon Homes plans to price $300 million of notes (B3/B-).

The deal includes a $250 million tranche of new eight-year senior notes. The issuing entity will be William Lyon Homes Escrow Subsidiary, which will be merged with and into California Lyon upon completion of the Polygon Northwest Homes (Polygon) acquisition.

In addition, subsidiary William Lyon Homes, Inc. is offering a $50 million add-on to its 5¾% senior notes due April 15, 2019.

J.P. Morgan, Citigroup and Credit Suisse are leading the acquisition financing.

Sunshine Oilsands returns

Sunshine Oilsands Ltd. returned to the high-yield primary market with a downsized and extensively restructured $200 million offering of three-year senior secured notes via sole physical bookrunner Imperial Capital.

The notes are talked to price with a 10% coupon at 93.801 for a 17% “constant yield” and are expected to price late this week or early in the week ahead.

In early July, Sunshine Oilsands withdrew a $325 million offering of five-year senior secured notes (see related story in this issue).

Milestone three-year bullet

Milestone Aviation Group Ltd. plans to price a $350 million offering of three-year non-callable senior notes early in the week ahead.

JPMorgan, BofA Merrill Lynch, Deutsche Bank, SunTrust, Huntington and Jefferies are leading the debt refinancing and general corporate purposes deal.

Play prices PIK toggles

In the European session, Warsaw-based mobile telecom Play Topco SA priced a €415 million issue of PIK toggle notes due Feb. 28, 2020 at 99 to yield 7.959%.

The cash coupon is 7¾%, which steps up by 75 basis points to 8½% for PIK payments.

The cash yield came in line with talk in the 8% area at 99.

Physical bookrunner JPMorgan will bill and deliver. BofA Merrill Lynch was also a physical bookrunner. Citigroup and Credit Suisse were bookrunners.

Proceeds will be used to fund a distribution to shareholders.

Paper Works pops

In the secondary market, a trader saw Paper Works Industries’ new 9½% senior secured notes due 2019 having firmed smartly, quoting the cardboard packaging company’s deal at 102 1/8 bid, 102¼ offered.

That was well up from the par level at which that $275 million issue had priced after it was upsized from an originally planned $250 million.

A trader meantime said he had not seen any dealings in Mallinckrodt’s $900 million issue of 5¾% notes due 2022, which had priced at par.

Tuesday deals busy

Traders saw a fair amount of activity in various bonds that had come to market on Tuesday.

The most actively traded credit – and by a wide margin – was Level 3’s 5 3/8% notes due 2022.

A market source saw the bonds trading at 99 5/16 bid, calling them down 5/8 point on the day on volume of over $37 million – enough to top the Most Actives list for purely junk-rated credits.

It was the second straight day of heavy dealings for the new issue, which had racked up over $47 million on Tuesday, again tops in Junkbondland.

The Broomfield, Colo.-based telecommunications fiber-optic network services provider’s quick-to-market $1 billion issue had priced at par via the company’s Level 3 Escrow II Inc. funding subsidiary after having been sharply upsized from $600 million originally.

Both halves of Universal Health Services’ $600 million two-part drive-by offering were seen having firmed slightly in decent-sized trading, as one market source put it.

Its 4¾% senior secured notes due 2022 were seen up 1/8 point at 100 1/8 bid on $19 million of dealings. The King of Prussia, Pa.-based hospital operator had priced $300 million of those bonds at par as well as $300 million of 3¾% senior secured notes due 2019, which also came to market at par. That latter issue was trading at 100 1/8 bid, about unchanged on the day, with over $15 million having changed hands.

And Compressco Partners’ new 7¼% notes due 2022 were seen solidly higher on Wednesday at 100 1/8 bid, with over $19 million having traded.

The Oklahoma City-based oilfield services provider had priced its $350 million offering at a discounted 98.508 on Tuesday to yield 7½%.

Regency deal busy

Going back a little further, a trader said that Regency Energy Partners’ 5% notes due 2022 lost ¼ point to end at par on brisk volume of over $15 million.

The Dallas-based midstream natural gas and liquids master limited partnership had priced $700 million of those notes at 99.158 to yield 5 1/8% in a quickly shopped deal that was upsized from an original $500 million.

Going back still further, a trader said that “the Calpine deals were down a little bit,” referring to Houston-based power generating company Calpine Corp.’s $2.8 billion two-part issue, which had priced back on July 8.

He saw its 5 3/8% notes due Jan. 1, 2023 at 99¼ to 99½, while its 5¾% notes due Jan. 1, 2025 were at 98¾ to 99, “so that’s off a little bit. The Calpines are a little older, but they’re down a little.”

Calpine had priced the $1.25 billion of the 5 3/8s and $1.55 billion of the 5¾% notes at par in a quick-to market deal.

Overall, the trader said, “the market is kind of heavy still. There’s not a lot of buying going on – the market is just a little softer.”

“I would say that a lot of the new issues have been off a little bit.”

First Data falters

Away from the new deals, First Data’s bonds were seen off in the wake of the Atlanta-based electronic transaction processor’s second-quarter earnings report.

A trader said that its 11¾% notes due 2021were 1 3/16 lower at 116½ on busy volume of more than $15 million.

Its 12 5/8% notes due 2021 eased by 1 point to 120.5, with over $14 million having changed hands.

And its 8¼% notes due 2021 dipped by 5/8 to end at 108 bid on volume of more than $12 million.

The bonds eased even though First Data reported that its net loss fell by 82% during the quarter versus a year ago, and it posted record revenues.

Its executives also touted the impact of the company’s recent $3.5 billion capital infusion from existing and new investors, which allowed it to cut more than $3 billion of debt from its balance sheet (see related story elsewhere in this issue).

Market indicators down again

Statistical indicators of junk market performance were in retreat for a fourth consecutive session on Wednesday.

The KDP High Yield Daily index slid by 13 bps on Wednesday to end at 73.77, its weakest level of the year so far and its lowest level since Oct. 16, 2013, when it closed at 73.73. It was the fourth straight loss for the index, which also went down by 9 bps on Tuesday.

Its yield rose by 3 bps for a second consecutive session to 5.3%, its third straight widening out.

The Markit CDX Series 22 index was virtually unchanged on the day after having posted four straight losses before that. It had fallen by 1/16 point on Tuesday to 107½ bid, 107 5/8 offered.

The widely followed Merrill Lynch High Yield Master II index lost ground for a fourth straight session on Wednesday. It went down by 0.166%, on top of Tuesday’s 0.097% retreat.

Wednesday’s downturn dropped the index’s year-to-date return to 4.889% from Tuesday’s 5.064%, and it remained well down from the 5.751% return recorded on July 7, the peak level so far for 2014.

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