NGL Energy, Horizon Pharma price; new NGL notes jump; Sprint on tap; coal names catch fire

By Paul Deckelman and Paul A. Harris

New York, Oct. 19 – Junkbondland saw a pair of new deals price on Wednesday, generating $1 billion of new dollar-denominated high-yield paper from domestic or industrialized-country issuers.

Midstream energy operator and propane retailer NGL Energy Partners LP brought an upsized $700 million offering of seven-year notes to market in a regularly scheduled forward calendar deal.

Traders said the new notes firmed smartly in brisk trading when they hit the aftermarket.

The day’s other transaction was Irish drug maker Horizon Pharma plc’s $300 million of eight-year notes, which also priced off the calendar.

Primaryside players were meanwhile setting their sights on Thursday’s expected pricing of wireless provider Sprint Corp.’s $3.5 billion five-year secured notes transaction, which has been restructured into a single-tranche offering after having been originally shopped with seven- and 10-year tranches as well as the five-year paper. Despite its nominally investment-grade rating, the deal is a joint effort on the part of the high-yield, high-grade and structured products syndicate desks.

Among recently priced issues, Tuesday’s drive-by deal from the captive financing arm of agricultural and construction equipment manufacturer CNH Industrial NV was seen moving up in active trading after having priced at a discount to par.

Away from the new deals, firming coal prices were seen pushing up the bonds of mining operators such as Peabody Energy Corp.

Statistical market performance measures were higher across the board Wednesday for a second consecutive session.

NGL upsized and tight

The primary market saw $1 billion come in two tranches on Wednesday.

Both deals came at the conclusions of roadshows.

NGL Energy Partners and NGL Energy Finance Corp. priced an upsized $700 million issue of seven-year senior notes (B2/BB-/B-) at par to yield 7½%.

The issue size was increased from $400 million.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

The deal was well-subscribed, a trader said.

Barclays was the lead left active bookrunner. Mizuho Securities was the joint active bookrunner.

RBC Capital Markets, BofA Merrill Lynch, BNP Paribas Securities Corp., PNC Capital Markets, TD Securities, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co., HSBC, SunTrust Robinson Humphrey Inc., UBS Investment Bank and Wells Fargo Securities LLC were joint bookrunners.

The Tulsa, Okla.-based vertically integrated energy company plans to use the proceeds to pay down its revolving credit facility.

Horizon at the wide end

Horizon Pharma priced a $300 million issue of eight-year senior notes (B3/B-) at par to yield 8¾%.

The yield printed at the wide end of the 8½% to 8¾% yield talk.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Credit Suisse and Goldman Sachs were the joint bookrunners.

Proceeds, along with $375 million of bank debt that the Dublin-based biopharmaceutical company is putting in place, will be used to help fund acquisition of Raptor Pharmaceutical Corp. and refinance existing debt.

Sprint talk 3½% area

Sprint set price talk on its $3.5 billion offering of class A-1 five-year senior secured notes (expected ratings Baa2//BBB) in the 3½% area, plus or minus 12.5 basis points.

Official talk comes well tight to the initial guidance in the 4% area.

The offer is playing to $33 billion of demand, according to a trader, who added that much of it is coming from investment-grade accounts.

Another trader, saying that the deal is heard to be playing to 292 accounts, said that investment-grade demand notwithstanding, high-yield investors are also piling into Sprint.

Although the deal is being priced off a $7 billion shelf, the size is not expected to grow, a source said.

Books closed Wednesday, 4 p.m. ET for West Coast accounts, and the deal is set to price on Thursday.

Earlier in the week, Sprint consolidated the securitization deal into a single tranche, withdrawing previously planned tranches of class A-2 seven-year notes and class A-3 10-year notes.

Timing was accelerated, as a previous schedule had the roadshow running through the entire week.

Goldman Sachs is the global coordinator and left lead bookrunner for the securitization deal, which is coming in a joint effort on the part of the high-yield, investment-grade and structured products syndicate desks. Mizuho and JPMorgan are the joint lead bookrunners.

Rackspace markets $1.2 billion

Rackspace Hosting Inc. is expected to price a $1.2 billion offering of eight-year senior notes in the early to middle part of the week ahead.

The deal, in the market to help fund the Apollo-led buyout, is coming with early guidance in the low 9% area.

The bonds are backed by a $1.2 billion bridge loan that did not go out widely but was taken down by as few as 15 accounts, a buyside source said.

Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Barclays and RBC are leading the deal.

Rackspace is the first deal to take a position on the active forward calendar as business slated for the Oct. 24 week.

However, it won't be lonely for long, source say, adding that activity in the primary market is expected to ramp up in the week ahead.

TUI 2 1/8% coupon

In the European market, Germany's TUI AG priced a €300 million issue of 2 1/8% five-year senior bullet notes (Ba2/BB-) at 99.415 to yield 2¼% on Wednesday.

The yield printed at the tight end of final yield talk in the 2 3/8% area. Initial guidance was 2½%.

The deal played to €2 billion of demand, the source said.

Commerzbank, Deutsche Bank, HSBC and SG were the bookrunners. Deutsche Bank will bill and deliver.

Daisy £385 million two-part

Daisy Group is in the market with a £385 million offering of five-year senior secured notes (expected ratings B2/B), coming in tranches of fixed-rate and floating-rate notes.

Joint bookrunner Goldman Sachs will bill and deliver. HSBC and Lloyds are also joint bookrunners.

Proceeds will be used to refinance debt.

Mixed flows on Tuesday

The cash flows of the dedicated high-yield bond funds were mixed on Tuesday, the most recent session for which data was available at press time, a trader said.

High-yield exchange-traded funds saw $74 million of inflows on the day.

However, actively managed funds sustained a substantial $290 million of outflows on Tuesday.

Dedicated bank loan funds, meanwhile, were strongly positive on Tuesday, with $110 million of inflows on the day.

NGL notes move up

In the secondary market, traders said that the new NGL Energy Partners 7½% notes due 2023 posted handsome gains when they hit the aftermarket after having priced at par.

Traders at two separate shops saw the new issue in a 101¾-to-102¼ bid context.

Later on, a market source at another desk saw the notes going home at 102 1/8 bid, with more than $24 million having changed hands.

Traders meantime did not immediately report any initial aftermarket dealings in Horizon Pharma’s 8¾% notes due 2024, which came to market later in the session than the NGL transaction did.

CNH issue improves

The traders meantime saw CNH Industrial Capital LLC’s new 3 7/8% notes due 2021 among the day’s busiest bonds, with over $37 million having traded by the close.

One trader pegged the bonds at 99 5/8 bid, 99 7/8 offered.

A second saw them going out in a 99¾-to-par bid context.

He said that the notes “were trading below par earlier in the day today, then they made their way back up.”

At another shop, the bonds were quoted at 99 15/16 bid, up 5/16 point on the session.

The company, the London-based captive financing arm of heavy equipment maker CNH Industrial, priced a quickly shopped $400 million of the notes on Tuesday at 99.441 to yield 4%.

The bonds firmed slightly to around the 99½ bid area in initial aftermarket dealings later Tuesday of around $4 million.

Recent issues rise

Among some of the more recently priced new deals, a market source said that Lions Gate Entertainment Corp.’s 5 7/8% notes due 2024 gained 1/8 point on Wednesday, finishing at 101¼ bid, on volume of more than $9 million.

The Santa Monica, Calif.-based film and television production company priced $520 million of those notes last Thursday at par in a regularly scheduled forward calendar offering.

Transocean Ltd.’s 7¾% senior secured notes due 2024 gained ¼ point on the day, ending at 104 bid, with over $17 million traded.

The Zug, Switzerland-based maritime energy drilling company priced $600 million of those notes at 98.5 in a quick-to-market transaction on Oct. 7, yielding 8%; they jumped to a 102-to-103 bid context when they hit the aftermarket and continued to firm from that point to current levels, in line with overall strength in energy-related names fueled by strengthening oil prices.

Energy names on the upswing

Oil prices continued to gain on Wednesday. The benchmark U.S. crude grade, West Texas Intermediate for November delivery, was up $1.31 per barrel on the New York Mercantile Exchange, settling in at $51.60, while the main international grade, Brent crude for December delivery, improved by 99 cents per barrel on the London ICE Futures Exchange, ending at $52.67.

It was the second straight gain for both crude grades and their third rise in the last five sessions.

That continued strengthening helped oil and gas operators such as California Resources Corp., whose 8% notes due 2022 gained 1½ points to close at 74¾ bid, with over 419 million traded.

Canadian oiler MEG Energy Corp.’s 7% notes due 2024 did even better, up 3 points on the day to end at 89 bid, with over $23 million traded.

Coal continues climb

Recently strong coal mining issues continued to move up, a trader said, in line with firmer commodity prices for the fuel.

“Met [i.e., metallurgical] coal was up another $8 [per ton] early in the day, and that was driving Peabody Energy,” he said, quoting the St. Louis-based coal operator’s 10% notes due 2022 up 6 points to 63½ bid, on “pretty active” volume of over $31 million, while its 6% notes due 2018 climbed by more than 5 points on the session to close at 43 bid, topping the Most Actives list with over $37 million traded.

Sector peer Murray Energy Corp.’s 11¼% notes due 2021 rose nearly 3 points, to 72½ bid, with over $27 million having changed hands.

Indicators stay firm

Statistical market performance measures were higher across the board Wednesday for a second consecutive session; they had turned better on Tuesday after having been mixed on Monday. Wednesday marked their third improvement in the last four trading days.

The KDP High Yield index climbed by 21 bps on Wednesday to end at 71.59, its fourth straight gain after two successive losses. On Tuesday, the index had moved up by 12 bps.

Its yield came in by 5 bps for a second session in a row on Wednesday, closing at 5.31%; it was the third straight narrowing after one unchanged session and the fourth such tightening in the last five trading days.

The Markit Series 27 CDX index improved by almost ¼ point on Wednesday, finishing at 104 15/32 bid, 104½ offered. It was the second consecutive rise in the index, which gained more than 3/16 point.

The Merrill Lynch High Yield index firmed by 0.221%, on top of Tuesday’s 0.219% improvement. It was the fourth straight gain after three consecutive downturns.

That upturn raised the index’s year-to-date return to 16.499% on Wednesday, its fourth consecutive new peak cumulative return for the year, surpassing the previous mark of 16.243% set on Tuesday – the first time this year the index had closed above 16% and its first time at that level since Dec. 31, 2009, when it had finished out the year with a 57.512% cumulative return.

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