Primary remains quiet, though calendar builds; Century Communities on tap; Revlon bonds fall

By Paul Deckelman

New York, May 8 – The high-yield primary market had a second consecutive session Monday during which no U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers priced.

However, syndicate sources saw the forward calendar grow as a series of deals were announced by their prospective borrowers and took to the road for marketing to potential investors – and one of those offerings was expected to come to market as early as Tuesday.

The sources said that homebuilder Century Communities Inc. is likely to price a $300 million issue of eight-year notes.

Three other pending new deals surfaced during the session.

CareTrust REIT, Inc., a real estate investment trust oriented toward healthcare and senior living properties, is also doing a $300 million eight-year offering. It was heard to have begun an investor roadshow on Monday that will run through Wednesday, with pricing expected thereafter.

Also hitting the road ahead of anticipated mid-week pricing was CDK Global, Inc., a provider of integrated information technology and digital marketing solutions to the automotive retail industry. Its $500 million of 10-year notes are expected to price around mid-week.

Salem Media Group Inc., which provides Christian and politically conservative content via radio and other forms of media, plans to sell $225 million of seven-year secured paper, which is expected to price after the conclusion of its roadshow on Thursday.

Besides those newly announced deals, market sources noted that oil and natural gas operator Tapstone Energy LLC, whose planned $300 million five-year transaction surfaced in the market last week, is scheduled to wrap up its roadshow for that offering on Tuesday, with pricing expected thereafter.

Traders said that recent new issues such as Wynn Resorts Ltd. and New Gold Inc. continued to trade at a premium to the par level at which those deals priced last week.

Revlon Consumer Products Corp.’s bonds were in retreat after the cosmetics company reported disappointing quarterly results.

Statistical market performance measures were mixed on Monday for a second straight session; they had turned mixed on Friday, after having been lower across the board on Thursday – their first losing session since April 18. The indicators had also been mixed last Tuesday and Wednesday and were higher all around in three consecutive sessions before that.

Century Communities seen on tap

In the new-deal arena, syndicate sources heard that Century Communities Inc. was in the market with $300 million of eight-year senior notes, a transaction which could get done as early as Tuesday.

The Rule 144A/Regulation S offering is being managed by J.P. Morgan Securities LLC.

Greenwood Village, Colo.-based Century, a builder of single-family homes, townhomes and flats in select United States markets, plans to use a portion of the net proceeds from the offering to repay all outstanding debt under its revolving credit facility.

The remainder of the proceeds are slated for general corporate purposes, which may include, among other things, working capital and acquisitions, including the company’s previously announced merger transaction with UCP, Inc.

Tapstone wraps up roadshow

The syndicate sources were also anticipating that Tapstone Energy’s $300 million of senior notes due 2022 might price following the end of its roadshow on Tuesday.

Bank of America Merrill Lynch; is managing the Oklahoma City-based independent oil and gas company’s debt refinancing deal.

CareTrust, CDK, Salem hit road

Looking out a little further on the horizon, a trio of deals was announced and were then heard by the syndicate sources to have taken to the road to market their prospective new deals to would-be investors in several U.S. states.

One was CareTrust REIT, a San Clemente, Calif.-based real estate investment trust specializing in healthcare and senior housing-related properties.

It started showing its $300 million eight-year senior notes offering around to investors on the U.S. West Coast Monday, with the roadshow scheduled to come east with presentations in New York on Tuesday and in Boston on Wednesday, with pricing anticipated soon thereafter.

The SEC registered offering will be brought to market via bookrunners KeyBancCapital Markets Inc., BMO Capital Markets Corp. and Barclays Capital Inc., along with co-managers Raymond James Securities, Capital One Securities, Inc., Fifth Third Securities Inc. and RBC Capital Markets Corp.

Care Trust plans to use the proceeds of the bond deal to redeem its existing senior notes due 2021, repay a portion of its revolving credit facility borrowings and for general corporate purposes, including acquisitions.

CDK Global, a Hoffman Estates, Ill.-based global provider of integrated information technology and digital marketing solutions to the automotive retail and related industries, was heard by the sources to have begun a roadshow on Monday for a $500 million issue of 10-year senior notes expected to price around mid-week.

Unlike the CareTrust deal, CDK’s roadshow began in the East on Monday, continues there Tuesday and wraps up in the West on Wednesday, with pricing seen thereafter.

The Rule 144A/Regulation S deal is being brought to market via joint book-running managers BofA Merrill Lynch, JPMorgan, Morgan Stanley & Co. Inc., MUFG, U.S. Bancorp Investment, Inc. and Wells Fargo Securities LLC.

BMO, BB&T Capital Markets, Citizens Financial Group Inc. and Lloyds Securities Inc. will be senior co-managers on the deal.

Williams Capital Group LP is a co-manager on the offering.

Net proceeds from the offering will be used for general corporate purposes, which may include share repurchases, dividends, acquisitions, repayments of debt, and working capital and capital expenditures.

And Salem Media Group was also marketing its $225 million of seven-year senior secured notes via a roadshow that started Monday in Boston, moves to New York on Tuesday and continues on the West Coast on Wednesday and Thursday, with pricing expected soon after that.

The Rule 144A/Regulation S offering will be brought to market via sole bookrunner Wells Fargo, along with co-managers Barclays Capital Inc. and Noble Capital Markets.

Salem, a Camarillo, Calif.-based domestic multimedia company specializing in Christian and politically conservative content, with media properties comprising radio broadcasting, digital media and publishing outlets, will also be entering into a new senior secured asset-based revolving credit facility

It plans to use the proceeds from the bond deal and the ABL facility to refinance outstanding debt, to pay offering fees and expenses and for general corporate purposes.

Recent deals stay firm

Among recently priced deals, a trader said that Wynn Resorts’ 5¼% notes due 2027 were finishing up ¼ point on the day at 101 3/8 bid.

The Las Vegas-based gaming and hospitality company priced its quickly shopped $900 million offering at par on Thursday.

He also saw New Gold Inc.’s 6 3/8% notes due 2025 holding steady at 101 5/8 bid.

The Toronto-based gold-mining concern had priced its quick-to-market $300 million issue at par, also on Thursday.

Going back a little further, he said that Restaurant Brands International Inc.’s 4¼% first-lien senior secured notes due 2024 were trading at 100¼ bid, though “on pretty light volume.”

The Oakville, Ont.-based owner of the Burger King, Tim Hortons and Popeyes Louisiana Kitchen restaurant chains priced its $1.5 billion of those bonds at par in a drive-by transaction on Wednesday, after the offering was upped from an originally planned $1 billion.

Revlon notes retreat

Away from the new deals, Revlon Consumer Products’ bonds were seen lower across the company’s capitals structure.

The New York-based cosmetics manufacturer’s 5¾% notes dropped by 2¾ points on the day, finishing at 92¾ bid, on volume of around $7 million.

The bonds fell, in line with the company’s shares, as investors reacted to the company’s first-quarter results, including a nearly 6% sales decrease on a pro forma basis for its acquisition of sector peer Elizabeth Arden, and a slightly more than 50% plunge in adjusted EBITDA to $32 million, versus $67 million a year ago.

At Gimme Credit, an independent advisory service, senior analyst Kim Noland said in a research note Monday that Revlon’s leverage is high following the purchase of the money-losing Elizabeth Arden – and even higher, over 7% in the latest period, thanks to the drop in EBITDA.

Noland also noted that the results were negatively impacted by a rise in sales, general and administrative expenses stemming from the Elizabeth Arden buy.

She said that although those elevated SG&A costs “will likely come down as projected synergies are realized (the company has forecast as much as $190 million over a multi-year period), we are maintaining our underperform rating until there is evidence of a turnaround.”

Indicators stay mixed

Statistical market performance measures were mixed for a second consecutive session on Monday; they had turned mixed on Friday, after having been lower across the board on Thursday – their first losing session since April 18.

The KDP High Yield Daily index lost 1 basis point to end at 72.10; it had moved up by 1 bp on Friday, after having nosedived by 13 bps on Thursday, its second straight loss after one unchanged session.

Its yield was unchanged on Monday at 5.16%, after having come in by 1 bp on Friday, after having widened out by 5 bps on Thursday and having been unchanged on Wednesday.

The The Markit CDX Series 28 index was up 1/8 point on Friday at 107½ bid, 107 17/32 offered; it had ended down for a third session in a row on Thursday, backtracking by over ¼ point.

It was about unchanged on the week.

The Merrill Lynch North American High Yield index turned up by 0.057% on Monday, after finishing off for a second straight session on Friday, when it had retreated by 0.056%, on top of Thursday’s 0.233% loss, which had broken an 11-session winning streak.

Monday’s gain raised the index’s year-to-date return to 3.746% from Friday’s 3.687%, though it remains down from last Wednesday’s close at 3.987%, which had been its eighth straight new year-to-date high.

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