Air Medical, NewStar price to cap $12.7 billion week, move up; AMD slides after results

By Paul A. Harris and Paul Deckelman

New York, April 17 –The high-yield primary market wound down on Friday after a busy week, pricing a pair of new deals totaling $670 million.

Airborne emergency transport service Air Medical Group Holdings Inc. brought a $370 million offering of eight-year notes to market, while loan provider NewStar Financial, Inc. did $300 million of five-year notes, both as regularly scheduled deals off the forward calendar.

Air Medical gained a little altitude when its bonds hit the aftermarket, while traders saw NewStar having firmed smartly in secondary dealings.

Those deals brought the week’s tally of new paper up to $12.74 billion in 17 tranches, according to data compiled by Prospect News, edging out the $12.63 billion seen to have priced in 21 tranches last week, ended April 10.

The week’s new bonds, in turn, lifted year-to-date issuance to $116.72 billion in 176 tranches, according to the data, running more than 25% ahead of last year’s new-deal pace, which saw $93.03 billion having priced in 187 tranches at this point on the calendar.

As has been the case for most of the week, the secondary market remained dominated by trading in recent new issues, including Thursday’s offerings from Communications Sales & Leasing, Inc. and Gulfport Energy Corp., as well as Tuesday’s big deal from Level 3 Communications, Inc.

Traders said the day’s dealings were unchanged to off around ¼ point.

Away from the new deals, Advanced Micro Devices Inc.’s bonds were on the slide after the computer-chip manufacturer announced what market participants considered to be disappointing quarterly results and guidance.

Statistical market performance indicators were lower across the board on Friday, after having been mixed on Thursday and higher all around on Wednesday.

They were mixed versus where they had finished out the previous Friday for the first time after three straight weeks of across the board Friday-to-Friday gains.

Air Medical prices mid-talk

Primary market news volume remained steady on Friday.

Two issuers raised a total of $670 million with single tranche dollar-denominated deals which came at the conclusions of roadshows.

Neither was upsized.

Executions were solid, with one pricing at the tight end of talk and the other pricing in the middle of talk.

Air Medical priced a $370 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 6 3/8%.

The yield printed in the middle of the 6¼% to 6½% yield talk.

Morgan Stanley, Jefferies LLC, KKR, Nomura and MCS Capital Markets were the joint bookrunners.

Proceeds will be used to help fund the leveraged buyout of Air Medical by KKR from Bain Capital and Brockway Moran & Partners.

The deal went extremely well, an informed source said, adding that investors like the credit and like KKR.

NewStar sells five-year notes

NewStar Financial priced a $300 million issue of five-year senior notes (/BB-/BB-) at par to yield 7¼%.

The yield printed at the tight end of the 7¼% to 7½% price talk. That talk, circulated on Thursday, came on top of initial guidance, according to a trader.

J.P. Morgan, BofA Merrill Lynch and Wells Fargo were the joint bookrunners.

The Boston-based internally managed specialized finance company plans to use the proceeds to repay its corporate credit facility agented by Fortress Credit Corp. and for general corporate purposes.

Optimas to start roadshow

Looking to the week ahead in the dollar-denominated market, Optimas OE Solutions, LLC and Optimas OE Solutions, Inc. plan to start a roadshow on Monday in New York for a $225 million offering of senior secured notes due 2021.

The deal is expected to price on Friday.

Morgan Stanley and SunTrust are the joint bookrunners.

Proceeds will be used to help fund American Industrial Partners’ acquisition of the OEM supply segment of Anixter, Inc.

$8 to $10 billion week seen

The week ahead should be a reasonably busy one, a syndicate official said, speaking on the telephone after Friday’s close.

The dollar-denominated market could see as much as $8 billion to $10 billion clear.

A hefty chunk of that amount will materialize in the form of drive-by deals, including “some good double-B credits,” the official said.

Noting that Friday was a rocky day in global equities, the source remarked that the debt markets appeared to look through Friday’s volatility.

With the 10-year Treasury yielding 1.87%, rates remain very low and therefore credit continues to look attractive to issuers.

Whether or not the volatility in equities carries over into the week ahead will no doubt be a mitigating force with respect to new issue activity in high yield, the official said.

“Monday should set the tone.”

Anglian prices tight

The European primary market also generated a hefty news volume on Friday.

Anglian Water priced a £210 million issue of non-callable eight-year guaranteed secured fixed-rate notes (Ba3//BB+) at par to yield 5%.

The yield printed at the tight end of the 5% to 5¼% yield talk.

Barclays, BNP Paribas, HSBC Bank plc, Lloyds Bank and Royal Bank of Scotland were the joint bookrunners for the debt refinancing deal.

Heidelberger at the wide end

Germany’s Heidelberger Druckmaschinen AG priced a €205 million issue of 8% seven-year senior notes (Caa1/CCC+) at 97.39 to yield 8½%.

The yield printed at the wide end of the 8¼% to 8½% yield talk.

Joint bookrunner Deutsche Bank will bill and deliver. BNP Paribas, Commerzbank, HSBC and LLBW are also joint bookrunners.

The Heidelberg, Germany-based manufacturer of offset printing presses plans to use the proceeds to fund the redemption of part of its 9¼% senior notes due 2018.

“Our achievements in improving profitability and stabilizing net debt at a low level allow us to further gradually optimize the company’s financing structure,” said Heidelberger chief financial officer Dirk Kaliebe in a news release. “With the recent issue of a convertible bond and the new high-yield bond we have secured our financing structure in the long term and have also optimized our maturity profile.”

Jerrold doubles tap size

Jerrold Holdings Ltd. priced an upsized £100 million add-on to its 9¾% senior secured notes due Sept. 15, 2018 (expected ratings /BB-/BB-) at 108.5 to yield 6.892%.

The debt refinancing deal was increased from £50 million.

The reoffer price came on top of price talk.

Global coordinator Credit Suisse will bill and deliver. Lloyds Bank and Royal Bank of Scotland are also global coordinators.

HSBC Bank plc, Jefferies and Natixis are joint bookrunners.

Elis plans roadshow

France-based Elis plans to start a European roadshow on Monday in London for an €800 million offering of senior notes due April 2022.

The roadshow is scheduled to wrap up on Tuesday and the deal is expected to price subsequently.

Joint global coordinator BNP Paribas will bill and deliver. Deutsche Bank is also a joint global coordinator.

Credit Agricole CIB, HSBC Bank plc and SG CIB are the joint bookrunners.

Proceeds from the notes, which are in the market via wholly owned subsidiary Novalis SAS, will be used to take out the company’s existing senior secured notes and senior subordinated notes, and for general corporate purposes.

NewStar shines in secondary

In the secondary arena, a trader opined that “it looks like everybody was looking into the new deals,” pretty much holding to the pattern seen throughout the week, when the Most Actives list was being dominated by new or recently-priced offerings.

One such credit was NewStar Financial’s 7¼% notes due 2020. The loan provider’s issue priced at par, but then was seen to have done well when it hit the aftermarket, where over $15 million of the new bonds traded.

One trader pegged the notes going home in a 101 to 101½ bid context, while a second saw them move up to 101¼ bid, 101¾ offered.

The day’s other deal, Lewisville, Texas-based air ambulance services provider Air Medical’s 6 3/8% notes due 2023, came to market later in the session and thus was not seen as much in the aftermarket as the NewStar Financial offering had been

A trader quoted the bonds between 100½ and 101 bid, up from their par issue price.

Thursday deals are active

There was brisk trading in the new deals which had priced on Thursday, notably Communications Sales & Leasing’s $1.51 billion two-part offering of notes due 2023.

“Both parts were very active,” said a trader, who quoted its 6% senior secured eight-year notes due in April 2023 trading in a 100¾ to 101 bid range on volume of more than $23 million, while its 8¼% senior unsecured 8.5-year notes due in October 2023 traded between 100 7/8 and 101½ bid, with over $45 million having changed hands, tops among regular junk bond issues.

The Little Rock, Ark.-based telecommunications industry real estate investment trust, which invests in fiber-optic and copper-wire networks and other telecom infrastructure, priced $400 million of the 6% notes and $1.11 billion of the 8 ¼% notes on Thursday, pricing the former at par and the latter at 97.055 to yield 8 ¾%. That regularly scheduled forward calendar offering priced after it had been downsized from an originally announced $1.65 billion.

Thursday’s other offering, Oklahoma City-based oil and natural gas exploration and production operator Gulfport Energy’s 6 5/8% notes due 2023, was also busily traded, with over $15 million having changed hands. But those bonds were lower on the day, with a market source quoting them at 102 1/8 bid, down 5/8 point on the day. Another trader saw them at 101½ bid, down ½ point on the day.

The company priced $350 million of the notes at par as a regularly scheduled offering after upsizing the deal from $300 million originally. They got as good as around the 103 bid area in initial secondary market trading on Thursday.

Going back a little further in the week, Level 3 Communications’ new 5 3/8% notes due 2025 were seen by a trader ending the session at 99 7/8 bid, down 5/16 point on the day, with over $15 million having changed hands, while its 5 1/8% notes due 2023 eased by 1/8 point to end at par, on volume of over $10 million.

The Broomfield, Colo.-based fiber-optic telecommunications network operator had priced $700 million of the eight-year notes and $800 million of the 10-years, both at par in a quick-to-market offering on Tuesday. The total deal size was upped to $1.5 billion from $1.2 billion originally.

AMD slides after numbers

Away from the new deals, Advanced Micro Devices’ bonds fell after the Sunnyvale, Calif.-based computer chip maker reported a larger-than-expected loss for the first quarter as sales of traditional personal computers dwindled.

A trader said the 7½% notes due 2022 dropped over 4 points to 90¾, while the 6¾% notes due 2019 lost 2½ points, closing at 95.

Another market source pegged the 7½% paper at 93 bid, down nearly 4 points.

For the first quarter, the company reported a loss of $180 million, or 23 cents per share – far wider than the $20 million of red ink, or 3 cents per share, the year before.

On an adjusted basis, the loss per share was 9 cents, almost double the nickel per share that analysts generally were looking for.

Revenue took a massive hit, falling over 26% to $1.03 billion. That figure also missed estimates of $1.05 billion.

Adding to investor angst, AMD warned that for the second quarter revenues would stay flat – or could fall by as much as 3% year over year.

Indicators turn lower

Overall, a trader said, “the market was flat to down maybe ¼ point across the board.

“There was not a ton of volume.”

Statistical indicators of junk market performance turned lower across the board on Friday, after having been mixed on Thursday, higher all around on Wednesday and mixed for the five sessions before that.

They meantime were mixed versus where they had finished out the previous Friday for the first time after three straight weeks before that of across the board Friday-to-Friday gains.

The KDP High Yield Daily Index lost 4 basis points Friday to end at 71.83, its first loss after five straight gains, 12 gains in the previous 13 sessions and 17 gains in the prior 19 sessions. It had gained 6 bps on Thursday.

Its yield edged upward by 1 bp to 5.13%, its first such widening after five straight sessions during which it had narrowed and nine tightenings in the previous 10 sessions. On Thursday, the yield had declined by 2 bps.

But while the index was down on the day, Friday’s levels compared favorably with the 71.65 index reading and 5.23% yield recorded last Friday, April 10.

The Markit Series 24 CDX North American High Yield Index saw its second consecutive loss on Friday, backtracking by 9/32 point to end at 107 3/16 bid, 107¼ offered. It was also the index’s fifth loss in the last six sessions and sixth such downturn in the last eight sessions. It had gone down by ¼ point on Thursday.

Friday’s finish was also down from 107 11/16 bid, 107 ¾ offered recorded last Friday.

The Merrill Lynch U.S. High Yield Master II Index lost 0.092% on Friday, its first loss after two consecutive gains, 13 gains in the previous 14 sessions and 18 gains in the previous 20 sessions. It had risen by 0.039% on Thursday.

Friday’s decline left its year-to-date return at 3.645%, down from Thursday’s 3.74% return, which was its second consecutive new peak level for the year so far.

For the week, the index was up by 0.027% – its fifth consecutive week-over-week gain and 12th such improvement so far this year, against just three weeks in which the index had declined.

It had been up by 0.764% last week, with a 3.41% year-to-date cumulative return at that point.

-Stephanie N. Rotondo contributed to this review

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