Bausch Health, Century Communities, Charter price; Virgin Media lags; funds lose $212 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 9 – With winds of trade war between China and the United States whipping up volatility in the global capital markets, the high-yield new issue market continued to operate at a screaming pace on Thursday, with most of the action appearing at the drive-through window.

Bausch Health Cos Inc. priced $1.5 billion of senior notes (B3/B-/B) in two tranches on Thursday.

Charter Communications, Inc. priced a downsized $750 million issue of 10-year senior notes (BB/BB+) at par to yield 5 3/8%.

Century Communities, Inc. priced an upsized $500 million issue of eight-year senior notes (B2/B+) at par to yield 6¾%.

WillScot Corp. priced a $190 million add-on to the Williams Scotsman International, Inc. 6 7/8% senior secured notes due Aug. 15, 2023 (expected ratings B3/B) at 100.25 to yield 6.783%.

Griffon Corp. had been expected to price a $500 million offering of eight-year senior notes (expected ratings B2/B+) before the Thursday close. However, no terms were available as of press time.

In the European market, United Group BV is marketing an €856 million two-part offering of high-yield notes with an investor roadshow set to wrap up on Friday.

Meanwhile, the secondary space was again soft on Thursday with weak earnings reports and weak guidance weighing on the tape, sources said.

However, several of the new deals continued to perform well in the secondary space.

Talen Energy Supply LLC’s newly priced 7¼% senior notes due 2027 (BB) continued to make gains in the secondary space after a strong start after breaking for trade.

MGM China Holdings Ltd.’s newly priced tranches (Ba3/BB-) were also trading at a large premium to their issue price.

However, DCP Midstream Operating, LP’s 5 1/8% senior notes due 2029 were weakening in active trading in the secondary space.

And Virgin Media Ltd.’s 5½% senior notes due 2029 were, at times, lagging their issue price.

Outside of the new paper, Tenneco Inc.’s junk bonds were trading down and pulling other names in the automotive parts sector with it.

Meanwhile, the heavy influx of cash into the high-yield market was beginning to show signs of waning with another outflow recorded.

High-yield mutual funds and exchange-traded funds saw an outflow of $212 million for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

Funds saw a modest inflow of $21 million for the week ended May 1.

The modest inflow was preceded by an outflow of $521 million for the week ended April 24 – the first outflow in seven weeks.

Big Thursday

With the equity markets roiling on the trade war headlines, the high-yield primary market had already turned out in excess of $11 billion of issuance on the week by the Thursday close.

The May 6 week is on track to be the biggest in the new issue market in nearly 10 months.

Pressed for an explanation of why dealers herded their borrowing clients in front of the institutions while the stock markets are flashing risk aversion, a debt capital markets banker said that while volatility might ease in the weeks to come, it also might not.

“I think you saw people front-running some rate-risk,” the banker said, adding that issuers came this week because the technicals of the market have been favorable, or better, and the accounts were believed to have cash to put to work.

Bausch prices $1.5 billion

Bausch Health priced $1.5 billion of senior notes (B3/B-/B) in two tranches on Thursday.

The drive-by debt refinancing deal featured $750 million of 8.6-year notes which priced at par to yield 7%.

The yield printed at the low end of yield talk in the 7 1/8% area and tight to initial guidance in the low 7% area.

The long tranche featured a $750 million amount of 10-year notes which priced at par to yield 7¼%.

The yield printed at the tight end of yield talk 7 3/8% area, in line with initial guidance that had the 10-year notes coming 25 basis points behind the 8.6-year notes.

The syndicate of bookrunners had joint bookrunner Goldman Sachs & Co. LLC on the left for the 8.6-year notes, while Morgan Stanley & Co. LLC was on the left for the 10-year notes.

Charter downsizes

Charter Communications priced a downsized $750 million issue of 10-year senior notes (BB/BB+) at par to yield 5 3/8%.

The issue size was decreased from $1 billion.

The yield printed in the middle of guidance in the 5 3/8% area.

Deutsche Bank Securities Inc. managed the sale.

The Stamford, Conn.-based broadband communications company plans to use the proceeds for general corporate purposes, including the repayment of certain debt and to fund potential buybacks of Charter's class A common stock or common units of Charter Communications Holdings, LLC.

Century Communities upsizes

Century Communities priced an upsized $500 million issue of eight-year senior notes (B2/B+) at par to yield 6¾%.

The issue size increased from $400 million.

The yield printed at the wide end of the 6½% to 6¾% yield talk, which was also the initial price talk.

J.P. Morgan Securities LLC was the lead.

The Greenwood, Colo.-based homebuilder plans to use the proceeds to fund the tender for and/or redemption of any and all of its $385 million 6 7/8% senior notes due 2022, with any remaining proceeds to be used for general corporate purposes.

WillScot taps 6 7/8% notes

WillScot Corp. priced a $190 million add-on to the Williams Scotsman International, Inc. 6 7/8% senior secured notes due Aug. 15, 2023 (expected ratings B3/B) at 100.25 to yield 6.783%.

The issue price came in the middle of the par to par ½ price talk.

Deutsche Bank had the lead.

The Baltimore-based modular space and storage space company plans to use the proceeds to pay down its senior secured revolving credit facility.

Griffon takes shape

Meanwhile, Griffon Corp. unveiled a $500 million offering of eight-year senior notes (expected ratings B2/B+) that had been expected to price before the Thursday close.

Initial talk had the deal shaping up with a yield in the 6 3/8% area.

No terms were available at press time.

United Group two-part deal

Amsterdam-based United Group BV is in the market with an €856 million two-part offering of high-yield notes.

An investor roadshow is set to wrap up on Friday.

The bridge loan refinancing deal from the EM-focused TMT features six-year senior secured floating-rate notes (B) with one year of call protection and 6.5-year senior unsecured pay-if-you-can notes (B-) with two years of call protection.

Physical bookrunner and global coordinator JPMorgan will bill and deliver. Credit Suisse, KKR and Morgan Stanley are global coordinators and joint bookrunners. Credit Agricole CIB is a joint bookrunner.

United Group operates mainly in Serbia, Slovenia, Bosnia and Herzegovina, and Montenegro.

Talen Energy gains

Talen Energy’s 7¼% senior notes due 2027 were continuing to post gains in the secondary space after a strong initial performance.

The notes were off to a strong start after breaking for trade on Wednesday and were up 1 5/8 point out of the gate, sources said.

The notes were up another 3/8 point on Thursday to trade just shy of 102, a market source said.

More than $57 million of the bonds were on the tape by the late afternoon.

Talen Energy priced an upsized $750 million issue of the 7¼% notes at par on Wednesday.

The deal, which was upsized from $500 million, priced at the low end of talk for a yield of 7¼% to 7½%.

MGM China trades up

MGM China’s recently priced tranches were also putting in a strong performance in the aftermarket.

The 5 3/8% senior notes due 2024 were trading between par ¾ and 101, sources said.

The 5 7/8% senior notes due 2026 were changing hands between par 7/8 and 101¼.

Despite the large issue, the tranches were relatively quiet, a market source said.

MGM China priced a $750 million issue of the 5 3/8% notes and a $750 million issue of the 5 7/8% notes at par on Wednesday.

The overall size of the deal increased to $1.5 billion from $1.25 billion.

While the notes were performing well, some sources chose to pass on the deal, citing a lack of value in relation to its peers.

DCP Midstream weakens

DCP Midstream’s 5 1/8% senior notes due 2029 were coming in slightly in high-volume activity on Thursday.

After trading as high as par ½ out of the gate, the notes were largely changing hands at par ¼ on Thursday, sources said.

With more than $60 million of the bonds on the tape by the late afternoon, the notes were among the most actively traded in the secondary space.

DCP Midstream priced an upsized $600 million issue of the 5 1/8% notes at par on Wednesday.

The issue size was increased from $500 million.

The yield printed 12.5 basis points tighter than the 5¼% to 5 3/8% price talk. Initial guidance was in the 5 3/8% area.

Virgin Media lags

Of the new paper to hit the aftermarket in recent sessions, Virgin Media’s 5½% senior notes due 2029 were among the underperformers.

The notes were seen at 99 7/8 bid, par 1/8 offered and were firmly stuck in that range, a market source said.

Some sources questioned the valuation of the company and pointed to the longer duration of the notes as a drawback.

Virgin Media priced $825 million of the 5½% notes at par on Wednesday. The yield printed in the middle of yield talk in the 5½% area.

Tenneco down

Tenneco’s capital structure was under pressure after releasing disappointing earnings and announcing a delay in a planned spinoff of one of the company’s units, sources said.

The 5% senior notes due 2026 dropped 4 points in intraday trading but pared its losses as the session progressed and was down about 3 points in the late afternoon, sources said.

The 5% notes were changing hands around 78 with more than $12 million of the bonds on the tape.

Tenneco reported earnings of 52 cents per share which missed estimates for 94 cents per share.

Full-year guidance was also lowered to between $17.7 billion and $18.1 billion from its previous guidance of between $18.2 billion and $18.4 billion.

The bonds were also trading down on news the planned spinoff of the company’s powertrains parts business from its aftermarket parts business would be delayed until mid-2020.

The drop in Tenneco’s junk bonds dragged down other names in the auto parts sector, a market source said.

Delphi Technologies plc’s senior notes were also down about 1 point on Thursday, a source said.

Adient US LLC’s recently priced 7% senior notes due 2026 were also losing ground with the notes down to par ¾ bid, 101¼ offered, sources said.

The notes were 101½ bid, 102 on Wednesday.

Indexes drop

Indexes continued their decline on Thursday.

The KDP High Yield Daily index dropped 12 bps to close Thursday at 70.14 with the yield now 5.89%.

The index was down 5 bps on Wednesday, slid 2 bps on Tuesday and was down 6 bps on Monday.

The ICE BofAML US High Yield index dropped 29.6 bps on Thursday with the year-to-date return now 8.337%.

The index slid 2 bps on Wednesday, dropped 11 bps on Tuesday and was down 13 bps on Monday.

The CDX High Yield 30 index dropped 30 bps to close Thursday at 106.58. The index was down 14 bps on Wednesday, plummeted 42 bps on Tuesday and dropped 24 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.