Pulte, Realogy deals drive by, new Pulte up; Intelsat rebounds more; funds gain $2.74 billion

By Paul Deckelman and Paul A. Harris

New York, Feb. 25 – The high-yield primary market saw some brisk drive-by action on Thursday, as two deals totaling $1.25 billion in three tranches were heard by syndicate sources to have gotten done.

The big deal of the day was homebuilder PulteGroup Inc.’s $1 billion two-part offering, split into five- and 10-year tranches.

Traders said that both moved up in extremely active aftermarket dealings.

Real estate services provider Realogy Group, LLC meantime brought a quickly shopped $250 million add-on to its existing 2021 notes. The existing notes were about unchanged on the day, trading above the add-on’s issue price.

The new-deal market continued to wait on insurance software provider Solera, LLC’s $2.03 billion equivalent eight-year issue of dollar- and euro-denominated notes. It had been expected to price on Thursday but now appears to be Friday’s business, with investor interest in the dollar bonds reported to be robust.

Away from the new issues, traders said that Intelsat SA’s bonds were higher across the board, as the communications satellite company’s paper continued to recover from the beating that it took the first two days of the week on less-than-stellar preliminary revenue numbers and guidance, as well as investor nervousness about the company’s having hired an adviser to assess financing and balance-sheet alternatives.

Another recently battered name – Whiting Petroleum Corp. – also turned northward on Thursday after having been beaten down earlier in the week on disappointing numbers.

Other gainers included Frontier Communications Corp. and Reynolds Group Holdings Ltd.

Statistical market performance measures turned higher across the board on Thursday after having been lower all around on Wednesday, their second higher session in the last four trading days.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – turned strongly positive this week as some $2.74 billion more came into those funds than left them, their biggest net inflow since last fall.

It was the second straight cash gain, following last week’s more modest inflow that snapped a two-week losing streak.

Pulte prices $1 billion

Thursday’s session saw a pair of deals price, with two issuers raising $1.25 billion in a combined three tranches.

All of Thursday’s business came quick to market.

Two tranches came at the tight end of talk and the third came on top of talk.

PulteGroup priced on Thursday $1 billion of non-callable senior notes (Ba1/BB+) in two tranches.

A $300 million tranche of five-year notes priced at par to yield 4¼%. The yield printed at the tight end of yield talk that had been set in the 4 3/8% area, and tighter than the 4 5/8% to 4 7/8% early guidance.

A $700 million tranche of 10-year notes priced par to yield 5½%. The 10-year notes came at the tight end of yield talk in the 5 5/8% area, and tighter than the 5 5/8% to 5 7/8% initial guidance.

The deal was transacted on the investment grade desk.

Citigroup, J.P. Morgan, SunTrust, BofA Merrill Lynch and Mizuho were the bookrunners.

Proceeds will be used to repay the company’s 6½% senior notes due May 1, 2016 and for general corporate purposes.

Realogy on reverse inquiry

Realogy Holdings Corp. priced a $250 million add-on to its 5 ¼% senior notes due Dec. 1, 2021 (B2/B) at 100.25 to yield 5.188%.

The reoffer price came on top of price talk.

The deal came to the market on the back of significant reverse inquiry and was likely rolled up when it was announced, a portfolio manager said.

J.P. Morgan and Barclays were joint bookrunners.

The Madison, N.J.-based residential real estate services provider plans to use the proceeds to temporarily reduce its revolving credit facility and for working capital purposes, prior to using the proceeds to retire a portion of its outstanding 3 3/8% senior notes at maturity in May 2016.

Solera demand at 12%

Elsewhere in the primary, the dollar-denominated tranche of Solera’s $2.03 billion equivalent offering of eight-year senior notes (Caa1/B-) appears to be shaping up well north of price talk.

The buzz in the market on Thursday had the deal coming in an 11½% to 12% yield context, up from official talk of 10¾% to 11%, sources said.

On Thursday afternoon one portfolio manager heard that there the book contained $3 billion of orders at 12%.

Pricing, which had been scheduled for Thursday, is now expected to take place on Friday or Monday, sources say.

The deal, via left bookrunner Goldman Sachs, is coming in tranches of dollar-denominated and euro-denominated notes, the sizes of which remain to be determined.

A euro-denominated tranche, talked to yield in the 25 basis points area inside of the yield of the dollar-denominated notes, has not been getting much traction, according to a London-based sell-side source.

Solera’s concurrent bank loan is done, the sellsider said.

The loan was oversubscribed, but it was not a blowout, although the order book did contain some triple-digit orders, the source added.

Bond investors, however, want to be better compensated for a deal they perceive to be highly leveraged and one coming amid difficult market conditions.

Western Digital in the wings

Watch for Western Digital Corp. to show up with an expected $5.1 billion of investment-grade secured notes and junk-rated unsecured notes, perhaps at the conclusion of the J.P. Morgan Global High Yield & Leveraged Finance Conference, set to run Feb. 29 to March 2, a portfolio manager said on Thursday.

Splits remain to be determined, the investor said.

The structure, involving both high-grade and speculative-grade notes, is somewhat like the bond financing undertaken last summer by Charter Communications Inc. in its bid to fund the acquisition of Time Warner Cable Inc., sources say. The Charter deal came structured as $15.5 billion of senior secured notes (Ba1/BBB-), which received an investment-grade style execution, and $2.5 billion of senior unsecured notes (B1/BB/BB), which priced on the high-yield desk.

Western Digital is acquiring SanDisk Corp. for $86.50 per share, or a total equity value of about $19 billion. In addition, debt at both companies is being refinanced.

The acquisition is expected to close in the third quarter of 2016.

Pulte paper pops

In the secondary arena, traders said that both tranches of the new PulteGroup megadeal wound up at or near the top of the day’s Most Actives list on Thursday following the pricing of the Atlanta-based homebuilder’s new issue.

One trader said that the 5½% notes due 2026 shot right to the top of the list, with over $55 million seen having traded.

He pegged those bonds at 101 bid, up from their par issue price earlier in the session.

The other half of the deal – Pulte’s 4¼% notes due 2021 – was also seen pretty busy, with over $34 million having changed hands.

He had those notes going home at 100½ bid, up from par.

At another desk, a trader saw the 4¼s doing better than that, locating them in a 101 to 101¼ bid context.

A trader saw the 5½s moving around between 100½ and 101½.

Realogy unchanged on add-on

Traders did not see any immediate aftermarket dealings in Realogy Group’s add-on to its 5¼% notes due 2021.

However, one market source did see trading in those existing bonds.

He saw them going home at 101½ bid – up from the 100.5 issue price for the add-on tranche, but essentially unchanged from where they had been at the close on Wednesday, before the new deal was announced. Another said they were off from their peak levels of earlier in the week around 101 7/8 bid. Volume was more than $18 million.

Intelsat improvement continues

For a second session in a row, Luxembourg-based Intelsat SA’s bonds were seen firming, in sharp contrast to their pronounced slide earlier in the week.

A trader said that as had been the case in the previous three sessions this week “they were at the top of the charts,” volume-wise.

He saw “a boatload” of the company’s Intelsat Jackson Holdings SA 7¼ % notes due 2020 traded, estimating the volume at over $35 million.

He saw them at 67½ bid, 68 offered, calling that up 1½ points from Wednesday’s finish.

The company’s Intelsat Luxembourg SA 7¾% notes due 2021 were “up a couple of points” at 25¼ bid, with over $22 million traded.

Another trader said those bonds had improved by over 3½ points, seeing them finishing at 26 bid.

“It’s nice when things stop going down,” he said, noting the sharp drop in the bonds at the beginning of the week.

“Intelsat has been all one way or the other this week,” a second trader said.

For instance, the 7¼% notes due 2020 had plummeted some 9¼ points in heavy trading on Monday and fell another 8½ points on Tuesday, then gained ¾ point on Wednesday.

The 7¾s of 2021 were 10¼ point losers on Monday, dropped another 4 points on Tuesday and were down another 1 point Wednesday before finally braking their slide on Thursday.

Whiting turns the corner

After three consecutive sessions on the downside, “Whiting [Petroleum] was pretty active and was feeling better,” one of the traders said.

He quoted the Denver-based oil and natural gas exploration and production company’s 5% notes due 2019 “up a couple of points” at 42¾ bid, on volume of more than $30 million.

While those bonds had gained ½ point on Monday, they had nosedived by 5½ points on Tuesday and lost another 1½ points on Wednesday.

He saw the 5¾% notes due 2021 at 42¼ bid, calling that 3 points better on the day, on volume north of $25 million.

And the company’s 6¼ % notes due 2023 were ending at 21½ bid, up 3 points, with over $16 million having changed hands.

Reynolds up on numbers

Elsewhere a trader said that “Reynolds [Group Holdings] really did something,” quoting its 8½% notes due 2021 up 4½ points during Thursday’s session at 97 bid.

Those bonds were up more than 5¼ points on the day, another trader said, seeing them end the session at 97 7/8 bid, with over $30 million traded.

Reynolds’ 5¾% notes due 2020 were up by 7/8 point on Thursday to 102¾ bid, with over $20 million traded.

Another market source said that its 9% notes due 2019 were about unchanged at par, with over $16 million of turnover.

Reynolds reported fourth-quarter and full-year earnings results.

While revenues for the year slipped to $11.18 billion from $11.67 billion for fiscal 2014, gross profit rose to $2.2 billion from $2.02 billion a year earlier.

Adjusted EBITDA from continuing operations rose to $2.02 billion from $1.94 billion a year earlier.

Frontier firms

Another gainer of note on the day, a trader said, was Frontier Communications Corp., though there was no fresh news out to explain the firming trend.

The Stamford, Conn.-based wireline telecommunications company’s 11% were ½ point better at 98½ bid, with over $39 million traded.

Its 10½% notes due 2022 were 1½ points better at 97¾ bid, with over $18 million traded.

Frontier had reported earnings earlier in the week.

Indicators turn higher

One of the traders, looking around at the broad-based rally on Thursday, opined that “cash has been coming into the market. High yield generally has been pretty much well bid for.”

Statistical market performance measures turned higher across the board on Thursday after having been lower on Wednesday, their second higher session in the last four trading days.

The KDP High Yield Daily Index jumped by 33 basis points on Thursday to finish at 62.75, in contrast to its 9 bps fall on Wednesday. It was the index’s second gain in the last four sessions.

Its yield came in by 7 bps, ending at 7.36%, its first narrowing after four straight sessions in which the yield widened out, including Tuesday and Wednesday, when it rose by 1 bp each time. It had tightened in the previous four sessions before that.

The Markit Series 25 CDX North American High Yield Index gained 7/16 point Thursday to close at 98 5/16 bid, 98 11/32 offered. It was the index’s first gain after two consecutive losses, including Wednesday’s 7/32 decline, and its second advance in the last four sessions.

The Merrill Lynch North American High Yield Master II Index got back in the black on Thursday with a 0.565% rise, more than offsetting Wednesday’s 0.265% downturn. Thursday was the index’s second rise in three sessions.

The gain cut the index’s year-to-date deficit to 2.38% from 2.928% on Wednesday The year-to-date red ink total also remains well short of the 5.142% loss seen on Feb. 11, the worst cumulative deficit for the year so far and the index’s worst level since the 30% plunge recorded at the end of 2008.

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