Downsized ClubCorp caps $4 billion primary week; recent bonds busy; Chesapeake slide continues

By Paul Deckelman and Paul A. Harris

New York, Dec. 4 – The high-yield primary market slowed down on Friday from the previous day’s activity pace, with syndicate sources seeing just one deal, worth $350 million, pricing during the session.

Club Corp Holdings, Inc., an operator of golf courses and other leisure-time facilities, came to market with a downsized $350 million of eight-year notes, which priced as a regularly scheduled forward calendar transaction.

That single pricing was in contrast to the $1.2 billion of new dollar-denominated, fully junk-rated paper which priced in three tranches during Thursday’s session, according to data compiled by Prospect News.

The day’s one new deal raised the week’s new-issuance total to just over $4 billion in nine tranches – well up from the $350 million which had gotten done in two tranches last week, ended Nov. 27, according to the data.

The week’s new issuance, in turn, raised the year-to-date total of new paper to $262.63 million in 413 tranches, although that was running 15% below the issuance pace seen at this time last year. Some $309.22 million of new junk had priced by this point on the calendar a year ago.

Traders saw active dealings in the new issues which had priced on Thursday – HCA Holdings Inc.,

Aramark Services Inc. and Group 1 Automotive, Inc., as well as Ball Corp.’s Wednesday megadeal.

Away from the new issues, Chesapeake Energy Corp.’s notes continued to retreat in the face of the company’s announcement of an exchange offer for a portion of its notes.

Statistical measures of junk market performance turned mixed on Friday, after having been lower across the board on Thursday. It was their second mixed session in the last three trading days.

The indicators were also mixed versus where they had finished out the previous week, their third straight mixed week after two consecutive higher weeks before that.

ClubCorp downsizes

ClubCorp priced Friday’s sole deal, a downsized $350 million issue of eight-year senior notes (B3/B-) that came at par to yield 8¼%.

The yield printed at the wide end of the 8% to 8¼% yield talk.

Initial guidance was in the high 7% yield context, market sources said.

The deal size was decreased from $400 million, as $50 million of proceeds was shifted to the concurrent term loan which was upsized to $675 million from $625 million.

Citigroup was the left bookrunner for the notes issue. J.P. Morgan, Wells Fargo, Deutsche Bank and Goldman Sachs were the joint bookrunners.

The company plans to use the proceeds from its sale of notes for general corporate purposes, including bank debt repayment, and for acquisitions.

Entertainment One inside talk

In the European primary market, Entertainment One Ltd. priced a £285 million issue of seven-year senior secured notes (B1/B+) at par to yield 6 7/8%.

The yield printed 12.5 basis points below the tight end of the 7% to 7¼% yield talk.

Joint bookrunner JPMorgan will bill and deliver. Barclays and BofA Merrill Lynch were also joint bookrunners.

The Toronto-based international entertainment group plans to use the proceeds to refinance debt and for general corporate purposes.

The week ahead

The Friday session closed with just one deal on the active calendar.

NGL Energy Partners LP is attempting to place $300 million of five-year senior notes (B2/BB-/BB-), a deal that launched at the end of November.

Formal talk has yet to be announced.

However the deal – emanating, as it does, from the battered energy sector – is facing headwinds, market sources say.

Pricing, which started in the 9% area, has been on the march, lately heard in the context of 11½% to 12%.

Apart from that deal, the primary ought to be active in the week ahead, sources say.

Look for $3 billion to $4 billion, perhaps – in line with the activity seen in the run-up to Thanksgiving – said a debt capital markets banker late Friday.

Junk rallied in line with equities on Friday on the back of a better-than-expected nonfarm payrolls data.

If, as is expected, a much-discussed hike in the Fed Funds rate materializes when the Fed’s Federal Open Market Committee convenes in mid-December, that hike may already be priced into the junk bond market, the source added.

ClubCorp not initially seen

In the secondary market, traders did not report an initial aftermarket dealings in ClubCorp Holdings’ new 8¼% notes due 2023, after the Dallas-based operator of golf courses and business clubs priced its downsized issue at par.

Thursday deals active

For a second consecutive session, the new deals that had come to market on Thursday were seen trading around actively.

The biggest purely junk offering of Thursday’s session – HCA’s add-on to its 5 7/8% notes due in February 2026 – was the busiest such issue in Junkbondland, with a market source seeing more than $50 million changing hands.

He quoted the notes at 101¼ bid, about where they had gone home on Thursday.

A second trader saw the bonds going out in a 100 7/8 bid, 101 1/8 context, while a third pegged the notes at 101¼ bid, 101 3/8 offered.

The Nashville-based hospital operator priced $500 million of the notes at 100.25 to yield 5.837 in a quick-to-market transaction.

Aramark’s new 5 1/8% notes due in January 2024 gained ½ point on the day, a trader said, to finish at 101¼ bid, with over $22 million trading.

A second trader also saw the bonds up ½ point, quoted them going out at 101 bid, 101½ bid.

The Philadelphia-based uniform supplier and food-service operator’s quickly shopped $400 million offering priced at par after having been upsized from an originally announced $300 million.

One of the traders saw Group 1 Automotive’s 5¼% notes due 2023 off ¼ point, trading at par ¼ bid, with over $12 million having changed hands.

The Houston-based auto dealership and collision-repair specialist drove by the market with $300 million of the notes, pricing them at par after upsizing them from $250 million originally.

Ball quiets down

A trader said there was considerably less activity Wednesday’s big deal from Ball Corp., which had traded actively in the aftermarket that same day and again on Thursday.

The Broomfield, Colo.-based food and beverage packaging manufacturer’s new 4 3/8% notes due 2020 traded in a 100 7/8 to 101 1/8 bid context, he said, but on volume of only $8 million.

Some $72 million of the notes had traded on Wednesday after the $1 billion issue priced at par in a quick-to-market transaction, with volume remaining a respectable $48 million on Thursday, at prices around those same levels

Quiet secondary market

A trader said, “We were just following the new deals from [Thursday].”

He characterized the overall market as “pretty quiet.

“The high-yield market definitely lagged the equity market – we were up maybe 1/8 or ¼ point.”

Chesapeake slide continues

Away from the new deals trader said that Chesapeake Energy’s bonds remained busy on Friday, with price levels sliding badly in the wake of its late-Wednesday announcement of a debt exchange at a discount to the existing bonds’ value.

A trader said that the Oklahoma City-based natural gas and oil company’s 7¼% notes due 2018 dropped by 5 points to 57¾ bid on volume of more than $22 million. They had also fallen 1½ points on Thursday on $31 million of volume.

Its 6½% notes due 2017 lost 6 points, closing at 67 bid, on volume of more than $11 million. On Thursday, they had been down a deuce, with over $31 million traded.

A trader noted that although Chesapeake’s offer is made to the holders of 10 issues, “the front end of the structure, the ’17s and ’18s, is really were it looks like the brunt of the exchange is going to happen, which makes sense – get the near maturity stuff out of the way, which will give them a little more runway.”

Indicators turn mixed

Statistical measures of junk market performance turned mixed on Friday, after having been lower across the board on Thursday. It was their second mixed session in the last three trading days.

The indicators were also mixed versus where they had finished out the previous week, their third straight mixed week after two consecutive higher weeks before that.

The KDP High Yield Daily Index slid by 19 basis points on Friday to close at 65.48, its second straight loss after three consecutive gains and its third loss in the last six sessions. On Thursday the index had plunged by 26 bps.

Its yield rose by 5 bps to finish at 6.97%, its second successive widening after two straight narrowings and two straight unchanged sessions. The yield had moved up 7 bps on Thursday.

Those levels compared unfavorably with the 65.66 index reading and 6.92% yield seen last Friday, Nov. 27.

The Markit Series 25 CDX North American High Yield Index rose by 3/16 point on Friday to end at 102 7/16 bid, 102 15/32 offered – its first gain after two straight losses and before that, four straight advances. It was the fifth gain in the last seven sessions. It had fallen by 3/8 point Thursday, on top of Wednesday’s downturn of 5/32 point.

On the week, the index was up from last Friday’s 102 1/32 bid, 102 3/32 offered.

The Merrill Lynch North American Master II High Yield index retreated by 0.24% on Friday, its second straight loss after three successive sessions on the upside. On Thursday, it had swooned by 0.363%.

For the week, the index lost 0.074% – its sixth straight weekly loss following three straight gains and its seventh losing week in the last 10. It had fallen by 0.536% last Friday.

The index’s year-to-date loss widened to 2.351% on Friday from 2.117% on Thursday.

However, those year-to-date losses were still well above the index’s worst 2015 cumulative setback of 3.069%, recorded on Oct. 2.

© 2015 Prospect News.
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