Charter, Vizient upsize, price, Acadia too, trades busily; Freeport up more; funds off $41 million

By Paul Deckelman and Paul A. Harris

New York, Feb. 4 – The high-yield primary sphere saw its busiest day of the year so far – in fact, its most active session since last November – as a trio of issuers brought $2.69 billion of new U.S. dollar-denominated, fully junk-rated paper to market in three tranches.

The big deal of the day was an upsized $1.7 billion eight-year drive-by issue from cable operator Charter Communications, Inc. In subsequent trading the bonds initially dipped a little but ended slightly above their issue price.

The day’s other two deals both came out of the healthcare sector. Vizient, Inc., a network of not-for-profit healthcare organizations, priced an upsized $600 million of eight-year notes in a regularly scheduled forward calendar offering. The notes were quoted up a point or so.

Acadia Healthcare Co., Inc., a provider of inpatient behavior health services, did $500 million of eight-year notes, also coming off the forward calendar. The new notes were among the most heavily traded in Junkbondland; they initially jumped out to a big gain over their issue price but had given back at least half of that by the time trading wound down.

The day’s tally of new paper topped the $2.4 billion of junk bonds that Centene Corp. priced in two tranches last Thursday, the previous biggest issuance day of the new year so far, according to a Prospect News analysis of new-issue data. In fact, the session was the most productive since last Nov. 19, when $2.89 billion came to market in six tranches, the analysis indicated.

Away from the new issues, Freeport McMoRan Inc. paper continued its upside ride, posting its fifth straight session of sizable gains following the metals mining and oil and gas company’s ratings downgrade; a combination of higher copper prices and junk investors stepping in to buy the now-split-rated bonds were seen driving the gains.

Statistical measures of junk market performance were mixed for a second consecutive session on Thursday; they had turned mixed on Wednesday after having been lower across the board on Monday and Tuesday. Thursday was their third mixed session in the last seven trading days.

Another numerical measure – the flow of investor cash into or out of high-yield mutual funds and exchange-traded funds, which is considered a reliable barometer of overall junk market liquidity trends – resumed its mostly negative pattern for the year so far, posting a small outflow of roughly $41 million in the latest week – their fourth such downturn in the five weeks since the start of the new year.

Charter upsizes

Thursday’s primary market session was the biggest of the year thus far, both in terms of dollar amount, $2.69 billion, and in terms of deal volume: three tranches.

Thursday’s executions were a mixed bag.

One of the three deals came quick to market.

Two were upsized.

One priced at the tight end of talk. One came in the middle. And one came at the wide end of talk.

Charter Communications was Thursday’s big issuer, bringing a drive-by deal.

Charter priced an upsized $1.7 billion issue of eight-year senior notes (expected B1/confirmed BB-/confirmed BB-) at par to yield 5 7/8%.

The deal size was increased from $1.5 billion.

The yield printed at the wide end of the 5¾% to 5 7/8% yield talk.

Deutsche Bank was the left bookrunner. BofA Merrill Lynch, Credit Suisse, Goldman Sachs, UBS, Citigroup and Wells Fargo were the joint bookrunners.

The Stamford, Conn.-based cable operator plans to use the proceeds to repurchase or redeem CCO Holdings’ 7% senior notes due 2019 and 7 3/8% senior notes due 2020, and for general corporate purposes including, possibly funding a portion of the incremental cash proceeds to Time Warner Cable, Inc. stockholders as part of Charter’s previously announced transaction with Time Warner Cable if shareholders elect $115 per share in cash rather than $100 per share. Any redemption or repurchase of notes would not take place until after the cash elections were determined.

Vizient upsizes

Vizient priced an upsized $600 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 10 3/8%.

The yield printed in the middle of the 10¼% to 10½% yield talk.

The deal size was increased from $500 million after having been previously increased from $400 million earlier in the week.

With the upsizing of the note issue, the concurrent term loan was successively downsized to $1,275,000,000 from $1,375,000,000 after having previously been downsized from $1,475,000,000.

Barclays was the sole bookrunner for the acquisition financing.

Acadia prices tight

Acadia Healthcare priced a $390 million issue of eight-year senior notes (B3/B) at par to yield 6½%.

The yield printed at the tight end of the 6½% to 6¾% yield talk.

That talk had tightened through the week as the deal was roadshowing, sources said.

Initial guidance had the bonds pricing in a low 7% yield context, which gave way later in the week to talk in the high 6% context.

Shortly before official talk surfaced on Thursday discussions had ratcheted down to 6 5/8%, according to a trader, who added that the $390 million acquisition financing deal was believed to be playing to between $3 billion and $4 billion of orders.

BofA Merrill Lynch was the left bookrunner. Jefferies was the joint bookrunner.

Manitowoc Food sets talk

Looking to the Friday session, Manitowoc Food Service, Inc. talked its $425 million offering of eight-year senior notes (Caa1/B) to yield 9½% to 9¾%.

Books close at 10:30 a.m. ET on Friday and the deal is set to price later on Friday.

Goldman Sachs is the left bookrunner. J.P. Morgan, HSBC and Citigroup are joint bookrunners.

WFS talks dual-tranche deal

WFS Global Holding SAS set price talk and timing in its €240 million two-part offering of high-yield notes.

The secured tranche, a €90 million add-on to its 9½% senior secured notes due July 15, 2022 (B2/B), is talked at 100 to 100.5. The notes, which become callable after July 15, 2018 at 104.75, will be an addition to the €225 million that were priced at par on June 19, 2015.

The unsecured tranche, €150 million offering of new seven-year senior notes (Caa1/CCC+), is talked to price at a to-be-determined discount and to yield in the 13% area. The unsecured seven-year notes come with three years of call protection.

Books close at 5:30 a.m. ET on Friday and the deal is set to price subsequently.

Global coordinator BofA Merrill Lynch will bill and deliver. ING is the joint bookrunner.

There are also some question marks with respect to Friday’s primary market session.

At least three deals were expected to wrap up roadshows by Friday’s close.

Manitowoc Cranes has been marketing a $250 million secured notes offer. Yield discussions on that deal have pushed into the low-to-mid teens, sources say.

Endurance International Group Holdings Inc. is selling $350 million of eight-year senior notes. That deal is facing headwinds, according to market sources.

And Italian ferry boat operator Moby SpA has been marketing €300 million of seven-year secured notes. That roadshow was scheduled to wrap up on Thursday.

Acadia trades actively

In the secondary market, Acadia Healthcare’s new 6½% notes due 2024 shot to the top of the day’s Most Actives list, racking up the highest volume among the purely junk-rated credits, with over $89 million changing hands.

A trader saw the Franklin, Tenn.-based behavioral healthcare services provider’s deal trading around a 100½ to 101 bid context, up a little from their par issue price – but he said that before that “it did trade up right out of the gate” only to surrender some of those early gains.

Acadia “opened high,” a second trader agreed, seeing the first prints in a 101¼ to 102¼ context.

However, “after that, it just came down,” settling into a 100¼ to 100¾ range by the end of the day.

A market source at another desk meantime pegged the bonds around 100¾ at the end of the day.

Charter, Vizient, less active

Trading in the new Acadia paper was helped by the fact that it was the first of the day’s three deals to price, giving investors an ample window of opportunity.

The day’s other two deals hit the tape later in the session, and traders did not see terribly much initial aftermarket activity in those credits.

A trader quoted Vizient’s 10 3/8% notes due 2024 at 101 to 102. That was up from the par level at which the Irving, Texas-based network of not-for-profit healthcare organizations priced its upsized forward calendar offering.

But two other traders had not seen any activity in the paper by late in the afternoon.

Charter Communications’ new CCO Holdings, LLC/CCO Holdings Capital Corp. 5 7/8% notes due were trading between 99 bid and par, after having priced at par and initially trading around that issue price.

A second trader also initially was quoting the cabler’s megadeal between 99 and par – but later said that the bonds had firmed from there to a par to 100¾ bid context.

Yet another market source located the bonds late in the day in a narrower 100 1/8 to 100 3/8 bid neighborhood.

Charter’s existing 5¾% notes due 2026 meanwhile were seen by a market source as having slipped by ¼ point on very active dealings of over $41 million, going home at 97¾ bid.

But its CCO Holdings 5¼% notes due 2022 gained ¼ point on the day to 100¾ bid.

Manitowoc moves up

With Manitowoc Co., Inc.’s food service equipment manufacturing unit set to price its $425 million eight-year deal on Friday – and the parent crane and industrial lifting equipment maker meanwhile shopping its own separate offering of $250 million eight-year secured notes around – the company’s existing paper was seen trading at firmer levels on Thursday.

A trader saw its Manitowoc, Inc. 5 7/8% notes due 2022 pushing up 1½ points on the day to 106½ bid, with over $18 million having moved around.

The Manitowoc, Wis.-based company’s 8½% notes due 2020 firmed by ¼ point to 104 bid on volume of around $7 million.

New KCI bonds little traded

A market source said that the new Kinetic Concepts Inc./KCI USA Inc. 7 7/8% first-lien secured notes due 2021 firmed slightly, adding on 1/8 point to end the day at 102 5/8 bid.

However, he said that there was just a small handful of large-sized trades in the issue – a far cry from Wednesday, when that deal had been the most actively traded junk credit, knocking down more than $87 million, including at least $71 million in round-lot trades alone.

KCI, a San Antonio, Texas-based provider of wound-care therapies, priced $400 million of those notes at par late in the session on Tuesday as a regularly scheduled transaction off the forward calendar.

Despite the relative lateness of the hour at which it emerged, the deal still managed to see some aftermarket action on Tuesday, with over $13 million traded in their initial dealings.

A market source pegged the new bonds at 101¾ bid, well up from their par issue price.

On Wednesday, they added to those gains in heavy-volume activity, pushing up to 102½ bid by the end of the session.

Freeport firms again

For a fifth session in a row, Freeport McMoRan’s bonds “were up 4 to 5 points,” one of the traders said, noting that the Phoenix-based metals mining and oil and natural gas exploration and production company’s New York Stock Exchange-traded shares jumped by 87 cents on the day, or 17.94%, to end at $5.72. Equity volume was 116 million shares, more than twice the norm.

Back among the bonds, the trader said that “the whole structure was up.”

One possible explanation for the sustained rise in the company’s paper – which had actually declined sharply one week ago, when Moody’s Investors Service downgraded the company’s senior unsecured rating by a whopping four notches to a pretty junky Ba from an investment-grade Baa3 before, was the idea that there was a rotation going on – investment-grade accounts barred by their own regulations from owning junk or even split-rated (B1/BBB-/BBB-) paper massively selling out of it last Thursday and high-yield accounts stepping in to buy the paper after that.

“I don’t know if it’s because the investment-grade guys are done and now you’ve just got high-yield guys buying it, kind of driving it,” or whether other factors were at play.

Another possibility was that the bonds were on an upside ride with the stock because of a steep rise in copper prices – the company is one of the world’s largest producers of the reddish industrial metal.

On Thursday, copper prices jumped almost 2% on the session to $2.13 per pound, their highest level so far this year. Copper prices are up by 9.8% since mid-January, helped by possible signs of an economic recovery in China, whose burgeoning economy is the world’s largest consumer of copper and other industrial commodities.

Freeport McMoRan’s 3.55% notes due 2022 and its 5.45% long bonds due 2043 were both seen up by 4 points on the session, closing at 49¼ bid and 45 bid, respectively. Volume was over $107 million for the ’22 notes, and over $92 million for the 2043 bonds.

Its 6½% notes due 2020 gained nearly 3 points to end at 56½ bid, with almost $30 million traded.

Indicators stay mixed

A trader said that overall, the junk market Thursday was “kind of unched, [unchanged] with some names up a little or down a little.”

He saw no real overriding trend.

Statistical measures of junk market performance were mixed for a second consecutive session on Thursday; they had turned mixed on Wednesday after having been lower across the board on Monday and Tuesday. Thursday was their third mixed session in the last seven trading days.

The KDP High Yield Daily Index retreated by 11 basis points on Thursday, closing at 62.54. It was the index’s fourth straight decline in a row after seven consecutive gains, which, in turn, had followed a seven-session losing streak before that. On Wednesday, the index surrendered 17 bps, on top of Tuesday’s 29 bps slide.

However, its yield – which would normally move inversely to the index reading, rising as the index fell and vice versa – bucked the usual trend on Thursday, coming in by 4 bps to end at 7.32%. It was the yield’s first narrowing after three consecutive widenings, which in turn had followed seven straight sessions before that during which the yield had come in. On Wednesday, the yield had risen by 3 bps, on top of Tuesday’s 12 bps jump.

The Markit Series 25 CDX North American High Yield Index lost ¼ point on Thursday, finishing at 98 13/16 bid, 98 27/32 offered. The loss was a reversal from Wednesday, when the index had gained ½ point. It was the third setback in the last four sessions.

But the Merrill Lynch North American High Yield Master II Index kept the session from being a total loss, rising by 0.113% on Thursday – its first gain after three consecutive losses, which in turn had followed seven straight advances. On Wednesday, the index had been off by 0.225%.

Thursday’s improvement cut the index’s year-to-date loss to 2.373% from 2.483% on Wednesday. The cumulative loss remains well down from the index’s worst red-ink level for the year so far, the 4.095% deficit seen on Jan. 20.

Fund flows turn negative

The flow 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 – resumed its mostly negative pattern for the year so far, posting a small outflow in the latest week, the fourth downturn in the five weeks since the start of the new year.

Some $40. 897 million more left those weekly-reporting-only funds during the reporting week ended Wednesday. Last week, the funds saw an $883.3 million net cash addition, their first up week so far in the new year, following three straight weeks of sizable outflows before that (see related story elsewhere in this issue).

© 2015 Prospect News.
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