Morning Commentary: U.S. election results provide tailwind for junk; Mednax on tap

By Paul A. Harris

Portland, Ore., Nov. 7 – Junk was up ¼ point on Wednesday, buoyed by U.S. election results, which returned the U.S. House of Representatives to the Democratic Party and saw potentially problematic ballot initiatives rejected by voters in Colorado and California, sources said.

The defeat of Colorado Proposition 112, which would have increased oil and gas setbacks, gave a boost to energy bonds, a trader said.

Bonds of Great Western Petroleum, LLC, SRC Energy, Noble Energy, Inc., PDC Energy Inc., Bonanza Creek Energy, Inc., Whiting Petroleum Corp. and Anadarko Petroleum Corp. all made positive moves on the news, the trader said.

The Extraction Oil & Gas, Inc. 7 3/8% senior notes due May 2024 were up 7 points on the Colorado result, the source added.

The defeat of California Proposition 8, which would have placed a cap on dialysis profits, was expected to register a positive impact on credits, including DaVita, sources added.

Results from congressional elections, which returned the U.S. House of Representatives to the Democrats, initially looked like a win for high yield, an investor said.

In part it should slow the erosion of the Affordable Care Act, improving revenue outlooks for hospital companies, the source added.

The fact that Utah, Idaho and Nebraska approved Medicaid expansion ballot measures should also prove supportive to such credits, a trader said.

It can't hurt RegionalCare Hospital Partners Holdings, Inc. and LifePoint Health, Inc., which are now in the market with $1,575,000,000 of eight-year senior notes (Caa1/CCC+) on a roadshow expected to wrap up on Thursday, sources noted.

Initial guidance on the merger financing is in the 9¼% area.

The deal was heard to have attracted big orders at that level.

The Canada Pension Plan and the Qatar Sovereign Wealth Fund are heard to be in the deal with orders totaling $700 million, a trader said.

Mednax drive-by

In the primary market, the high-yield drive-through window reopened on Wednesday.

Mednax, Inc. plans to price a $750 million offering of 8.2-year senior notes in a quick-to-market trade.

Initial price talk is in the 6% area.

JPMorgan is leading the debt repayment deal.

Elsewhere, HC2 Holdings, Inc. remains in the market with a $535 million offering of five-year senior secured notes (Caa1/B-), a deal held in the market over the past weekend.

Word in the market is that the deal has been discussed with a 10% coupon, discounted by 3 to 5 points, to yield 11½% to 12%, the investor said, adding that covenant changes are expected.

The perception in the market is that the deal is coming from a highly motivated issuer and will price, a trader said.

The HC2 deal could price on Wednesday, a trader said.

In the meantime, the European primary market continued to generate news.

Intertrust Group BV talked its €500 million offering of seven-year senior notes (Ba2/BB+) to yield in the 3½% area.

The offer is set to price on Wednesday.

The deal is well oversubscribed and appears set to come at 3 3/8%, an investor said.

And InterContinental Hotels Group plc could price a €500 million offering of 8.5-year notes as early as Thursday.

The Denham, U.K.-based hospitality company was expected to wrap up a three-day roadshow on Wednesday, a source said, adding that the company met with over 50 accounts.

Barclays, Commerz and HSBC are leading the deal.

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