Mednax prices; HC2, LifePoint on tap; Dean Foods, Coty under pressure post-earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 7 – The domestic primary market saw one cross-over deal price with two straight junk deals on tap.

Mednax, Inc. priced a downsized $500 million issue of split-rated 8.2-year senior notes (Ba2/BBB-) at par to yield 6¼%.

HC2 Holdings, Inc. set official price talk for its $535 million offering of five-year senior secured notes (Caa1/B-) with pricing expected on Thursday.

RegionalCare Hospital Partners Holdings, Inc. and LifePoint Health, Inc. are set to wrap up their roadshow for a $1,575,000,000 offering of eight-year senior notes (Caa1/CCC+) on Thursday.

The European primary market also saw one deal price with two more on the forward calendar.

Intertrust Group BV priced a €500 million issue of seven-year senior notes (Ba2/BB+) at par to yield 3 3/8%.

Verisure and International Design Group SpA are in the market with euro-denominated offerings.

Meanwhile, trading activity in the secondary space continued to focus on earnings reports with several names under pressure in high-volume activity.

Dean Foods Co.’s outstanding tranche of 6½% senior notes due 2023 was among the most actively traded issues of the day with the notes under pressure after an earnings miss.

Coty Inc.’s 6½% senior notes due 2026 also dropped after the company missed revenue projections due to supply chain disruptions.

Endo International plc’s 6% senior notes due 2023 were trading down in high-volume activity in the run up to its third-quarter earnings.

Outside of earnings-related news, political tailwinds benefited several sectors after the U.S. midterm elections, with the energy sector boosted by the defeat of state ballot referendum Colorado Proposition 112.

Extraction Oil & Gas, Inc.’s7 3/8% senior notes due May 2024 skyrocketed on the results.

Mednax downsizes

Thursday’s primary session saw a drive-by crossover deal clear the market.

Mednax priced a downsized $500 million issue of split-rated 8.2-year senior notes (Ba2/BBB-) at par to yield 6¼%.

The deal was decreased from an initially planned amount of $750 million.

The yield printed on top of yield talk but wide of initial guidance that was set in the 6% area.

JP Morgan, Barclays and BofA Merrill Lynch were the joint bookrunners for the debt repayment deal.

HC2 on Thursday

HC2 Holdings talked its $535 million offering of five-year senior secured notes (Caa1/B-) with an 11½% coupon at a reoffer price of 98.75 to yield 12%.

Books were scheduled to close late Wednesday afternoon and the deal, via Jefferies, is set to price Thursday.

HC2 announced the deal on Oct. 22 and it had been expected to price late in the week of Oct. 29 but was carried over as volatility in capital markets stifled new deal activity.

The New York-based diversified holding company plans to use the proceeds to refinance its 11% secured notes due 2019.

LifePoint on tap

The active forward calendar featured just one other dollar-denominated deal at Wednesday’s close.

RegionalCare Hospital Partners and LifePoint Health are in the market with a $1,575,000,000 offering of eight-year senior notes (Caa1/CCC+).

The roadshow is expected to wrap up on Thursday with pricing to follow.

The deal should benefit from the U.S. midterm election results, according to market sources.

With the Democratic Party taking a majority in the U.S. House of Representatives, Republican initiatives to erode the Affordable Care Act are expected to slow, improving revenue outlooks for hospital companies, sources said.

Also, the fact that Utah, Idaho and Nebraska – all red states – approved Medicaid expansion ballot measures should also prove supportive to such credits, a trader said.

Initial guidance on the RegionalCare/LifePoint Health merger financing deal is in the 9¼% area.

It was heard to have attracted big orders at that level, sources said.

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.

Intertrust prices tight

In the European new issue market, Intertrust Group priced €500 million of seven-year senior notes (Ba2/BB+) at par to yield 3 3/8%.

The yield printed at the tight end of yield talk announced in the 3½% area.

The deal was heard to be well oversubscribed, an investor said.

Joint global coordinator Deutsche Bank will bill and deliver. Goldman Sachs International was also a joint global coordinator. ABN Amro, HSBC and ING are joint bookrunners.

The Netherlands-based financial services company plans to use the proceeds, together with cash on hand and new bank debt, to repay existing bank debt.

Two other euro-denominated deals remain on the calendar as business expected to clear ahead of the coming weekend.

Verisure is in the market with €1,012,000,000 of debt coming in the form of a bank loan and high-yield notes, which it is bringing in order to refinance debt and fund a dividend.

International Design Group started a roadshow on Monday for a €720 million two-part offering of seven-year senior secured notes backing the buyout of the company.

Dean Foods in focus

Dean Foods’ 6½% senior notes due 2023 were among the most actively traded issues in the secondary space on Wednesday with the notes seeing a steep decline after an earnings miss.

The 6½% notes traded down 3¾ point in intraday trading, going as low as 87 early in the session.

The notes stood poised to close the day down 2¾ points with most trades in the late afternoon between 87½ and 88, a market source said.

More than $58 million of the bonds were on the tape by the late afternoon.

Dean Foods, the largest dairy company in the United States, reported a large earnings miss with a loss per share of 28 cents versus analyst expectations of a loss per share of 6 cents.

While Dean Foods bested revenue expectations, reporting $1.89 billion in the third quarter, it lowered its earnings guidance for the full year. Guidance was also lowered in its second quarter report.

Coty under pressure

Coty’s 6½% senior notes due 2026 were also under pressure in high-volume activity after the beauty company missed revenue expectations in its first quarter earnings report.

The notes dropped almost 2 points to 91 5/8 by late afternoon Wednesday, a market source said. More than $18 million were on the tape by late afternoon.

While Coty beat on its bottom line with non-GAAP earnings per share of 11 cents versus analyst expectations for earnings per share of 7 cents, it missed on revenue.

Coty reported revenue of $2.03 billion versus analyst expectations for revenue of $2.17 billion.

The loss in revenue was due to supply chain disruptions, which are expected to have a continued albeit lesser impact on future quarters.

Endo active

Endo International’s 6% senior notes due 2023 were active in the run up to the company’s third quarter earnings report, which is expected prior to the market open Thursday.

The notes traded down about 7/8 point to 86 7/8, according to a market source. More than $22 million bonds were on the tape by the late afternoon.

Extraction pops

Extraction Oil & Gas’ 7 3/8% senior notes due 2024 saw large gains on Wednesday after a ballot referendum in Colorado was defeated.

The notes jumped 7 points to 98¾ after Colorado Proposition 112 was defeated, a market source said. However, trading volume was light.

The proposition would have increased setbacks for oil and gas drilling operations from residential and commercial areas and waterways.

The primary area of operation for the oil and gas production company is in the Wattenberg Field in the Basin of Colorado.

Tuesday inflows

The daily cash flows for dedicated high-yield bond funds were positive on Tuesday, the most recent session for which data was available at press time, sources said.

High-yield ETFs saw $431 million of inflows on the day.

Actively managed high yield funds saw $155 million inflows on Tuesday.

The combined high-yield funds sustained a whopping $3.6 billion of aggregate outflows in the month of October and were in the red by a staggering $32.6 billion for the year to the end of that month, a trader said.

Indexes gains continue

Indexes posted gains for the third consecutive session on Wednesday as the secondary space continued to firm after a brutal October.

The KDP High Yield Daily index was up 12 basis points to 69.39 with the yield now 6.23%.

The index was up 9 bps on Tuesday and 8 bps on Monday. The index dropped 13 bps on the week last week after a 60 bps drop during the Oct.22 week.

The ICE BofAML US High Yield index was up 28.8 bps on Wednesday with the year-to-date return now 1.466%. The index gained 11.4 bps on Tuesday and 5.8 bps on Monday.

The index gained 24.4 bps on the week last week after a 74.5 bps slide the week before.

The CDX High Yield 30 index gained 37 bps to close Wednesday at 106.46.

The index was up 18 bps on Tuesday and 23 bps on Monday. The index climbed 89 bps last week after a 92 bps drop the week before.

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