Junk primary stays quiet, though ‘oversubscribed’ Team Health hits road; Vanguard up despite oil woes

By Paul Deckelman and Paul A. Harris

New York, Jan. 9 – The high yield primary market stayed quiet on Monday for a second consecutive session during which no new U.S. dollar-denominated and fully junk-rated issues priced.

However, syndicate sources said that there was behind-the-scenes action going on, with at least two issues heard to be hitting the road to market new deals to prospective investors.

Physician services organization Team Health Holdings, Inc. is expected to begin a roadshow on Tuesday for its $1.015 billion offering of eight-year notes – although a market source described the deal as already “oversubscribed’ before any marketing has officially started.

Monaco-based luxury cruise line operator Silversea Cruise Holding Ltd. meantime set sail with a $275 million eight-year offering,

In the secondary market, energy issues such as California Resources Corp. came under pressure as crude oil prices slipped badly after three consecutive sessions on the upside.

However, traders said that Vanguard Natural Resources LLC’s bonds defied the trend and firmed up on the session.

Statistical market performance measures were mixed for a third straight session on Monday; those indicators had turned mixed on Thursday after having been stronger across the board over the previous four consecutive trading days.

Team Health already oversubscribed

No deals priced on Monday.

As expected, Team Health Holdings, Inc. set a roadshow for a $1,015,000,00 offering of eight-year senior notes (Caa1/CCC+/B-).

However the deal is already oversubscribed, market sources told Prospect News on Monday.

The book size is already at $1.5 billion, at trader said, adding that much of the deal is expected to be taken by accounts which participated in the syndication of the bridge loan.

Initial guidance has the notes coming with a 6¾% yield.

The roadshow for the LBO deal is set to run into Thursday.

Barclays in the lead left bookrunner. JP Morgan, BofA Merrill Lynch, Morgan Stanley and RBC are the joint bookrunners.

Silversea Cruise starts roadshow

Monaco-based Silversea Cruise Holding Ltd. began a roadshow on Monday for a $275 million offering of eight-year senior secured notes (expected B2 or B3/confirmed BB-).

JP Morgan Securities is leading the offer.

The notes come with three years of call protection.

The privately owned luxury cruise line plans to use the proceeds to repay debt and pre-fund capital expenditures.

Team Health and Silversea climb aboard a calendar that also includes Novolex Holdings, Inc. (Flex Acquisition Co., Inc.) with a $625 million offering of eight-year senior notes, an LBO deal also expected to price before the Friday close.

TalkTalk to sell £300 million

For the first time in 2017 the lights came on in the European primary market on Monday.

TalkTalk Telecom Group plc plans to start a roadshow on Tuesday for a £300 million five-year offering of senior notes (expected ratings BB-/BB-).

Joint bookrunner Barclays will bill and deliver for the bank debt refinancing. HSBC and NatWest Markets are also joint bookrunners.

Jaguar eyes euro benchmark

Jaguar Land Rover Automotive plc (Ba1/BB+) plans to undertake meetings with investors on Tuesday.

A euro-denominated benchmark offering of senior notes may follow, subject to market conditions.

The notes are expected to come with a five- to eight-year maturity.

Goldman Sachs, BNP Paribas, Credit Agricole, Deutsche Bank, SG, ING, Lloyds, Mizuho, NatWest and UniCredit have the mandate.

There is one more expected transaction in the European market for the present week, a London-based sellside source said on Monday.

Crude fall pressures energy

In the secondary arena, traders said that oil and natural gas names came under pressure as crude oil prices got hammered down on Monday after three consecutive days of gains.

The benchmark U.S. crude grade, West Texas Intermediate for February delivery, swooned by $2.03 per barrel on the New York Mercantile Exchange, settling in at $51.96, after having gained 23 cents in Friday’s dealings.

The key international grade, North Sea Brent crude for March delivery, was likewise down more than $2 on the day on the London ICE Futures Exchange, closing at $54.94, versus Friday’s 21-cent-per barrel advance.

That took its toll on energy credits such as sector bellwether California Resources Corp., whose 8% notes due 2022 retreated by 1 point to end at 90 bid, although the Los Angeles-based oil and natural gas operator’s 6% notes due 2024 were seen unchanged at 78½ bid, 80½ offered.

Denver-based Whiting Petroleum Corp.’s 6¼% notes due 2023 were also down 1 point at just under par bid, a market source said.

However, here and there, oil and gas issues managed to buck the trend, including Houston-based Vanguard Natural Resources’ 7 7/8% notes due 2020.

A market source said that the notes got as good as 71 bid, a gain of more than six points on the session.

At another desk, a trader saw the notes climb to a round-lot close of 68¾ bid, which he called a 4-point gain over Friday’s levels, although there were only a handful of round-lot trades; most activity Monday in the credit came in smaller odd-lot pieces.

The Vanguard notes moved up even though the company – which reported third-quarter results at the end of last week – acknowledged at that time that it might have trouble covering a $187.5 million borrowing-base deficiency that it has agreed to pay its banks in five equal installments.

Vanguard’s earnings statement said that it “anticipates that its forecasted excess cash flow will not be sufficient to pay the remaining borrowing base deficiency. Refinancing or restructuring our debt, selling assets, reducing or delaying our drilling program or seeking to raise additional capital through non-traditional lending or other private sources of capital will be necessary to satisfy this requirement in order to be back in compliance under the Credit Agreement.”

Elsewhere in the energy sector, Noble International Holding Ltd.’s recently priced 7¾% notes due 2024 pushed slightly above the 98 bid level, with over $11 million having traded.

The Cayman Islands-based energy drilling company had sold $1 billion of the notes last month, but they fell from their 98.01 issue price to as low as the 94 bid level by the end of the year. However, the notes have firmed back above their issue price in recent sessions.

Indicators stay mixed

Statistical market performance measures were mixed for a third straight session on Monday; those indicators had turned mixed on Thursday after having been stronger across the board over the previous four consecutive trading days.

The KDP High Yield index lost 2 basis points on Monday to close at 72.13 – its first loss after seven straight sessions on the upside, including Friday’s 7 bps gain.

Its yield rose by 1 bp to 5.13% – its first widening out since Dec. 20. It had come in over the previous four sessions, including Friday’s 2 bps tightening.

The Markit Series 27 CDX index remained on the downside for a third day in a row, ending down by 5/32 point Monday after having fallen 1/8 point on Friday. It closed at 106½ bid, 106 9/16 offered.

However, the Merrill Lynch High Yield index stayed strong, improving on Monday by 0.046% – its 14th successive gain – on top of Friday’s 0.062%.

Monday’s advance raised its year-to-date return to 0.973%, a fourth consecutive new high for the new year, eclipsing the prior cumulative mark of 0.927%, set on Friday.

The index had closed out 2016 with a total return of 17.489% – its best showing since 2009’s record-setting 57.512% jump. In 2015, the index had lost 4.643% on the year.

© 2015 Prospect News.
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