Tenet prices $4.2 billion; Clear Channel in focus; Exela rebounds; Tenet mixed

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 12 – The domestic high-yield primary market saw one megadeal price during Monday’s session.

Tenet Healthcare Corp. priced a supersized $4.2 billion offering of senior secured first-lien notes (Ba3/BB-) in three tranches.

While the active forward calendar was vacant as of Monday, the Aug. 12 week may be the last active week ahead of the Labor Day holiday.

Meanwhile, the secondary space was soft on Monday although volume was light, sources said.

Tenet Healthcare’s outstanding junk bonds were mixed as the market awaited the health care company’s megadeal.

Clear Channel Outdoor Holdings, Inc.’s 5 1/8% senior notes due 2027 (B1/B+) were in focus with the notes continuing to trade at a premium to their issue price.

Exela Technologies Inc.’s 10% senior notes due 2023 rebounded in high-volume activity on Monday after tanking during last Friday’s session.

Tenet $4.2 billion drive-by

In the midst of significant volatility in the capital markets on Monday, Tenet Healthcare showed up with a supersized $4.2 billion offering of senior secured first-lien notes (Ba3/BB-).

While in market, the drive-by deal was revised into three tranches from two tranches with the addition of a shorter dated five-year tranche.

In that added tranche, Tenet priced $600 million of five-year notes at par to yield 4 5/8%. The tranche was upsized from its $500 million launch size.

The deal also featured $2.1 billion of 6.3-year notes, which priced at par to yield 4 7/8%. The tranche size decreased from the $2.2 billion launch size. The yield printed in the middle of the 4¾% to 5% yield talk, which was also the initial talk.

The long tranche featured $1.5 billion of 8.2-year notes, which priced at par to yield 5 1/8%.

The yield printed in the middle of the 5% to 5¼% yield talk, which was also the initial talk.

Barclays was the lead left bookrunner.

Although the company admittedly braved Monday's market volatility, Tenet is an ultra-familiar name to the high-yield bond investment community, a buyside source remarked.

It came with secured first-lien bonds for the purpose of redeeming other secured first-lien bonds with nearer maturities (see related story in this issue).

Hence, the Dallas-based health care company had little difficulty scaring up a crowd on Monday, the source added.

A lot of investors who were being taken out of the notes being redeemed rolled into Monday's new deal, an investor said.

Empty active calendar

In the wake of Monday's big Tenet deal, the active forward calendar stood empty.

Heading into the Aug. 12 week further new issue business had been expected.

However, opportunistic issuers might be reluctant to follow Tenet's lead, and come to market, should volatility remain as high as it was on Monday, the buyside source said.

Sizing up present investor apprehension, the yield of 10-year Treasuries fell to 1.64% on Monday, from late Friday's 1.73%, the source said.

The 10-year government paper is down more than 35 basis points, month-to-date.

What's more, the Aug. 12 week is apt to be the last reasonably active one of the summer, with new issue activity expected to begin falling off in the run-up to the extended Labor Day holiday weekend, set to get underway following the Friday, Aug. 30 close, market sources say.

Tenet mixed

Tenet Healthcare’s outstanding junk bonds were mixed in secondary trading as the market awaited the company’s new megadeal.

While the longer duration notes in Tenet’s capital structure were trading down on the new offering, the shorter duration notes were making gains.

Tenet’s 6¼% senior notes due 2027 dropped 1 point to 103 in active trading, according to a market source.

There were about $15 million of the bonds on the tape during Monday’s session.

The healthcare company’s 4 5/8% senior notes due 2024 dropped ½ point to 101½.

The notes were also active with about $13 million in reported volume by the late afternoon.

However, Tenet’s 4 3/8% senior notes due 2021 rose 2 points to 104½ and the 4½% senior notes due 2021 were up 1½ points to 103½, according to a market source.

Proceeds from Tenet’s new offering will be used to take out the 4 3/8% and 4½% notes.

Clear Channel in focus

Clear Channel’s newly priced 5 1/8% senior notes due 2027 remained active in secondary trading with the notes making modest gains on Monday.

The 5 1/8% notes were up another 1/8 point to close Monday at par ½, according to a market source. There was more than $50 million in reported volume during Monday’s session.

The notes traded as high as par 7/8 after breaking for trade on Friday. However, the notes closed the day at par 3/8, sources said.

Clear Channel priced a downsized $1.25 billion issue of the 5 1/8% notes at par on Friday.

The issue was downsized to $1.25 billion from $1.26 billion.

The yield printed at the tight end of the revised 5 1/8% to 5¼% yield talk, which had tightened from earlier official talk of 5¼% to 5½%.

Early guidance was in the mid-5% area.

Exela rebounds

Exela Technologies’ 10% senior notes due 2023 were on the rebound on Monday after a disastrous session on Friday, which saw the notes shave off double digits.

The 10% notes traded up 3¼ points to 60¾, according to a market source. The notes were again active with almost $30 million in reported volume during Monday’s session.

The 10% notes dropped more than 11 points on Friday following a disappointing earnings report.

The global business process automation company reported an increase in losses and declining EBITDA for the second quarter.

Friday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Friday, according to a market source.

High-yield ETFs saw $285 million of inflows on the day.

Actively managed funds saw $50 million of inflows on Friday, the source said.

Last Thursday the market heard that the combined junk funds saw $4.07 billion of net outflows in the week to the Wednesday, Aug. 7 close, according to Lipper US Fund Flows.

It was the biggest weekly outflow since last October and the eighth biggest weekly outflow on record, the market source said.

Indexes mixed

Indexes launched the week mixed after all saw cumulative losses on the week last week.

The KDP High Yield Daily index rose 11 bps to close Monday at 70.96 with the yield now 5.72%. The index was down 65 bps on the week last week.

The ICE BofAML US High Yield index shaved off 5.3 bps with the year-to-date return now 9.878%.

The index was down 37 bps on the week last week. It slid below the 10% return threshold amid the market sell-off on Aug. 5.

The CDX High Yield 30 index dropped 56 bps to close Monday at 105.54. The index was down 66 bps on the week last week.

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