Four-part Tenet megadeal leads $5 billion primary session, Nokia, TRI Pointe also price; energy issues off

By Paul Deckelman and Paul A. Harris

New York, June 5 – The high-yield primary saw one of its biggest days of this or any other year, as more than $5 billion of new U.S. dollar-denominated and fully junk-rated new paper came to market in seven tranches.

The day saw two megadeal-sized offerings, including Tenet Healthcare Corp.’s $3.78 billion four-part issue of secured and unsecured notes.

The hospital operator’s quick-to-market transaction is the biggest junk bond deal seen so far this year, according to data compiled by Prospect News, as well as the biggest deal seen in Junkbondland in well over a year.

Traders did not immediately report any initial aftermarket dealings in any of the big deal’s tranches – but they did say that the company’s existing bonds were mixed in active trading across the capital structure on the news of that debt-refinancing deal.

The other billion-dollar offering came from Finnish cellphone maker Nokia Corp., which priced two equally sized $500 million tranches of five- and 10-year notes.

The 10-years were up modestly in busy aftermarket dealings, though much of the volume was generated by investment-grade oriented accounts.

Homebuilder TRI Pointe Group Inc. rounded out the day’s new-deal action with an upsized and quickly shopped $300 million of 10-year notes, which traded around their issue price.

Away from new-issue activity, traders saw energy credits such as California Resources Corp. retreat in line with lower world crude oil prices.

Statistical market performance measures were mixed on Monday after having been higher across the board for a second consecutive session on Friday; the indicators had been mixed for the four sessions before that.

Tenet $3.78 billion drive-by

A busy Monday session in the primary market saw three issuers bring a combined seven tranches of speculative-grade rated notes, to raise a combined total of $5.07 billion.

Two of the three issuers came with drive-by deals, while the third, Nokia Corp., came with a deal that was pre-marketed high-grade style and priced on the investment-grade syndicate desk.

One of the seven tranches was upsized.

Executions were varied, with four of the seven tranches pricing at the tight ends of yield talk or spread talk. Two came in the middle of talk. And one priced on the wide end.

Tenet Healthcare Corp. priced $3.78 billion of high-yield notes in four tranches.

The debt refinancing deal included $1.87 billion of secured first lien notes due July 15, 2024 (Ba3/BB-/BB-) that priced at par to yield 4 5/8%. The issuing entity for $830 million of that amount was Tenet Healthcare Corp. THC Escrow Corp., III, a Delaware corporation established to issue the THC Escrow Corp. notes, priced $1.04 billion of the 4 5/8% first lien notes.

The first lien notes yield was in the middle of the 4½% to 4¾% yield talk.

THC Escrow Corp. III also priced $1.41 billion of secured second lien notes due May 1, 2025 (Ba3/B-/B-) at par to yield 5 1/8%. The yield printed at the tight end of the 5 1/8% to 5 3/8% yield talk.

In addition THC Escrow Corp. III priced $500 million of senior unsecured notes due Aug. 1, 2025 (Caa1/CCC+/B-) at par to yield 7%. The yield printed at the tight end of the 7% to 7¼% yield talk.

Barclays was the lead left bookrunner. BofA Merrill Lynch, Goldman Sachs, Capital One, Citigroup, RBC, SunTrust, Wells Fargo, Morgan Stanley and Scotia were the joint bookrunners.

Nokia, high grade style

Nokia Corp. priced $1 billion of senior bullet notes (Ba1/BB+).

The debt refinancing deal included $500 million of 3 3/8% five-year notes, which priced at a 175 basis points spread to Treasuries. The spread came tight to spread talk in the 180 bps area and well inside of the 215 bps to 225 bps initial guidance.

Nokia also priced $500 million of 4 3/8% 10-year notes at Treasuries plus 225 bps. The spread came tight to the 230 bps area spread talk and well inside of the 260 bps to 270 bps initial guidance.

The deal came in an investment grade style execution, pre-marketed by means of a non-deal roadshow, sources said.

It priced on the investment-grade syndicate desk and garnered a significant audience among crossover investors despite the fact that both the Moody's and S&P ratings were speculative grade, a trader said.

Barclays, Citigroup, Goldman Sachs and J.P. Morgan were joint bookrunners.

TRI Pointe upsizes

TRI Pointe Group, Inc. priced an upsized $300 million issue of 10-year senior bullet notes at par to yield 5¼% in a quick-to-market Monday transaction.

The issue size was increased from $250 million.

The yield printed at the wide end of the 5 1/8% to 5¼% yield talk.

J.P. Morgan, Citigroup, Credit Suisse, Wells Fargo and US Bancorp were joint bookrunners.

The Irvine, Calif.-based homebuilder intends to use the net proceeds to repay approximately $200 million of borrowings under its $625 million unsecured revolving credit facility, which matures on May 18, 2019, with the remainder to be used for general corporate purposes, which may include debt repayment, property acquisition, the repurchase of common shares via the previously announced stock repurchase program, working capital and capital expenditures.

KIRS restructures sets talk

Looking toward the Tuesday session, KIRS Group set price talk in its £800 million equivalent two-part offering of six-year senior secured notes (confirmed B3/expected B/confirmed B-).

The revised deal features sterling-denominated notes talked to yield in the 8½% area, and dollar-denominated notes talked to yield in the 8¾% area.

The notes are expected to price on Thursday.

A restructuring saw the withdrawal of a proposed floating-rate tranche. The tenor of the remaining fixed-rate notes was increased to six years from five years. Call protection was increased to three years from two years.

Global coordinator BofA Merrill Lynch is the physical bookrunner. Barclays, Credit Suisse, Goldman Sachs and KKR are bookrunners.

The Kent, England-based insurance group plans to use the proceeds to refinance debt, as well as to finance the acquisitions of Ryan Direct Group1 and Chase Templeton, and to overfund cash on balance sheet.

Second-biggest session

Monday’s $5.07 billion of new junk paper in seven tranches from three domestic or industrialized-country issuers was the second-heaviest primary session seen so far this year, according to data compiled by Prospect News, behind only the $6.64 billion which got done in eight tranches back on March 9, a session dominated by drugmaker Valeant Pharmaceuticals International Corp.’s $3.25 billion two-part offering.

Monday’s big deal from Dallas-based hospital operator Tenet surpassed that Valeant issue as the biggest junk bond transaction seen so far this year.

It was, in fact, the biggest pricing seen in the junk market since French cable and broadband operator Numericable SA’s $5.18 billion single-tranche offering of senior secured 2026 notes which priced on April 6, 2016.

And it was the largest junk deal by a U.S.-based issuer since Stamford, Conn.-based wireline telecom company Frontier Communications Corp. did a $6.6 billion three-part offering back on Sept. 11, 2015, the data indicated.

Existing Tenet notes trade actively

While traders did not immediately see the new Tenet paper trading around on Monday afternoon, the company’s several series of existing notes more than made up for that, trading mixed on the day in busy dealings.

A market source said that Tenet’s 7 ½% notes due 2022 lost 5/16 point on the day to close just below 108½ bid, with over $21 million changing hands.

They saw its 6¾% notes due 2023 up ½ point, at 100½ bid; with over $18 million traded.

Its 8 1/8% notes due 2022 were 1 full point better, a trader said, pegging the notes at 107¼ bid on volume of over $15 million.

Day’s issues up

Apart from Tenet’s big new deals, a trader saw TRI Pointe Group’s new 5 ¼% notes due 2027 get as good as 100½ bid when the bonds were freed for trading, although he said that later prints were in a 100 to 100¼ bid context.

At another desk, the bonds were seen going home right at their par issue price, with over $14 million traded.

Nokia’s new 4 3/8% notes due 202y moved up about 7/8 point on the day to 100 3/8 bid, after pricing at 99.591 to yield 4.426%.

Most of the more than $29 million of the bonds that traded were snapped by high-grade investors, to whom the oversubscribed deal had been marketed after pricing off the investment-grade desks of the unsderwriting investment banks.

Oil issue on the slide

Away from the new issues, trader saw energy credits such as California Resources Corp. lower in line with lower oil prices.

The Los Angeles-based exploration and production operator’s 8% notes due 2022 retreated by 1 5/8 points, to 72 3/8 bid, on market-topping volume of over $31 million,

West Texas Intermedia crude for July delivery was off by 26 cents per barrel, settling at $47.40 on the New York Mercantile Exchange on Monday, its first loss after one gain on Friday and losses in two sessions before that.

Indicators turn mixed

Statistical market performance measures were mixed on Monday after having been higher across the board for a second consecutive session on Friday; the indicators had been mixed for the four sessions before that.

The KDP High Yield Daily index posted its fourth consecutive gain on Monday after two unchanged sessions before that, edging up by 1 basis point to 72.69, the same size as Friday’s 12 bps gain.

Its yield came in by 1 bps to 4.87%, after having been unchanged at 4.88% on Friday; it had narrowed over three straight sessions before that.

The Markit CDX Series 28 index moved down by almost 3/32 point on Monday, matching the size of Friday’s upturn, which had been its second successive improvement.

It ended Monday at 107 23/32 bid, 107¾ offered.

But the Merrill Lynch North American High Yield index notched its sixth consecutive upturn, advancing by 0.046%, which followed Friday’s 0.101% gain.

The latest gain swelled the index’s year-to-date return to 5.455% from 5.025% on Friday which was the first time this year that the YTD return had topped the psychologically significant 5% mark,

Monday’s close was its sixth straight new 2017 peak cumulative return.

© 2015 Prospect News.
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