Grifols megadeal, ADT, Tenet lead $2.25 billion day; Tuesday deals active; Navistar off

By Paul Deckelman and Paul A. Harris

New York, March 5 - The high-yield primary sphere continued to churn out new deals on Wednesday, as some $2.25 billion of new junk-rated, dollar-denominated paper came to market, on top of Tuesday's $2.4 billion session.

The big deal of the day came from Spanish pharmaceuticals company Grifols, SA, which priced a $1 billion eight-year offering via a subsidiary. Those bonds were seen by traders to have firmed solidly when they moved into the aftermarket.

Back on the domestic front, hospital operator Tenet Healthcare Corp. did an upsized, quick-to-market $600 million of five-year notes, while security alarm provider ADT Corp. drove by with $500 million of five-year notes. Both Tenet and ADT traded right around their par issue price.

Canadian homebuilder Mattamy Group Corp. brought an upsized $150 million add-on to its existing 2020 notes, with the tap quoted as having moved up by a point or so.

Traders meantime noted active secondary dealings in Tuesday's new issues, such as Access Midstream Partners, LP, AES Corp. and Tesoro Corp., all of which firmed.

Away from the new issues, Navistar International Corp.'s bonds fell after the bus, truck and vehicle engine manufacturer reported quarterly numbers, which showed the company plunging more deeply into red ink than it was a year ago.

Statistical market-performance measures were improved on Wednesday, after having turned mixed on Tuesday and being down across the board on Monday.

Grifols prices $1 billion

The primary market news flow continued to intensify on Wednesday.

In the dollar market, four issuers completed single-tranche deals to raise a combined total of $2.25 billion.

Executions appeared solid.

Two deals priced at the tight end of price talk, while the other two came on top of talk.

Two of the four were upsized.

Two of the four were a.m.-to-p.m. drive-bys. One was in the market overnight, and one priced at the conclusion of a roadshow.

Grifols Worldwide Operations Ltd. priced a $1 billion issue of eight-year senior notes (B1/B+/) at par to yield 5¼%, on top of yield talk.

Joint physical bookrunner Nomura will bill and deliver. Morgan Stanley was also a joint physical bookrunner. BBVA, Deutsche Bank and HSBC were also bookrunners.

The Barcelona-based pharmaceutical company plans to use the proceeds to refinance debt.

Tenet upsized and tight

In drive-by action, Tenet Healthcare priced an upsized $600 million issue of non-callable five-year senior notes (B3/CCC+) at par to yield 5%.

The deal was upsized from $400 million.

The yield printed at the tight end of the 5% to 5¼% yield talk.

Barclays, BofA Merrill Lynch, Citigroup, Wells Fargo, Goldman Sachs, J.P. Morgan and SunTrust were the joint bookrunners.

The Dallas-based health-care services company plans to use the proceeds for general corporate purposes including the repayment of debt and drawings under its revolver.

ADT drives by

ADT priced a $500 million issue of non-callable five-year senior notes (Ba2/BB-/BBB-) at par to yield 4 1/8%.

The yield printed at the tight end of yield talk in the 4¼% area.

A drive-by debt-refinancing and general corporate purposes deal, it was led by left bookrunner BofA Merrill Lynch and joint bookrunners Citigroup, JPMorgan, Morgan Stanley, Barclays, Credit Suisse and Goldman Sachs.

Mattamy upsizes tap

Mattamy Group priced an upsized $150 million tack-on to its 6½% senior notes due Nov. 15, 2020 (B1/BB) at 99 to yield 6.686%.

The deal was upsized from $100 million.

The reoffer price came on top of price talk.

Timing on the deal was moved ahead; it was announced earlier in the week as being Thursday's business.

Credit Suisse, RBC and Citigroup were the joint bookrunners for the general corporate purposes deal.

Talking the deals

Looking ahead to the final two sessions of the first week of March, PHI, Inc. talked its $500 million offering of five-year senior notes to yield 5¼% to 5½% in a deal set to price on Thursday.

UBS is the sole bookrunner.

The Lafayette, La.-based helicopter services provider plans to use the proceeds to refinance its 8 5/8% senior notes due Oct. 15, 2018 as well as to repay borrowings under its revolver and fund lease buyouts.

Imperial Metals Corp. talked its $325 million offering of five-year senior notes (B3/B-) to yield 7¼% to 7½%.

JPMorgan and BMO Securities are the joint bookrunners for the deal, which is also set to price Thursday.

And Niska Gas Storage Partners LLC talked its $575 million offering of five-year senior notes (B2/B) to yield 6¼% to 6½%.

The deal, via left bookrunner RBC, is set to price Friday. Barclays, Citigroup and JPMorgan are the joint bookrunners.

HeidelbergCement 2¼% coupon

The euro-denominated market also cranked out plenty of news on Wednesday.

Three issuers brought single-tranche deals, raising a combined total of €1.18 billion.

Here again, executions were notable.

Two of the three deals priced at the tight end of talk, while the other priced through initial spread guidance.

Two of the three came as drive-bys.

One was upsized.

Germany's HeidelbergCement Finance Luxembourg SA priced a €500 million issue of 2¼% five-year notes (Ba1//BB+) at a 150 basis points spread to mid-swaps in a quick-to-market transaction.

The deal came into the market earlier Wednesday with guidance of mid-swaps plus 160 to 170 bps.

The notes were sold at 98.839 to yield 2½%.

Joint global coordinator Morgan Stanley will bill and deliver. Royal Bank of Scotland was also a joint global coordinator. Banca IMI, BayernLB, Commerzbank, LBBW, Mediobanca and SEB were the joint bookrunners.

Proceeds will be used for general corporate purposes.

Obrascon upsizes

Madrid-based civil engineering and construction firm Obrascon Huarte Lain SA priced an upsized €400 million quick-to-market issue of eight-year senior notes (expected ratings Ba3//BB-) at par to yield 4¾%.

The deal was upsized from €300 million.

The yield printed at the tight end of the 4¾% to 5% yield talk.

BoA Merrill Lynch, Credit Agricole, Credit Suisse, Royal Bank of Scotland, SG CIB and UBS led the deal.

Credit Suisse will bill and deliver.

Labeyrie at the tight end

In a deal that came at the conclusion of a roadshow, Labeyrie Fine Foods SAS priced a €275 million issue of seven-year senior secured notes (/B/B+) at par to yield 5 5/8%, at the tight end of yield talk in the 5¾% area.

Joint bookrunner BNP Paribas will bill and deliver. Natixis was also a joint bookrunner.

The Cam, France-based specialty foods company plans to use the proceeds to refinance debt and partially repay shareholder debt.

Metsa talk is 4¾%

Finland-based Metsa Board Corp. (B2/B+) is talking a planned euro-denominated bond deal at 4¾%.

The fiber paperboard company mandated coordinators Danske Bank and Nordea Markets and joint lead managers and bookrunners Pohjola Markets, SEB and Swedbank to arrange a conference call with fixed-income investors on Thursday.

Although the company has not formally announced the deal, Moody's Investors Service assigned its provisional B2 rating to Metsa's proposed €200 million offering of non-callable five-year notes on Tuesday.

Proceeds, along with proceeds from a new credit facility, would be used to repay the term loan that matures in March 2015 and replace the undrawn revolver, according to the ratings release from Moody's.

Ship Finance's NOK 900 million

In other Scandinavian action, Ship Finance International Ltd. priced a NOK 900 million issue of five-year senior floating-rate notes at par to yield Nibor plus 410 bps.

Earlier in the European session the company announced a NOK 600 million minimum offer with guidance of Nibor plus 400 bps to 425 bps.

DNB Markets, Nordea Markets and Swedbank were joint lead arrangers for the quick-to-market deal.

The Hamilton, Bermuda, registered company, which owns and operates oil tankers and other offshore assets, plans to use the proceeds to repay debt and for general corporate purposes.

Great gains for Grifols

In the secondary realm, traders saw the new Grifols 5¼% notes due 2022 having firmed smartly in initial aftermarket dealings after the megadeal priced at par.

One trader saw the bonds at 101 bid right out of the gate, while a second quoted them at 101¼ and later saw the issue having improved to 102 ¾ bid, 103¼ offered.

At another desk, Grifols was seen going home at 102½ bid, 103½ offered.

Grifols' existing 8¼% notes due 2018 eased slightly to around the 106 5/8 bid level from 107 earlier in the week on volume of over $4 million.

ADT, Tenet trade near issue

While Grifols' new deal was climbing, traders saw more restrained levels in the day's other issues.

One saw Tenet Healthcare's 5% notes due 2019 at 100¼ bid, up slightly from the par level at which the hospital operator had priced its upsized deal, while a second quoted the bonds late in the day at 100 1/8 bid, 100¼ offered.

Tenet's established 8 1/8% notes due 2022 meantime lost 3/8 point to end at 112, a market source said, seeing more than $12 million of those notes having changed hands.

ADT's 4 1/8% notes due 2019 likewise did not venture too far from their par pricing level, although there was considerable activity in the new issue, with over $36 million of turnover, putting the credit high up on the Most Actives list.

A trader saw those notes ending at 100 1/8 bid, 100½ offered, although at another desk the bonds were quoted as high as 100¼ bid.

The Boca Raton, Fla.-based security alarm service provider's established 4 1/8% notes due 2023 eased by ¾ point Wednesday on news of the new deal, going out at 93½ bid on brisk trading of over $13 million.

A trader saw Burlington, Ont.-based homebuilder Mattamy Group's 6½% notes due 2022 at par bid, 101 offered, up from the 99 level at which the company's add-on tranche to its existing notes came to market.

Tight pricings seen

One of the traders - noting that neither the new Tenet and ADT issues, nor Tuesday's deals from the likes of Tesoro Corp., AES and Access Midstream Partners, had ventured too far from their respective par issue prices - suggested that "they [the issuers and their underwriters] are pricing stuff on the tight side, because they're getting increased demand" from investors.

Even though many of the new deals have been upsized, still, he said, "people aren't getting allocations," with underwriters hanging onto the bonds in many cases, or even doling out allocations to favored larger customers, leaving the smaller hedge funds scrambling for paper.

He said that with new issues priced so tightly, "everything is hanging in - but nothing is running away."

For instance, he said that Tesoro's 5 1/8% notes due 2024 "didn't go anyplace," quoting the bonds at 100¼ bid, 100½ offered, even though the credit was one of the most actively traded bonds of Wednesday's session, with over $39 million seen having traded. The San Antonio-based petroleum refiner and marketer's $300 million drive-by offering had priced at par and had straddled that level in initial aftermarket dealings.

He saw AES's 5½% notes due 2024 at 100 5/8 bid, 100 7/8 offered, up perhaps ¼ point from the levels they held late Tuesday, when the Arlington, Va.-based power-generating company had priced its quick-to-market $750 million issue at par after upsizing it from an originally announced $500 million.

AES, while moving up just modestly, was also one of the day's busier issues, with over $43 million having changed hands.

But the busiest issue of the day by far in Junkbondland was Access Midstream Partners' 5 1/8% notes due 2024, seen trading in a 100 3/8 to 100½ bid context on volume of over $73 million.

Those levels were marginally better than the trading levels around 100¼ seen after the Oklahoma City-based oil and natural gas transportation, processing and storage company priced its quickly shopped $750 million issue at par on Tuesday after upsizing it from $600 million originally.

A trader at another desk meanwhile quoted AES, Access Midstream and Pioneer Energy Services Corp.'s 6 1/8% notes due 2022 all in a 100½ to 101 bid context, opining that "it looks like a pattern." San Antonio-based Pioneer, an energy drilling services provider, priced its $300 million quick-to-market deal at par on Tuesday after upsizing it from an originally announced $250 million, and the new bonds traded around 100½ bid when they were freed for aftermarket dealings.

The relative lack of large price movement in many new issues stands in sharp contrast to last week, when new deals like Regal Entertainment Group, TreeHouse Foods, Inc., Greektown Holdings LLC and Cloud Peak Energy Inc. all saw handsome gains - some jumping by multiple points - when they moved into the aftermarket.

Navistar knocked around

Away from the new-deal arena, Navistar International's 8¼% notes due 2021retreated by about 5/8 point on the day, ending at 104½ bid on volume of over $8 million.

That followed the release of the Lisle, Ill.-based truck, bus, military vehicle and engine manufacturer's results for the 2014 fiscal first quarter ended Jan. 31.

Navistar continues to try and bounce back from years of legal problems with some of its engines, heavy warranty costs, accounting issues and, more recently, reduced vehicle and engine sales to the U.S. military. While it has made some progress on these fronts, the company continues to underperform.

It announced a 2014 fiscal first-quarter net loss of $248 million, or $3.05 per diluted share, versus year-earlier red ink of $123 million, or $1.53 per share.

Revenues were $2.2 billion, down from $2.6 billion a year earlier.

The numbers cast a pall over company efforts to show progress, for instance in maintaining strong cash generation for a sixth consecutive quarter (see related story elsewhere in this issue).

Navistar's New York Stock Exchange-traded shares lost $1.62, or 4.29%, to end at $36.17. Volume of 3.1 million shares was about triple the norm.

Market indicators get better

Statistical junk-market performance indicators were mostly steady-to-higher on Wednesday after having turned mixed on Tuesday and declining across the board on Monday, which broke a three session streak of stronger indicators.

The Markit Series 21 CDX North American High Yield index gained 1/16 point on Wednesday to end at 108 1/8 bid, 108 3/16 offered, its second straight gain. On Tuesday, it had risen by ½ point, after having lost ½ point on Monday.

The KDP High Yield Daily index was unchanged at 75.27. On Tuesday, it had fallen for a second consecutive session, losing 5 bps.

Its yield, meanwhile, came in by 2 bps to finish at 5.15%, after having risen by 1 bp on Tuesday.

The widely-followed Merrill Lynch High Yield Master II index was better for a second session in a row on Wednesday, improving by 0.022%, on top of Tuesday's 0.07% advance bouncing back from a rare loss on Monday, which had snapped an 18-session string of daily wins, going back to Feb. 5.

Wednesday's gain lifted its year-to-date return to 2.812%, its second consecutive new 2014 peak level. That was up from the previous zenith of 2.79%, recorded on Tuesday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.