McClatchy prices; Community Health, Nationstar, Stars, AmWins, LGI strong

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 29 – Trailing a high-volume Thursday which put up the biggest single-session total of dollar-denominated issuance year-to-date, Friday was relatively quiet in the primary market.

McClatchy Co. priced a $310 million issue of 9% eight-year senior secured notes (expected B1/confirmed B-) at 97.242 to yield 9½%.

Like many of Thursday’s deals, the new notes moved well above their issue price in secondary trading.

In the European market, Radisson Hospitality AB priced €250 million of 6 7/8% five-year senior secured notes (expected ratings B1//BB-) at 99.473 to yield 7%.

New issue activity in the domestic and European market is expected to be muted in the week ahead with Enterprise Development Authority’s $440 million offering of five-year senior notes and K+S AG’s €300 million minimum sale of six- or seven-year notes the only two deals on the forward calendar.

However, a growing pipeline of merger and acquisition financing is taking shape for the second half of 2018, which is expected to generate hefty amounts of junk bond issuance, sources said.

The $4.68 billion in six deals that priced on Thursday was well placed with trading activity slowing into Friday afternoon, a market source said.

Nationstar Mortgage Holdings Inc.’s newly priced 8 1/8% senior notes due 2023 and 9 1/8% senior notes due 2026 were in high demand in the secondary space with the notes more than 1.5 points above their issue price.

New notes from Stars Group Holdings BV, AmWINS Group, Inc., LGI Homes, Inc. and CHS/Community Health Systems also continued to trade well above their issue prices.

While the secondary space has been heavy, it was seen firming on Friday with the market in general up an 1/8 to ¼ point, a market source said.

McClatchy prices secured deal

In Friday’s lone deal, McClatchy priced a $310 million issue of 9% eight-year senior secured notes (expected B1/confirmed B-) at 97.242 to yield 9½%.

The issue came on top of talk.

J.P. Morgan and Credit Suisse led the best efforts transaction.

The Sacramento, Calif.-based media company plans to use the proceeds, together with a proposed new asset-based revolver, a junior lien term loan and cash on hand, to redeem its 9% senior secured notes due 2022.

The notes were quoted more than 1½ points above their issue price at 98½ bid, 99 offered, a market source said.

While the notes were active, trading volume was light across the board in the secondary space with many participants packing it in early for the weekend, sources said.

Radisson at a discount

In Europe, Radisson Hospitality priced €250 million of 6 7/8% five-year senior secured notes (expected ratings B1//BB-) at 99.473 to yield 7%.

The yield printed on top of yield talk and at the wide end of initial talk in the high 6% area to 7%.

JP Morgan was the sole bookrunner.

The Brussels-based hotel group plans to use the proceeds to repay debt under its credit facilities and for general corporate purposes including its five-year operating plan, further investments and the creation of a liquidity buffer.

The week ahead

New issue activity is apt to be muted in the week ahead due to the July 4 holiday on Wednesday when the United States of America celebrates its independence.

Crossing the weekend, just two deals have places aboard the active forward calendar.

Tribal gaming concern Enterprise Development Authority is heard to still be in the market with its $440 million sale of five-year senior secured notes (S&P: expected B-) via Wells Fargo.

Most recent price talk specifies a 10½% coupon at 98 to yield 11%, wider than initial guidance in the high 9% to low 10% area, sources say.

And Germany-based K+S is expected to begin investor meetings on Monday for an expected €300 million minimum offering of notes with a six- or seven-year maturity.

Deutsche Bank, DZ Bank, Goldman Sachs and HSBC are the leads.

Big M&A pipeline

A big and growing pipeline of merger and acquisition financing is taking shape for the second half of 2018, buyside and sellside sources said on Friday.

That pipeline is expected to generate hefty amounts of junk bond issuance.

The most recent news on that pipeline is that syndication efforts are underway for Thomson Reuters’ Financial & Risk, which is placing $5.5 billion of bridge loans that are expected to lead to high-yield bonds.

Dealers are in the market with $3 billion equivalent of 7.5-year senior secured bridge debt in dollars and euros, priced at Libor/Euribor plus 400 basis points, and $2.5 billion equivalent of eight-year senior unsecured bridge debt in dollars and euros, priced at Libor/Euribor plus 625 bps.

Of the secured portion, $1 billion equivalent is expected to be euro-denominated. The unsecured portion is expected to have $700 million equivalent of euro-denominated debt.

Commitments are due July 9.

Joint bookrunner JP Morgan is the administrative agent. BofA Merrill Lynch and Citigroup are also joint bookrunners.

Also, dealers are expected to attempt to syndicate $2.15 billion of bridge loan debt backing the buyout of Envision Healthcare Corp. by KKR.

That bridge is also expected to be taken out by means of high-yield bond issuance.

Citigroup will lead the syndication effort.

Biggest week since March

McClatchy brought the week’s total issuance in the U.S. market to $7.22 billion, the strongest figure since the March 4 week, which saw $8.27 billion.

It was also three times the $2.49 billion seen the previous week.

Year-to-date issuance now totals $111.50 billion in 211 tranches, still lagging well behind 2017’s comparable $148.80 billion in 273 tranches.

Nationstar in demand

Nationstar Mortgage’s dual tranche offering was in demand in the secondary space, a market source both.

The 8 1/8% tranche of senior notes due 2023 and 9 1/8% tranche of senior notes due 2026 (B2/B+) were set to close Friday at 101 3/8 bid, 101 5/8 offered, sources said.

Nationstar priced $1.7 billion of senior notes in two tranches on Thursday.

The company priced $950 million of the 8½% notes at par, in the middle of the 8% to 8¼% yield talk.

Nationstar also priced $750 million of the 9 1/8% notes at par, at the wide end of yield talk set in the 9% area.

Community Health healthy

Community Health’s newly priced 8 5/8% senior notes due 2024 maintained their strength on Friday with the notes seen trading around par ½, sources said.

The notes were trading in a range of 99¾ to par 7/8 on Thursday.

CHS/Community Health Systems priced an upsized $1,032,607,000 of the 8 5/8% notes at 99.457 to yield 8¾% on Thursday.

The deal was said to be 1.5 to 2 times oversubscribed with at least $300 million worth of reverse inquiry, sources said.

Stars Group strong

Stars Group’s newly priced 7% senior notes due 2026 (Caa1/B-/B-) continued to put in a strong performance in the secondary space on Friday. The notes were seen trading at 101 on Friday.

They were trading between par ½ and 101¾ on Thursday and closed the day at 101 bid, 101 3/8 offered.

Stars Group priced an upsized $1 billion of the 7% senior notes at par on Thursday.

The yield printed in the middle of yield talk that was set in the 7% area and tight to initial price talk in the low to mid 7% area.

The book was said to be four-times oversubscribed.

LGI Homes up

LGI Homes 6 7/8% senior notes due 2026 were also quoted well above their issue price on Friday, despite struggling during bookbuilding.

The 6 7/8% notes were quoted at 99 7/8 bid, 100 7/8 offered, according to a market source.

LGI priced a downsized $300 million of the 6 7/8% notes at 99.239 on Thursday.

The deal was initially launched at $400 million.

AmWins ‘clubby’

AmWins newly priced 7¾% senior notes were more than 1 point above their issue price although the notes were slow to trade with the deal described as “clubby,” according to a market source.

The 7¾% notes were quoted at 101¼ bid, 102¼ offered on Friday.

AmWins priced $300 million of the 7¾% notes at par on Thursday in the middle of talk for a yield in the 7¾% area.

Thursday outflow

Daily cash flows for dedicated high-yield bond funds were negative on Thursday, the most recent session for which data was available at press time, an investor said.

High-yield ETFs sustained $327 million of outflows on the day.

Asset managers saw $100 million of outflows on Thursday.

News of Thursday's daily outflows comes on the heels of a Thursday report from AMG Data Services Inc. that dedicated high yield funds saw $1.135 billion of net outflows in the week to the Wednesday, June 27 close.

It’s part of a tidal wave of retail cash – $18.57 billion – that has washed out of the asset class, since the beginning of the year, according to a Prospect News analysis of the numbers.

Those retail cash flow numbers paint in part of a picture of the liquidity of the asset class, but it is a small part, a senior syndicate official insisted.

However, while asserting that the much less transparent portions of institutional money at play in junk are by far the biggest part of that liquidity picture, the official conceded that the present depth of the high-yield market is not vast.

Indexes mixed

Three benchmarks for the high-yield secondary market closed the week mixed.

The KDP High Yield index was down 5 basis points to close Friday at 70.39 with the yield now 5.89%.

The index has seen a solid week of losses and was down 17 bps on Thursday, 5 bps on Wednesday, 9 bps on Tuesday and 6 bps on Monday.

The Merrill Lynch High Yield index flipped back to the positive on Friday.

The index was up 8 basis points with the year-to-date return now 0.058%.

The index dropped 33.3 bps on Thursday with the year-to-date return sinking to negative 0.022%.

Thursday was the first day the index was in negative territory since June 5.

Friday marked the index’s first day of gains all week. The index was down 10 bps on Wednesday, 7 bps on Tuesday and 11.9 bps on Monday.

The CDX High Yield 30 index closed Friday with losses after a slight bounce on Thursday. The index was down 5 bps to close the day at 105.76. Friday’s losses wiped out the index’s 4 bps gain on Thursday.

The index has seen dramatic drops throughout the week. It was down 42 bps on Wednesday, 6 bps on Tuesday and 39 bps on Monday.

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