Primary sees busiest day of year; Sprint under pressure; funds lose $1.14 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 28 – In the biggest day in the U.S. high-yield primary market thus far in 2018, six issuers placed $4.68 billion face amount of junk in seven dollar-denominated tranches on Thursday.

Nationstar Mortgage Holdings Inc. priced $1.7 billion of senior notes (B2/B+) in two tranches.

CHS/Community Health Systems priced an upsized $1,032,607,000 issue of 8 5/8% 5.5-year senior secured notes (B3) at 99.457 to yield 8¾%.

Stars Group Holdings BV priced an upsized $1 billion issue of eight-year senior notes (Caa1/B-/B-) at par to yield 7%.

Superior Plus Corp. sold a $350 million offering of eight-year senior notes (Ba3/BB) at par to yield 7%.

AmWINS Group, Inc. priced $300 million of eight-year senior notes (Caa1/B-) at par to yield 7 ¾%.

LGI Homes, Inc. brought a downsized $300 million of 6 7/8% eight-year senior notes (B1/BB-).

In the crossover market, Charter Communications, Inc. subsidiaries Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. priced $1.5 billion of split-rated senior secured notes (Ba1/BBB-/BBB-) in two tranches.

The deluge of new paper entering the secondary space was the focus of trading activity with the new paper seen trading almost 1 point above their issue prices.

While Stars and Community Health were major volume movers, activity in the notes paled in comparison to the trading frenzy surrounding Transocean Guardian Ltd. Transocean’s newly priced 5 7/8% senior notes due Jan. 15, 2024 were above their issue price in high-volume trading.

PHI Inc.’s 5¼% senior notes due 2019 remained active in the secondary space as the company zeroes in on a deal to refinance the debt.

The company’s proposed offering of a downsized $300 million in five-year senior notes was rumored to be pulled in favor of a term loan, according to a market source.

Sprint Corp.’s junk bonds were under pressure on Thursday after a hearing before the Senate’s antitrust subcommittee earlier in the week raised doubts about its merger with T-Mobile US, Inc.

Rite Aid Corp.’s 6 1/8% notes due 2023 were also active and down slightly after Amazon.com Inc. announced plans to purchase the online pharmacy PillPack.

High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – suffered a $1.135 billion loss of cash in the week to June 27, according to fund-flow statistics generated by AMG Data Services Inc.

Nationstar prices

Nationstar Mortgage Holdings priced $1.7 billion of senior notes (B2/B+) in two tranches.

The acquisition deal included $950 million of five-year notes which priced at par to yield 8 1/8%. The yield printed in the middle of the 8% to 8¼% yield talk.

Nationstar also sold $750 million of eight-year notes at par to yield 9 1/8%. The yield printed at the wide end of yield talk set in the 9% area.

Credit Suisse, Jefferies, Deutsche Bank, Goldman Sachs, Morgan Stanley and KKR were the joint bookrunners.

CHS upsizes

CHS/Community Health Systems priced an upsized $1,032,607,000 issue of 8 5/8% 5.5-year senior secured notes (B3) at 99.457 to yield 8 ¾%.

The deal was increased from $1,027,000,000.

The yield printed in the middle of yield talk that was announced in the 8¾% area.

Orders were heard to be 1.5 times to two times book size, with at least $300 million of reverse inquiry, sources said.

Credit Suisse was the left bookrunner for the debt refinancing deal.

The notes were major volume movers after breaking for trade with more than $78 million of the bonds on the tape, a market source said.

The notes were quoted at par bid, par ¼ offered and were seen trading between 99¾ and par 7/8.

Big book for Stars

Stars Group Holdings priced an upsized $1 billion of eight-year senior notes (Caa1/B-/B-) at par to yield 7%.

The offering was increased from $750 million, while the concurrent multi-currency loan deal was downsized by means of the withdrawal of a £400 million term loan tranche.

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 acquisition financing deal played to a book that was four-times oversubscribed, a trader said.

Morgan Stanley, Deutsche Bank, Goldman Sachs, Macquarie, Barclays, BMO and J.P. Morgan were the joint bookrunners.

The notes were major volume movers in the secondary space with more than $84 million on the tape by late afternoon. The notes were seen trading between par ½ and 101¾.

They were quoted at 101 bid, 101 3/8 offered by late afternoon.

Superior Plus eight-year deal

Superior Plus priced a $350 million offering of eight-year senior notes (Ba3/BB) at par to yield 7%.

The yield printed in the middle of the 7% area yield talk and slightly wide of initial talk in the high 6% area.

Goldman Sachs, JP Morgan, TD, CIBC and Wells Fargo were the joint bookrunners for the acquisition financing deal.

While only $2 million of the bonds were seen on the tape, they traded well above their issue price and were quoted at par ¾ bid, 101 1/8 offered.

AmWINS in line with talk

AmWINS Group priced a $300 million sale of eight-year senior notes (Caa1/B-) at par to yield 7¾%.

The yield printed in the middle of talk for a yield in the 7¾% area.

Goldman Sachs was the left bookrunner. Barclays, JP Morgan, Morgan Stanley and Wells Fargo were the joint bookrunners.

The Charlotte, N.C.-based specialty insurance broker plans to use the proceeds, together with proceeds from new term loans and cash on hand, to pay off its second lien credit facility and first lien revolving credit facility as well as to fund a dividend and make payments to certain holders of stock options related to the dividend.

LGI downsizes

LGI Homes priced a downsized $300 million offering of 6 7/8% eight-year senior notes (B1/BB-).

The amount was cut from $400 million

Deutsche Bank managed the debt refinancing deal.

Charter prices $1.5 billion split-rated

In the crossover market, Charter Communications, Inc. subsidiaries Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. priced $1.5 billion of split-rated senior secured notes (Ba1/BBB-/BBB-) in two tranches.

The deal included $400 million of floating-rate notes due Feb. 1, 2024 at Libor plus 165 basis points, on top of final talk. The floaters attracted a book of $750 million.

The floating rate notes were seen trading between 100.04 and 100.29 after breaking for trade.

Charter also priced $1.1 billion of 4.5% fixed-rate notes due Feb. 1, 2024 at a Treasuries plus 180 bps spread. The notes were initially talked to price with a spread of Treasuries plus 195 bps. The tranche had a book size of $2.85 billion.

The 4.5% notes were seen trading between 99.893 and par after breaking for trade.

The deal came in a high-grade execution and played to a mix of investment grade, crossover and high yield accounts.

Charter’s existing paper become active in the secondary market as word of the new deal spread on Thursday morning, bond traders said.

Charter’s 5¾% notes were down about ½ point to trade at 96.3 with $18 million bonds on the tape, a market source said.

Bway prices €475 million

In the European primary market Bway Corp. priced €475 million of senior secured notes due April 15, 2025 (B3/B) at par to yield 4¾%.

The yield printed at the tight end of initial price talk in the 4 7/8% area, according to a bond trader.

BofA Merrill Lynch, Goldman Sachs, BMO and Citigroup were the leads.

Proceeds will be used to help fund the acquisition of the Atlanta-based manufacturer of rigid metal and plastic containers by Stone Canyon Industries LLC, a Santa Monica, Calif.-based global industrial holding company.

Elsewhere, Synthomer plc announced that despite a strong response from investors it has decided not to complete its €300 million offering of seven-year senior notes (Ba2/BB) due to unfavorable market terms and conditions.

Initial price on those notes talk was in the high 3% area.

Community Health trades down

While Community Health’s new 8 5/8% senior notes due 2024 were performing well in the secondary market, the company’s outstanding notes continued to trade down.

The company’s 5 1/8% senior notes due 2021 were quoted at 93 bid, 93½ offered on Thursday. They were quoted at 94 bid, 94½ offered prior to the new deal, according to a market source.

Community Health’s 6¼% notes due 2023 were quoted at 91½ bid, 92 offered on Thursday. Prior to the deal, they were quoted at 93½ bid, 94 offered.

The drop in Community Health’s outstanding junkbonds was widely expected due to the new deal, a market source said.

“They’re getting primed,” a market source said.

With $1 billion in secured debt on top of the structure, holders are worried the outstanding notes will get layered over, the source said.

RIG dominates

Transocean’s new 5 7/8% senior notes due Jan. 15, 2024 dominated trading activity in the secondary space with more than $184 million of the bonds on the tape by late afternoon. The notes were trading above their issue price.

They were seen at 99½ bid, 99¾ offered and were trading in a range of 99 1/8 to 99 7/8.

“They’re doing okay,” a market source said.

Transocean priced an upsized $750 million issue of the 5 7/8% 5.5-year senior secured notes (B1/BB-) at 99 on Wednesday. The deal was initially sized at $700 million.

PHI in focus

PHI’s 5¼% senior notes due 2019 remained active in the secondary space with the notes continuing to trade between 98¼ and 98½, sources said.

The notes have been in focus since PHI announced plans to refinance them with a new senior notes offering. They have seen gains and losses as PHI’s proposed offering of new senior notes has struggled during book building.

There was a buzz on Thursday that PHI pulled its downsized $300 million bond offering, shifting instead to a new term loan, according to a market source.

Earlier in the week, the Lafayette, La.-based provider of helicopter aviation services downsized the five-year senior secured notes offer (B3/B/B+) to $300 million from $500 million and talked the bonds at 9¾% to 10%, well wide of earlier guidance in the mid 8% area to 9%. Concurrently with the downsizing, the company began marketing a term loan B.

On Thursday, PHI upsized its three-year term loan B to $600 million from $300 million.

The term loan will be used to finance PHI’s tender offer for the 5¼% notes.

Sprint down

Sprint’s junk bonds were under pressure again on Thursday, a market source said.

Sprint’s 7 5/8% notes due 2025 were quoted at 101½ bid, 102½ offered on Thursday and were seen trading at 101½ in decent trading volume. They were previously quoted at 104 bid, 105 offered.

More than $25 million of the bonds were on the tape by late afternoon, a market source said.

The notes have seen losses since representatives of Sprint and T-Mobile testified before the Senate’s antitrust subcommittee. Doubts were raised during the hearing about the horizontal merger, a market source said.

While Sprint’s notes weakened, T-Mobile’s notes were relatively unchanged to down slightly.

The notes were down about ½ point on Thursday at 104 bid, 104½ offered. They previously were quoted at 104½ bid, 105 offered.

T-Mobile is a much more stable credit than Sprint, which is why T-Mobile’s notes have held firm while Sprint’s notes have seen gains and losses alongside merger announcements. T-Mobile is a solid double B credit while Sprint is only a single B.

“Sprint needs T-Mobile more than T-Mobile needs Sprint,” a market source said.

Rite Aid active

Rite Aid’s 6 1/8% notes due 2023 were active in the secondary space and coming in slightly after Amazon.com announced plans to purchase the on-line pharmacy PillPack.

The notes were seen down about ¼ to ½ point in the morning at 101¼ bid. They were seen trading later in the afternoon at 101 3/8. More than $28 million bonds were on the tape by late afternoon.

Competing drug store retailers took a hit following Amazon.com’s announcement.

Indexes mixed

Three benchmarks for the high-yield secondary market were mixed on Thursday with some seeing large losses while others gained.

The KDP High Yield index was down 17 basis points to close Thursday at 70.44 with the yield now 5.88%. Thursday’s loss was the largest drop for the index so far this week. The index was down 5 bps on Wednesday, 9 bps on Tuesday and 6 bps on Monday.

The Merrill Lynch High Yield index is back in negative territory after Thursday’s losses. The index dropped 33.3 bps on Thursday with the year-to-date return now negative 0.022%.

The index was down 10 bps on Wednesday, 7 bps on Tuesday and 11.9 bps on Monday.

Thursday was the first day the index has crossed back into negative territory since June 5.

The CDX High Yield 30 index was the sole index to see gains. The index was up 4 bps to close Thursday at 105.81. The index saw dramatic losses on Wednesday dropping 42 bps, after a 6 bps drop on Tuesday and 39 bps drop on Monday.

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