Credit Acceptance on tap; Digicel gains; recent deals active; Staples drops

By Abigail W. Adams

Portland, Me., March 4 – The March 4 week is expected to be an active one for the domestic high-yield primary market.

Initially six deals were heard to be in the works for the week, but the latest number of deals was heard to be four, a market source said.

However, only one deal joined the active forward calendar on Monday.

Credit Acceptance Corp. started a roadshow on Monday for a $400 million offering of seven-year notes (existing Ba3/BB) with pricing expected Wednesday

Johnson Controls, Inc. is expected to bring $4.8 billion equivalent of bonds during the March 4 week.

Frontier Communications Corp. and Digicel Group Ltd. may also surface with deals.

As whispers circulate about an upcoming deal from Digicel, the company’s outstanding bonds were on the rise in active trading in the secondary space.

New paper remained in focus in the secondary space although with little movement in price.

Bombardier Inc.’s 7 7/8% senior notes due 2027 (Caa1/B-) were active but flat on Monday after making large gains in their initial days in the secondary space.

Community Health Systems, Inc.’s 8% senior notes due 2026 (Caa1/B-/B) also saw high-volume activity although the notes continued to lag their new issue price.

CNX Resources Corp.’s newly priced 7¼% senior notes due 2027 (B3/BB-) were slow to trade in the secondary space but were also lagging their issue price.

Outside of the new paper, Staples, Inc.’s 8½% senior notes due 2025 dropped in active trading on Monday on news competitor Office Depot formed a strategic collaboration with Alibaba.com.

Credit Acceptance on tap

Credit Acceptance started a roadshow on Monday for a $400 million offering of seven-year notes (existing Ba3/BB which is whispered in the mid-to-high 6% area, according to market sources.

The roadshow will run through Tuesday with pricing expected on Wednesday.

Wells Fargo Securities LLC is the left bookrunner. Credit Suisse Securities (USA) LLC and BMO Capital Markets Inc. are joint bookrunners for the Rule 144A and Regulation S offering.

The pipeline

While only one deal joined the active forward calendar on Monday, the week ahead is expected to be busy.

Johnson Controls is expected to bring $4.8 billion equivalent of bonds during the March 4 week, according to market sources.

The deal is expected to include $2.75 billion equivalent of secured notes in dollar and euro denominations and $2.05 billion of unsecured bonds.

The secured dollar-denominated tranche was heard to be coming in the 7% area, a market source said.

J.P. Morgan Securities LLC is expected to lead the dollar-denominated secured notes.

The unsecured notes were heard to be coming in the low 9% area. Credit Suisse is expected to lead the unsecured notes.

Frontier Communications and Digicel may also surface with deals, sources said.

Digicel gains

As whispers circulate in the market about an upcoming deal from Digicel, the Jamaica-based mobile phone network provider’s outstanding bonds were making gains in active trading.

Digicel’s 6% senior notes due 2021 rose 1¾ points to 82 3/8, a market source said.

More than $22 million of the bonds were on the tape by the late afternoon.

The 6¾% senior notes due 2023 rose 1 7/8 points to 71½, according to a market source. More than $11 million of the bonds were on the tape during Monday’s session.

The notes have been on a downward spiral since the company reported third-quarter earnings and announced that lenders had agreed to ease the leverage covenant on its bonds.

Prior to the earnings report, the 6% notes were trading around 88 and the 6¾% notes were trading around 75.

Bombardier flat

Bombardier’s recently priced 7 7/8% senior notes due 2027 continued to see high-volume activity on Monday although the notes were largely trading sideways.

The 7 7/8% notes continued to change hands around 101½, flat from Friday’s close, according to a market source.

The yield on the notes is now 7½%.

More than $38.5 million of the bonds were on the tape by the late afternoon.

The notes have made large gains since hitting the secondary space.

Bombardier priced an upsized $2 billion issue of the 7 7/8% notes at 99.246 to yield 8% on Feb. 28.

The nice coupon and improving prospects of the company were pointed to as reasons for the strength of the new paper in secondary trading.

Bombardier is tendering for its 6 1/8% senior notes due 2021, 8¾% senior notes due 2021 and 7¾% senior notes due 2020 with proceeds from the new offering.

Community Health active

Community Health Systems’ recently priced 8% senior notes due 2026 were also largely unchanged in active trading with the notes continuing to lag their issue price.

The notes were quoted at 98 1/8 bid, 98½ offered. They were seen changing hands at 98¼ in the late afternoon.

The yield on the notes is now 8.33%.

With more than $45.75 million of the bonds on the tape, they were the most actively traded of Monday’s session.

Community Health priced a $1.58 billion issue of the 8% notes at 98.683 to yield 8¼% on Feb. 28.

The notes have lagged their issue price since hitting the secondary space.

CNX lags

Trading volume for CNX Resources’ 7¼% senior notes due 2027 was light on Monday. However, the new notes were lagging their issue price, market sources said.

The 7¼% notes were quoted at 96¾ bid, 97½ offered.

They were seen changing hands around 97. However, there were only three trades on the tape by the late afternoon, a market source said.

CNX Resources priced a $500 million issue of the 7¼% notes at 97.06 to yield 7¾% on Friday, a market source said.

The yield printed at the wide end of the 7½% to 7¾% yield talk.

Initial talk had been in the mid-to-high 6% area.

Staples drops

Staples’ 8½% senior notes due 2025 dropped in active trading on Monday on news competitor Office Depot had formed a strategic collaboration with Alibaba.com.

The 8½% senior notes traded down 1¼ points to 97 early in the session, a market source said.

They fell another ¼ point to 96¾ by the late afternoon.

More than $14 million of the bonds were on the tape by the late afternoon.

The newly announced partnership between Office Depot and Alibaba.com will include an online store.

It will also target the business-to-business e-commerce market with the aim of improving distribution and providing new sales channels for small- to medium-sized businesses, the companies said in a press release.

The new collaboration was seen as a negative for Staples.

Indexes mixed

Indexes were flat to down on Monday.

The KDP High Yield Daily index was flat at 69.91 with the yield also flat at 5.99%.

After a mixed week last week, the index closed the week largely flat as well. The index saw a cumulative gain of 1 bp on the week last week.

The ICE BofAML US High Yield index was also largely flat.

The index rose 0.2 bp with the year-to-date return now 6.409%.

The index saw a cumulative gain of 51.3 bps on the week last week.

The index shot past 6% returns on Feb. 25 after passing 5% returns on Feb. 12.

The index initially crossed the 5% threshold on Feb. 5 but sunk below it on Feb. 7.

The index surpassed 4% year-to-date returns on Jan. 30.

The CDX High Yield 30 index dropped 12 bps to close Monday at 106.31.

The index saw a cumulative gain of 14 bps on the week last week.

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