Envision prices downsized deal, trades lower; Vine Oil prices; Tesla dominates

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 28 – The domestic primary market rounded out an active week with $1.6 billion pricing over two deals, including Envision Healthcare Corp.’s closely watched LBO financing deal.

Envision priced a downsized $1,225,000,000 issue of eight-year senior notes (Caa1/B-) at par to yield 8¾%.

The notes were trading at lower levels soon after pricing.

While Envision downsized, Vine Oil & Gas LP and Vine Oil & Gas Finance Corp. upsized its sale of $380 million of senior notes due April 15, 2023 (Caa1/B-) and priced it at par to yield 9¾%.

The forward calendar continued to fill in with Intertape Polymer Group Inc. planning to start a roadshow on Monday for a $250 million offering of eight-year senior notes (B2/B+).

The European primary market also remained active on Friday with El Corte Ingles, SA pricing a €600 million offering of 5.5-year senior notes (Ba1/BB+/BB+).

Meanwhile, Tesla Inc.’s 5.3% senior notes due 2025 were the focus of trading activity in the secondary space with the notes dropping after the Securities and Exchange Commission accused chief executive officer Elon Musk of fraud.

Refinitiv’s dollar-denominated tranches from its $4.25 billion equivalent LBO financing deal remained active in secondary trading with the notes growing weaker amid speculation the deal’s sponsor may extract a dividend.

J.C. Penney Co., Inc.’s junk bonds were also active and trading down on Friday after the departure of the company’s chief financial officer.

Envision downsizes

Envision Healthcare priced a downsized $1,225,000,000 issue of eight-year senior notes (Caa1/B-) at par to yield 8 ¾% on Friday.

The deal was reduced from $1,625,000,000 with $400 million of proceeds shifted to a concurrent term loan, increasing its size to $5.45 billion from $5.05 billion.

The bond yield printed in the middle of yield talk set in the 8¾% area. That talk came tight to the earlier whisper of 8¾% to 9%, as well as tight to initial price talk announced in the high 8% area, sources said.

The dealer did not have a lot to say about the book, according to a buyside source who was following the situation.

Timing on Envision Healthcare was accelerated with a roadshow that had been expected to continue into the Oct. 1 week shortened.

Citigroup was the left bookrunner.

The notes “traded down pretty fast,” a market source said. The notes were hitting a 99¼ bid soon after pricing, although no prints were on the tape yet, the source said.

While the term loan was heard to be a blowout, there was some speculation the junk bonds had trouble getting out the door.

Proceeds will be used to help fund the buyout of the company by KKR for $46.00 per share in cash, or about $9.9 billion including the assumption or repayment of debt.

Vine Oil & Gas upsizes

Vine Oil & Gas priced an upsized $380 million issue of senior notes due April 15, 2023 (Caa1/B-) at par to yield 9¾%.

The deal was increased from $350 million.

The yield printed at the wide end of the 9½% to 9¾% yield talk. Initial price talk was set in the mid 9% area.

Morgan Stanley, HSBC, J.P. Morgan, Credit Suisse, SG, Natixis and Blackstone were the joint bookrunners for the 4.5-year notes issue.

The Plano, Texas-based oil and gas company plans to use the proceeds to refinance its term loan B.

The additional proceeds resulting from the $30 million upsizing will be used for general corporate purposes.

Intertape sets roadshow

Intertape Polymer Group plans to start a roadshow on Monday for a $250 million offering of eight-year senior notes (B2/B+).

BofA Merrill Lynch, BMO, JP Morgan, NBC and RBC are the joint bookrunners.

Proceeds will be used to pay down the plastic and paper packaging company’s $600 million credit facility due June 2023 and for general corporate purposes.

The week ahead figures to be an active one, according to a syndicate official who professed to have no visibility on anything particularly sizable bound for execution in the high-yield primary market during the first week of October.

El Corte Ingles at 3%

In the European market, El Corte Ingles priced a €600 million issue of 5.5-year senior notes (Ba1/BB+/BB+) at par to yield 3%.

The yield printed at the tight end of the 3% to 3¼% yield talk.

The deal came with a fall-away provision which would strip some of the more restrictive high-yield covenants from the agreement if the issuer attains investment-grade ratings from two of the three ratings agencies, Moody's Investors Service, S&P Global Ratings and Fitch Ratings, an investor said.

Physical bookrunner BofA Merrill Lynch will bill and deliver. Goldman Sachs International was also a physical bookrunner.

Santander, BNP Paribas, Caixa, Sabadell, Credit Agricole CIB, Credit Suisse, SG CIB, UniCredit Bank, Deutsche Bank, Bankia and BBVA were joint bookrunners.

The Madrid-based department store operator plans to use the proceeds for general corporate purposes, including debt repayment.

Tesla in focus

Tesla’s 5.3% senior notes due 2025 were the focus of the secondary space on Friday with the notes trading down after the SEC formally accused CEO Musk of misleading investors.

The 5.3% notes traded as low as 94¼ in high volume activity although the notes rebounded and were set to close the day at 85 bid, 85 1/8 offered, sources said.

With more than $40 million of the bonds on the tape by late afternoon, the 5.3% notes were among the most actively traded of Friday’s session.

Prior to Friday, the notes were trading in the 86½ to 87 range.

While the bonds traded down, the drop was not dramatic.

“They’re in the news so much people are kind of waiting to see where this goes,” a market source said.

The SEC filed a lawsuit against Musk on Friday over his early August tweet about taking the company private, which sent Tesla’s stock and bonds on a roller-coaster ride.

The suit alleges Musk misled investors with false public statements and is seeking to bar Musk from serving as an executive or director of a publicly traded company.

Musk pulled out of a no-guilt settlement with the SEC prior to the lawsuit, CNBC reported.

Investors are concerned about whether Musk will be staying with the company, sources said.

Refinitiv active

Refinitiv’s dollar-denominated tranches from its $4.25 billion equivalent offering again saw high-volume trading on Friday ahead of settlement of the new deal on Oct. 1.

While largely unchanged on Friday, the 8¼% unsecured senior notes due 2026 (Caa2/B-/B+) grew softer in high-volume activity throughout the week.

The 8¼% notes were again seen at 99 3/8 bid, 99 5/8 offered on Friday. The notes were above par on Monday and traded as high as 101 the week before.

Refinitiv’s 6¼% senior secured notes due 2026 (B2/B/BB+) were also active on Friday although unchanged at par 3/8 bid, par 5/8 offered.

The notes were down about ½ point on the week.

There is an expectation in the market that the sponsors including Blackstone could extract cash from the enterprise in the form of a dividend, a market source said.

While there were some concessions on the deal, its covenants were decidedly issuer friendly, the source said.

Sponsors have the right to pay themselves a dividend of up to $2 billion right after the buyout closes.

Such a dividend might be accomplished by means of asset sales or another pass at the leveraged markets, the source said.

Refinitiv priced its four-tranche $4.25 billion equivalent offering on Sept. 18, which included a $1.25 billion tranche of the 6¼% first lien notes and a $1,575,000,000 tranche of the 8¼% notes.

Both tranches priced at par.

Proceeds from the deal will be used to help fund the acquisition of a 55% stake in Thomson Reuters Financial & Risk by Blackstone, Canada Pension Plan Investment Board and GIC.

J.C. Penney drops

J.C. Penney’s bonds were active and trading down on Friday after the departure of the company’s chief financial officer.

The retailer’s 8 5/8% notes due 2025 dropped about 3 points in high-volume activity.

The notes were seen at 66¾ bid, 67 offered on Friday. They were previously trading with a 69 handle, a market source said.

While not as active, the company’s 6 3/8% notes due 2036 were also down about 3 points to 40½ on Friday.

The company’s 5 5/8% notes traded down to 88¾. The notes were previously trading between 91 and 92, according to Trace data.

News broke Friday that CFO Jeffrey Davis was leaving the position he assumed a little more than one year ago.

The departure leaves the company without a CFO or a chief executive officer.

J.C. Penney’s bonds have been under pressure since mid-August when the company announced a dramatic earnings miss.

The company reported a loss per share of 38 cents for the second-quarter versus analyst expectations for a loss of 8 cents and slashed its forward guidance for 2018.

Indexes gains

Three benchmarks for the high-yield secondary market rounded out the week with gains after a mixed week.

The KDP High Yield Daily index was up slightly on Friday. The index climbed 1 basis points to close the day at 70.44 with the yield now 5.81%.

The index was up 3 bps on Thursday, down 1 bps on Wednesday, was flat on Tuesday, and was up 5 bps on Monday.

The ICE BofAML US High Yield index was up for the third consecutive trading day on Friday after launching the week with losses.

The index was up 4 bps with the year-to-date return now 2.483%.

The index was up 7.7 bps on Thursday and 7.6 bps on Wednesday but was down 1.3 bps on Tuesday and 3.8 bps on Monday.

The CDX High Yield 30 index closed out the week with gains after seesawing throughout the week.

The index was up 4 bps to close Friday at 107.3. The index dropped 14 bps on Thursday after climbing 11 bps on Wednesday.

The index closed Tuesday flat.

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