HC2, LifePoint carry over; McDermott tanks again; Revlon pops post earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 9 – While the domestic primary market saw the two deals on its forward calendar pushed into the Nov. 12 week, the European primary market saw some action with two issuers pricing and one more joining the forward calendar.

RegionalCare Hospital Partners Holdings, Inc. and LifePoint Health, Inc.’s $1,575,000,000 offering of eight-year senior notes (Caa1/CCC+) and HC2 Holdings, Inc.’s $535 million offering were expected to price on Friday but volatility in the markets delayed the deals.

In the European market, Verisure syndicated €1,112,000,000 of debt in the form of high-yield bond and term loan paper.

International Design Group SpA priced €720 million of seven-year senior secured notes (B2/B/B+) in two tranches.

And Co-operative Group Ltd. joined the forward calendar with plans to start a roadshow on Tuesday for a £250 million offering of non-callable five-year fixed-rate green-eligible notes.

Meanwhile, the secondary space was soft on Friday after starting the week strong.

California Resources Corp.’s 8% senior secured second-lien notes due December 2022 were the most actively traded name in the secondary space on Friday.

The notes again traded down as crude oil futures continued their decline after entering bear territory on Thursday.

McDermott International Inc.’s 10 5/8% senior notes due 2024 (B2/B-) also saw high-volume activity with the notes again cratering after seeing a slight rebound earlier in the week.

Trading activity continued to focus on earnings related news with some notes dropping and others gaining after their earnings announcements.

CenturyLink, Inc.’s 7½% senior notes due 2024 (B2/B+) dropped 2 points in active trading on Friday.

However, Revlon, Inc.’s 5¾% senior notes due 2021 (caa3/CCC) popped on Friday after a large earnings surprise with the company posting a profit.

Verisure places €1.11 billion

Friday’s new issue news came from Europe.

Verisure syndicated €1,112,000,000 of debt that came in the form of high-yield bond and term loan paper.

The transaction featured two tranches of senior secured debt issued by Verisure Holding AB, in the form of a term loan and notes (B1/B).

It included a €712 million seven-year term loan B with a Euribor plus 350 basis points coupon which priced at par.

The spread came at the wide end of the 325 to 350 bps spread talk. The Euribor floor came on top of talk. The reoffer price came at the rich end of the 99.75 to par price talk.

Verisure Holding AB also priced a €300 million issue of 4.5-year notes at par to yield 3½%. The yield printed 12.5 bps inside of yield talk set in the 3¾% area.

In an unsecured tranche, Verisure Midholding AB priced a €100 million add-on to its 5¾% senior notes due Dec. 1, 2023 at 99.75.

The reoffer price came at the rich end of the 99.5 to 99.75 price talk.

The Malmo, Sweden-based provider of security systems plans to use the proceeds to refinance its 6% senior secured notes due Nov. 1, 2022, as well as to repay its revolving credit facility and to fund a distribution to its shareholders.

IDG prices two-part deal

International Design Group priced €720 million of seven-year senior secured notes (B2/B/B+) in two tranches.

The deal included €400 million of fixed-rate notes which priced at par to yield 6½%. The yield printed in the middle of yield talk announced in the 6 ½% area and towards the wide end of earlier guidance in the low-to-mid 6% area.

In addition, the company priced €320 million of floating-rate notes with a 600 bps spread to Euribor and a 0% Euribor floor at par.

The floating-rate tranche came on top of final price talk and in line with initial guidance which had the floater coming 50 basis points inside of the fixed-rate notes.

Joint global coordinator JPMorgan will bill and deliver. UniCredit and Goldman Sachs International were also joint global coordinators. DNB Markets and HSBC were joint bookrunners.

Proceeds will be used to help fund the buyout of the Italy-based lighting and furniture producer by Investindustrial and the Carlyle Group and to repay debt.

Co-operative brings green deal

Co-operative Group plans to start a roadshow on Tuesday for a £250 million offering of non-callable five-year fixed-rate green-eligible notes.

Joint lead manager Barclays will bill and deliver. ING Bank and Lloyds Bank are also joint lead managers.

Proceeds will be used to fund green-eligible sustainable projects.

The deal is coming concurrently with a tender offer for £250 million of the company's 5 5/8% notes due 2020, a sell-side source noted.

No proceeds from the new green notes offer will be used to fund the tender but completion of the tender is contingent upon the successful placement of the notes, the source said.

Heading into the weekend, the only other deal on the active calendar was Groupe Ecore Holding SAS (Luxembourg)’s €255 million offering of five-year senior secured floating-rate notes via sole bookrunner Barclays.

The roadshow wraps up on Wednesday.

Dollar deals held over

As volatility continued to rock the markets, the dollar-denominated news on Friday focused on what did not happen.

RegionalCare Hospital Partners and LifePoint Health’s $1,575,000,000 offering of eight-year senior notes (Caa1/CCC+), which had been on deck to price Friday, was moved back into the Nov. 12 week, market sources said.

The notes were talked Thursday to yield 9% to 9¼%, tight to earlier guidance for a yield in the 9¼% area.

However, wider price talk and covenant changes are expected to be announced on Tuesday, according to a trader, who added that accounts were heard to have been canvassed at 9¾%.

The merger financing deal is being helmed by left lead bookrunner Barclays.

Meanwhile, HC2 Holdings will extend the stay of its $535 million offering of senior secured notes into the Nov. 12 week.

The deal, via sole bookrunner Jefferies, was announced on Oct. 22 and originally set to price in the week of Oct. 29.

The HC2 Holdings notes were talked Wednesday with an 11½% coupon at a reoffer price of 98.75 to yield 12%.

The HC2 deal’s structure, pricing and covenants are all believed to be in play, market sources said on Friday, adding that the issuer is determined to get the deal done.

The pipeline

Apart from those offerings that were pushed across the extended Veterans Day holiday weekend in the United States, there is a modest pipeline, sources say.

In addition to debt repayment deals, there are some committed merger and acquisition financings that need to come, market conditions notwithstanding, a syndicate banker said.

“It’s not a big stretch to suggest that we’re just about done for the year,” the banker said.

The post-Veterans Day week will have only four market sessions and the following week, the pre-Thanksgiving Day week in the United States, will have only three sessions, rendering it a customarily quiet week in the primary market, the source said.

Those give way to the final week in November, the Dec. 3 week, the Dec. 10 week and possibly the Dec. 17 week as possible periods to get deals done, the source calculated.

However early in that final week, the Federal Open Market Committee will convene for two days of meetings on Dec. 18 and 19, widely expected to generate another increase in the Fed Funds rate.

The rising rates are likely the biggest impediment to steady business in the high-yield new issue market, the source said.

California Resources in focus

California Resources’ 8% senior notes due 2022 were the most actively traded issue in the secondary space as crude oil futures extended their losses.

The notes shaved off another 1 7/8 point to close Friday at 86½, a market source said. The 8% notes were down 3.5 points on the week.

With more than $63 million of the bonds on the tape by the late afternoon, the 8% notes were the most actively traded issue of the day.

WTI crude is now trading in bear territory with the per-barrel price dropping below $60 in intraday trading but settling at $60.19, a decrease of 48 cents or 0.79%.

Friday marked the 10th consecutive session in which crude oil futures have declined – the longest losing streak since 1984, CNBC reported.

All eyes will be on OPEC when it convenes on Sunday for an indication of what output levels will look like going forward.

Headlines circulated on Friday about Saudi Arabia mulling a potential withdrawal from the 15-member organization, contributing to uncertainty about oil prices.

McDermott tanks again

McDermott’s 10 5/8% senior notes due 2024 were again in focus in the secondary space with the notes tanking after staging a slight rebound earlier in the week.

The notes dropped 8¼ points to close Friday at 86, a market source said. More than $51 million of the bonds were on the tape by the late afternoon.

The notes are now well below their previous level after cratering 10 points on Oct. 31 to 90½.

The notes dropped after McDermott missed earnings on its top and bottom line and announced a divestiture from its storage tank and U.S. pipe fabrication business.

The 10 5/8% notes staged a slight rebound earlier in the week to trade up to 94 after an investor’s day.

Prior to the earnings announcement, the 10 5/8% notes were trading around par ½.

CenturyLink drops

CenturyLink’s 7½% senior notes due 2024 were down in active trading on Friday after the company reported third quarter earnings.

The notes dropped 2 points to close the day just shy of 104, a market source said. More than $26 million of the bonds were on the tape by the late afternoon.

While earnings per share matched analyst expectations, the telecommunications company missed on revenue and reported declining sales across its business segments.

CenturyLink reported earnings per share of 30 cents, which matched analyst expectations.

However, revenue was $5.82 billion, which missed expectations of $5.88 billion.

Revenue across its four business segments decreased year-over-year for an aggregate decline of 3.6%.

Revlon pops

Revlon’s 5¾% senior notes due 2021 popped after the company announced a third quarter profit. Most were expecting continued losses, a market source said.

The 5¾% notes jumped 4 points to close Friday at 82½. More than $21 million of the bonds were on the tape by the late afternoon.

Revlon reported earnings per share of 14 cents in the third quarter versus the consensus estimate of a loss per share of 40 cents.

The cosmetics company reported revenue of $11.10 million.

The earnings were surprising, a market source said.

The notes have been under pressure throughout the year with steep losses in previous earnings reports and the retail sector in general out of favor.

Thursday inflows

The daily cash flows for dedicated high-yield bond funds were positive on Thursday, the most recent session for which data was available at press time, a trader said.

Actively managed high-yield funds saw $505 million of inflows on the day, their largest daily inflow in six months, the source noted.

High yield ETFs saw $386 million of inflows on Thursday.

The combined funds saw $1.04 billion of net inflows in the week to Wednesday’s close, almost exactly canceling out the previous week’s $1.043 billion of outflows, the source said.

That factoring completed, the year-to-date flows of the combined high yield funds stood at negative $33.1 billion to Thursday’s close, according to a market source.

Indexes close week with losses

Indexes closed Friday with losses although some still posted gains on the week, which started off strong.

The KDP High Yield Daily index dropped 20 basis points to close Friday at 69.22 with the yield now 6.30%.

The index was up 3 bps on Thursday, 12 bps on Wednesday, 9 bps on Tuesday and 8 bps on Monday for a 12 bps gain on the week after Friday’s loss is taken into account.

The index dropped 13 bps during the previous week after a 60 bps drop during the Oct.22 week.

The ICE BofAML US High Yield index fell 40.3 bps on Friday with the year-to-date return now 1.11%.

The index was up 4.7 bps on Thursday, 28.8 bps on Wednesday, 11.4 bps on Tuesday and 5.8 bps on Monday for a 10.4 bps gain on the week.

The index gained 24.4 bps last week after a 74.5 bps slide the week before.

The CDX High Yield 30 index tanked on Friday. The index was down 78 bps to close the day at 105.54.

The index dropped 24 bps on Thursday after gaining 37 bps on Wednesday, 18 bps on Tuesday and 23 bps on Monday.

The index was down 24 bps on the week. The index climbed 89 bps last week after a 92 bps drop the week before.

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