Novalex prices; Team Health ahead; Valeant down on post-asset sale, Trump comments; E&P mixed

By Colin Hanner and Paul A. Harris

Chicago, Jan. 11 – Novolex Holdings, Inc. priced Wednesday's sole offering in the high-yield primary market, a $625 million issue of 6 7/8% eight-year senior notes.

Team Health Holdings, Inc. downsized its offering of eight-year senior notes to $865 million as proceeds were shifted to a bank loan. The notes are talked to yield 6½% to 6¾% and are set to price Thursday.

In the high-yield secondary market, activity on Wednesday played to a similar tune it had a day prior as trading continued to swirl around one of the most actively traded pharmaceutical names.

After announcing $2.1 billion worth of asset sales on Tuesday, Valeant Pharmaceuticals International, Inc. swung downward Wednesday after posting several gains across its securities during the previous session.

“Valeant took a little breather. Bonds started trading off their recent highs,” a trader said. “There was lots of activity.”

A trader said the notes were dipping on post-asset sale news but also mentioned that president-elect Donald Trump’s comments during a press conference also had a factor in the movement.

Other pharmaceutical companies felt the effects of the Trump press conference, though not as actively as Valeant, a trader said.

In exploration and production, several names did not respond to the rising price of oil on the session. California Resources Corp. and Range Resources Corp. remained unchanged. Meanwhile, Chesapeake Energy Corp. was down.

Novolex inside of talk

Novolex priced a $625 million issue of eight-year senior notes (Caa1/CCC+) that came at par to yield 6 7/8%. It was Wednesday's sole deal.

The yield printed 12.5 basis points inside of the 7% to 7¼% yield talk and well inside of the mid-7% area initial guidance.

The deal was heard to be at least three-times oversubscribed, market sources said.

Late in the marketing, dealers excised “no premium in default” language from the bond indenture after it engendered significant pushback from investors. (See related story in this issue.)

Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC and Jefferies LLC were the joint bookrunners.

The issuing entity is be Flex Acquisition Co., Inc.

Proceeds will be used as permanent financing for the leveraged buyout of the Hartsville, S.C.-based packaging company by Carlyle Group from Wind Point Partners and TPG Growth.

Team Health downsizing, talk

The LBO debt financing for Team Health saw $150 million of proceeds shifted to the bank loan from the bonds, reducing the bond offering to $865 million from $1,015,000,000 on Wednesday.

The bank loan increased to $2.75 billion from $2.6 billion.

The downsized offering of eight-year senior notes (Caa1/CCC+/CCC+) was talked to yield 6½% to 6¾%, tight to initial guidance in the 6¾% area.

Books for the bond deal were heard to be four-times deal size on Wednesday morning, according to a portfolio manager who added that much of the deal will likely go to investors who participated in the syndicated bridge loan.

The notes are set to price Thursday.

Barclays in the lead left bookrunner. J.P. Morgan Securities LLC, BofA Merrill Lynch, Morgan Stanley and RBC Capital Markets are the joint bookrunners for the LBO deal.

TalkTalk talk

In the European primary market TalkTalk Telecom Group plc talked its £300 million offering of five-year senior notes (BB-/BB-) to yield 5½% to 5¾%.

A planned Thursday roadshow stop in Edinburgh is canceled, and the debt refinancing deal appears headed for a Thursday execution.

Joint bookrunner Barclays will bill and deliver. HSBC and NatWest Markets are also joint bookrunners.

The notes come with two years of call protection and feature a 101% poison put.

The London-based provider of pay television, telecommunications, internet and mobile network services plans to use the proceeds to repay its revolving credit facility.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed and essentially flat on Tuesday, the most recent session for which data was available at press time.

High-yield exchange-traded funds sustained $69 million of outflows on the day.

Actively managed funds saw $5 million of inflows on Tuesday.

However, as has been the trend since late 2016, the daily cash flows of the dedicated bank loan funds were positive and persuasive. The loan funds saw $350 million of inflows on Tuesday.

Valeant declines

Canadian pharmaceutical company Valeant announced late Monday and early Tuesday the sale of several of its brands and interests in deals totaling $2.1 billion, a dent in the $30 billion debt load the company currently has.

On Wednesday, bonds fell off their highs, in what amounted to a combination of dips off the momentum caused by the asset sale and remarks directed at the pharmaceutical industry by president-elect Trump.

A trader said the notes had already begun to trade off Tuesday’s highs before Trump took the stage late Wednesday morning and continued the pace after he had finished.

The 6 1/8% notes due 2025 – the “most actively” traded bond of the day, according to traders – were down 2½ points to 75¾, and the 5 7/8% notes due 2023 followed with a 2-point loss to 76 5/8, a trader said.

Valeant’s 6¾% notes due 2018 were down 1¼ points to 97¾, and the 5 3/8% notes due 2020 were down 1½ points to 88¾.

Trump’s rapid-fire condemnation of specific businesses and sectors – typically reserved for social media in recent weeks – came out in his first press conference in six months on Wednesday, this time against pharmaceutical companies.

Trump said he would create new bidding procedures for the drug industry because “they're getting away with murder.”

“Pharma, pharma has a lot of lobbies, a lot of lobbyists and a lot of power,” Trump said during the press conference. “And there's very little bidding on drugs. We’re the largest buyer of drugs in the world, and yet we don't bid properly. And we’re going to start bidding, and we’re going to save billions of dollars over a period of time.”

Drug companies’ equity prices retreated immediately after the comments were made, including Valeant’s, which were down $1.07, or 6.52%, to $15.33.

Health care followers

Endo Finance Co. (Endo Pharmaceuticals plc) saw one of the day’s biggest hits in response to Trump’s comments.

A trader said its 6% notes due 2023 were down almost 3 points to 86¾.

Its stock price plummeted $1.30, or 8.49%, to $14.01.

Dallas-based Tenet Healthcare Corp.’s 6¾% notes due 2022 were down 1/8 point to 94 3/8 on “pretty heavy volume.”

Though Trump did solidify his position to repeal and immediately replace the Affordable Care Act with another plan during the press conference Wednesday, traders did not respond as actively as other headlines in the past.

Community Health Systems, Inc.’s 5 1/8% notes due 2021 were down ¾ to 94¾, a market source said.

And HCA Inc.’s 4½% notes due 2027 were unchanged at 99 5/8, a trader said.

E&P mostly down

Though oil prices did advance amid news that refiners in the United States produced a record amount of crude last week, companies in Junkbondland were flat to lower.

California Resources’ 8% notes due 2022 were unchanged at 89½, a trader said.

Mirroring the flat movement was Fort Worth, Texas-based Range Resources’ 5¾% notes due 2021, which remained at 105¼.

A day after being the most active name in the high-yield arena, Sabine Pass Liquefaction LLC’s biggest gainer from Tuesday, its 5 5/8% notes due 2023, were down ½ point to 108¾, a market source said.

Denbury Resources Inc.’s 6 3/8% notes due 2021 were down ¼ point to 92½.

And perhaps one of the steepest losers on the day were Chesapeake’s 8% notes due 2022, which were down 1 point to 106 5/8, a market source said.

Mixed on the airwaves

Traders said the activity across a handful of communication companies were mixed on the session, especially iHeartCommunications, Inc.’s 14% notes due 2021, which were down ¾ point to 34.

Another trader said they settled around a 34½ context though added that it was not necessarily out of the most recent trend.

“There’s nothing necessarily out news-wise, but they continue to be active” ahead of an upcoming auction, the trader said.

Frontier Communications Corp.’s 11% notes due 2025 were down 3/8 point to 102½, a trader said.

And Stamford, Conn.-based Charter Communications, Inc.’s 6 5/8% notes due 2022 were up ¼ point to 104 1/8.

A mixed bag roundup

A trader said a variety of high-yield securities traded modestly in both directions on Wednesday.

Intelsat SA’s 8% notes due 2024 were down 1/8 point to 103, a trader said.

Nathan’s Famous, Inc.’s 10% notes due 2020 – a bond the trader had never seen traded before – were up ½ point to 109 on 10 trades.

Gold, silver and copper producer Freeport-McMoRan, Inc.’s 3.55% notes due 2022 moved ½ point to 96, and the 5.4% notes due 2034 were down 1/8 point at 90 3/8, a trader said.

West Chester, Ohio-based AK Steel Holding Corp.’s 7 5/8% notes due 2020 were up ¼ point at 102¼.

Debt-issuing company Altice Financing SA’s 7¾% notes due 2026 were up ¼ at 105 3/8.

Indexes down

Two indexes continued to post downturns during Wednesday session.

The KDP High Yield index lost 5 bps on Wednesday to close at 72.07. It’s the third consecutive loss after seven straight sessions on the upside. On Tuesday, the index fell by 1 bps, and on Monday, it fell by 2 bps.

Its yield, meanwhile, rose to 5.16% after being unchanged on Tuesday.

The Markit Series 27 CDX index stayed on the downside for a fifth consecutive session, ending down by 5/32 point on Wednesday to close at 106¼ bid, 106 1/3 offered. It had lost 3/16 point on Tuesday.

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