Avaya gains as sale mulled; Tenet, Community Health fall post-downgrade; oil names improve

By Stephanie N. Rotondo

Seattle, May 23 – The high-yield bond market traded lower Monday, even as oil and gas names improved and Avaya Inc. lurched upward on news of a possible sale.

Leading the weakness was the healthcare arena. Both Tenet Healthcare Corp. and Community Health Services Inc. traded off as investors digested recent ratings downgrades.

Moody’s Investors Service lowered its rating on Tenet on Friday. A downgrade in Community Health came Monday.

As for the oil and gas arena, California Resources Corp. and Chesapeake Energy Corp. firmed during the session, despite renewed weakness in domestic crude.

For its part, oil prices waned as wildfires in Canada started to fade, allowing oil workers to come back in. Even though it will take time for local refineries to get back up to pre-fire production levels, the fact that workers are back on the line once again stoked concerns about a supply glut.

Also weighing on oil was a recent report from Baker Hughes, which showed active U.S. drills unchanged week over week. A recent rally in crude prices has caused some to speculate that it will encourage producers to start drilling once again.

A trader said California Resources’ 8% second-lien notes due 2022 were up 4½ points to 69.

In Chesapeake paper, a trader sas the 8% second-lien notes due 2022 ticking up over a point to 74¼, as the 3.878% notes due 2019 increased 1½ points to 66.

Another trader pegged Chesapeake’s 8% notes “around 74,” which was up from “73-ish” on Friday.

“So that was up a little bit,” the trader said.

Gogo upsizes

Three issuers priced single-tranche deals to raise $1.22 billion during a news-heavy Monday session in the primary market.

Two of the three were upsized.

One came as a drive-by.

Executions were a mixed bag, with one deal pricing inside of talk, one pricing at the tight end and one at the wide end.

Gogo Intermediate Holdings LLC priced an upsized $525 million issue of six-year senior secured notes (B2/B-) at par to yield 12%.

The issue size was increased from $500 million.

The yield printed at the wide end of the 11¾% to 12% yield talk.

Morgan Stanley, J.P. Morgan and BofA Merrill Lynch led the deal.

Proceeds will be used to repay all debt under the company’s amended restated senior term facility, with remaining proceeds for working capital and other general corporate purposes, including potential costs associated with the launch and commercial rollout of next-generation technology solutions.

US Concrete inside of talk

U.S. Concrete, Inc. priced an upsized $400 million issue of eight-year senior notes (B3/BB-) at par to yield 6 3/8%.

The issue size was increased from $350 million.

The yield printed 12.5 basis points beneath the tight end of the 6½% to 6¾% yield talk.

J.P. Morgan was the lead bookrunner for the debt refinancing deal.

TRI Pointe prices tight

In drive-by action, TRI Pointe Group, Inc. priced a $300 million issue of 4 7/8% five-year senior notes (B1/BB-) at 99.437 to yield 5%.

The yield printed at the tight end of the 5% to 5 1/8% yield talk.

The issue was priced on the investment grade desk.

Citigroup was the left bookrunner. JP Morgan, Wells Fargo, Credit Suisse and Deutsche Bank were the joint bookrunners.

Proceeds will be used to repay borrowings under the company's revolver and for general corporate purposes.

Multiplan starts roadshow

MultiPlan Inc. led a parade of issuers starting brief roadshows for deals expected to price before the Memorial Day weekend, causing the forward calendar to balloon to $5.14 billion.

MutilPlan began a roadshow on Monday for a $1.3 billion offering of eight-year senior notes.

The roadshow wraps up on Wednesday, and the deal is set to price thereafter.

Goldman Sachs is the left bookrunner for the buyout deal. Barclays, BofA Merrill Lynch, Citigroup and UBS are the joint bookrunners.

Albertsons guidance 6¾% to 7%

Albertsons Cos. Inc. is guiding a $1.25 billion offering of eight-year senior notes to yield 6¾% to 7%, according to a trader.

The deal, which is being led by BofA Merrill Lynch, is expected to price on Wednesday.

The Boise, Idaho-based food and drug retailer plans to use the proceeds to repay some amounts outstanding under its existing term loan facility and to redeem 7¾% senior secured notes due 2022.

Teck Resources starts roadshow

Teck Resources Ltd. began a roadshow on Monday for a $1 billion two-part offering of senior notes (B1).

The deal includes five-year notes, which come with two years of call protection, and eight-year notes, which come with three years of call protection.

Tranche sizes remain to be determined.

The deal, via JP Morgan, is expected to price on Thursday.

The Vancouver, BC-based developer and miner of steelmaking coal and zinc plans to use the proceeds to fund the tender offers for up to $1 billon of its 3.15% notes due 2017, 3.85% notes due 2017, 2½% notes due 2018 and 3% notes due 2019, with any remaining proceeds to be used for general corporate purposes.

Cengage eight-year notes

Cengage Learning, Inc. plans to price a $740 million offering of eight-year senior notes (Caa1/CCC+) at the end of the present week.

Morgan Stanley, Credit Suisse, BMO, Citigroup, Goldman Sachs, Wells Fargo, Deutsche Bank and KKR are the joint bookrunners.

The Boston-based educational content, technology and services company plans to use the proceeds to retire its existing term loan and pay a special dividend to the shareholders.

The financing also included a new $1.59 billion term loan.

Parsley to price Tuesday

Parsley Energy, LLC plans to price a $200 million offering of eight-year senior notes on Tuesday.

The deal is set to roll out on a conference call scheduled for 10 a.m. ET.

Credit Suisse is leading the offer.

The Austin, Tex.-based oil and gas exploration and production company plans to use the proceeds to fund the acquisition of mineral rights and a working interest in the Delaware Basin, and for general corporate purposes.

Mixed flows on Friday

The dedicated high yield funds saw mixed cash flows on Friday, the most recent session for which data was available at press time, according to a market source.

High yield ETFs saw $118 million of inflows on the day.

Asset managers sustained $185 million of outflows on Friday.

The dedicated bank loan funds with also negative on Friday, sustaining $15 million of outflows.

Avaya bonds jump

Avaya saw its debt bouncing higher Monday after it was reported late Friday that the private equity owners were mulling a possible sale.

A trader saw the 10½% notes due 2021 jumping nearly 8 points to 30. The 7% notes due 2019 finished up over 3½ points at 74, while the 9% notes due 2019 added 1¼ points to close at 75¼.

Another trader said the 10½% notes moved up to 30 from previous levels around 22.

Silver Lake Partners LP and TPG Capital LP are reportedly considering a sale of the telecommunications equipment company in an effort to deal with a $6 billion debt burden. Avaya is said to be working with Goldman Sachs Group Inc. on a sale of the entire company, or potentially just pieces of it.

Avaya has $600 million of debt coming due in late October. In its earnings call on May 16, the company said it was working with Centerview Partners Holdings LLC to explore restructuring options.

Healthcare sector weakens

The healthcare space was under pressure Monday, following a string of downgrades.

A trader said the 8 1/8% notes due 2022 fell over a point to 102 1/8, on about 20 trades in size. The 6¾% notes due 2023 were off a like amount at 96 1/8.

As for Community Health’s 6 3/8% notes due 2022, those ended down a point at 84¾.

On Friday, Moody’s dropped its rating on Tenet Healthcare to B2 from B1, citing high leverage. The agency also noted that a need to maintain an adequate liquidity cushion to mitigate potential litigation exposure “will likely prevent any meaningful debt repayment in the near term.”

Come Monday, Community Health was downgraded to B2 from B1. High leverage was also cited as the main reason for the change.

Given the ratings actions, both Tenet and Community Health saw their bonds drifting down.

Market indicators mixed

The KDP High Yield index took a down turn on Monday.

The index closed at 67.07, with a 6.35% yield. That compared to Friday’s reading of 67.17, yielding 6.31%.

But the CDX North American Series 26 High Yield index ticked up a 10th of a point to 101.8 bid, 101.9 offered, according to a market source.

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