Upsized Level 3, DaVita and Carrizo drive-bys dominate primary, trade actively in aftermarket

By Paul A. Harris and Paul Deckelman

New York, April 14 – A trio of upsized large drive-by offerings were the big story in Junkbondland on Tuesday, syndicate sources said.

Besides being at the center of activity in the primary sphere, secondary market traders saw those three issues dominating the Most Actives list once they were freed for aftermarket activity.

All three of those optimistically timed and quickly shopped offerings were related to tender offers or redemptions of the respective companies’ outstanding bonds.

Level 3 Communications, Inc. brought a $1.5 billion two-part offering to market via a financing subsidiary, consisting of eight-year and 10-year paper. Both tranches of the fiber optic telecom network services provider’s bonds were seen trading at or slightly below their respective par issue prices.

DaVita HealthCare Partners Inc. did a single-tranche $1.5 billion offering of 10-year notes. The kidney dialysis operator’s new issue traded up slightly from its par issue price.

Energy exploration and production company Carrizo Oil & Gas Inc. priced $650 million of eight-year notes, which were seen having firmed smartly when they reached the aftermarket.

The day’s $3.65 billion of new U.S.-dollar denominated and fully junk-rated paper that came to market in four tranches, in this case all from domestic issuers, slightly exceeded Monday’s total of $3.46 billion, also in four tranches, according to data compiled by Prospect News.

There meanwhile was brisk secondary activity in those bonds which had priced on Monday, cable operator Charter Communications, Inc.’s $1.9 billion two-part issue of eight-and 10-year notes, Canadian pharmaceuticals company Concordia Healthcare Corp.’s $735 million of eight-year notes, and Hispanic broadcaster Univision Communications Inc.’s $810 million of 10-year secured notes.

Traders only saw dull activity away from the new deals.

Statistical indicators of junk market performance were mixed for a fifth straight session on Tuesday.

DaVita upsizes

A busy Tuesday session saw $3.65 billion of dollar-denominated issuance come in four tranches from three issuers.

All three companies upsized their deals and all three came with drive-by transactions.

Of the four tranches, one priced at the tight end of talk while the other three came on top of talk.

DaVita HealthCare Partners priced an upsized $1.5 billion issue of 10-year senior notes (B1/B+) at par to yield 5%.

The deal was increased from $1.25 billion.

The yield printed on top of yield talk that was tightened during the session. Early on the deal was guided in the low 5% yield context, according to a trader.

BofA Merrill Lynch was the left bookrunner. Barclays, Credit Suisse, Goldman Sachs, J.P. Morgan, Morgan Stanley, SunTrust and Wells Fargo were the joint bookrunners.

The Denver-based company plans to use the proceeds to fund the tender and/or redemption of its 6 5/8% senior notes due 2020, and for general corporate purposes which may include future acquisitions and share repurchases.

Level 3’s two-part deal

Level 3 Financing, Inc. priced an upsized $1.5 billion two-part senior notes transaction (B3/B/BB).

The deal grew from its initially announced size of $1.2 billion.

It included $700 million of eight-year notes which priced at par to yield 5 1/8%, and $800 million of 10-year notes which priced at par to yield 5 3/8%.

The notes in both tranches priced on top of yield talk, as well as on top of early guidance, according to a market source.

Citigroup was the left bookrunner. BofA Merrill Lynch, Morgan Stanley, Barclays, Goldman Sachs, Credit Suisse and J.P. Morgan were the joint bookrunners.

The Broomfield, Colo.-based fiber-based communications services provider plans to use the proceeds to repay or retire all $1.2 billion of its outstanding 8 1/8% senior notes due 2019. The additional proceeds resulting from the $300 million upsizing of the deal will be used to repay Level 3 Communications’ 8 7/8% senior notes due 2019.

Carrizo upsized, prices tight

Carrizo Oil & Gas priced an upsized $650 million issue of eight-year senior notes (B2/B) at par to yield 6¼%.

The deal was increased from $600 million.

The yield printed at the tight end of the 6¼% to 6½% yield talk, and inside of early guidance in the mid-6% yield context, according to a trader.

It was also the clear outperformer in late Tuesday secondary market action, the trader added, spotting the new Carrizo 6¼% notes due 2023 trading as high as 101½ bid, 102 offered.

RBC was the left bookrunner. Wells Fargo, Citigroup, BBVA, Capital One, Credit Agricole and Credit Suisse were joint bookrunners.

The Houston-based energy company plans to use the proceeds, including the additional proceeds resulting from the $50 million upsizing of the deal, to fund a tender offer for its 8 5/8% senior notes due 2018 as well as to pay down its revolver and for general corporate purposes.

Air Medical starts roadshow

Air Medical was scheduled to host an investor conference call and begin a roadshow on Tuesday for a $370 million offering of eight-year senior notes.

The LBO deal is expected to price on Friday.

Morgan Stanley, Jefferies, KKR, Nomura and MCS are the joint bookrunners.

Moy Park taps 6¼% notes

In the European high-yield market, Moy Park Holdings (Europe) Ltd. priced a £100 million add-on to its 6¼% notes due May 29, 2021 (B1/B+) at 98.5 to yield 6.55%.

The reoffer price came on top of price talk.

Global coordinator and bookrunner Goldman Sachs International will bill and deliver. Deutsche Bank and HSBC were also global coordinators and bookrunners.

The Ireland-based poultry producer plans to use the proceeds to fund a distribution to Marfrig Global Foods SA, its parent.

Junk funds seeing inflows

Cash flows for dedicated high-yield funds have been tracking positive into the early part of the present week, according to a market source.

High-yield ETFs saw $162 million of inflows on Monday, the most recent session for which data was available at press time.

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

For the week to Monday’s close, aggregate inflows came to $645 million.

Day’s deals trade actively

For a second consecutive session, much of the high yield world’s focus was on waiting for a trio of upsized drive-by deals to come to market – and then trading actively in them when they were freed for secondary dealings.

A trader saw both tranches of Level 3’s new notes trade as high as a 100 3/8 to 100 5/8 bid context when those notes started trading around, up from their par issue price.

However, said a second trader, “they were around par to 100¼ [bid] right out the chute – but then they both got hit.”

He said the bonds were going out around 99 7/8 to 99 15/16 bid “and both of them losing steam.”

At another desk, a market source pegged Level 3’s new 5 1/8% notes due 2023 at 99 7/8 bid at the end of the day, on busy volume of over $39 million, putting the issue high up on the day’s Most Actives list.

He also saw the company’s new 5 3/8% notes due 2025 at 99 13/16 bid, with over $27 million of the notes having changed hands.

Among Tuesday’s single-tranche issues, DaVita’s 5% notes due 2025 were seen having pushed up from their par issue price, but unlike Level 3, they stayed modestly above issue.

One trader saw the notes trading between par and 100½ bid.

A second had them finishing the day even better than that, at 100 5/8 bid, with over $60 million having changed hands.

But the big mover of the day among Tuesday’s issues was Carrizo Oil & Gas’ 6¼% notes due 2023.

A trader saw the bonds in a 101 to 102 bid context almost as soon as they began changing hands.

A second trader, though, first saw them between 100¼ and 100½ – but then saw those bids lifted until “it was settling in” around 102 bid, he said.

At another desk, the bonds were quoted around 101 5/8 bid, with over $72 million having traded.

Monday deals stay busy

Meanwhile, the big deals from Monday’s session were seen trading actively on Tuesday, with none more so than Charter Communications’ 5 1/8% notes due 2023, which saw over $95 million changing hands – easily the most active on the day.

He quoted those bonds at 100 3/8 bid, calling them down around 7/16 point on the day.

“They kind of hung in there in a 100¼ to 100½ range, on both of them,” another trader said.

The Stamford, Conn.-based cable, voice and internet service provider priced $1.15 billion of the 5 1/8% notes along with $750 million of 5 3/8% notes due 2025, both at par, via Charter’s CCO Holdings, LLC subsidiary. The quick-to-market offering was upsized to $1.9 billion from an originally announced $1.5 billion.

Concordia Healthcare’s 7% notes due 2023 had been the big winners on Monday, moving well up after the Toronto-based pharmaceuticals company’s $735 million offering had priced at par off the forward calendar, upsized from $610 million.

On Tuesday, they were among the most actively traded junk credits, with volume of over $60 million seen. A trader saw the bonds going out at 102¾ bid, while a second had them in a narrow 102½ to 102¾ area.

Univision Communications’ 5 1/8% senior secured notes due 2025 were little changed around 101 3/8 to 101 5/8 bid on Tuesday, a trader said – about where the Los Angeles-based Spanish-language television broadcaster’s bonds had wound up the previous day after its $810 million add-on issue had priced at 101.375 to yield 4.91%.

That quick-to-market offering had priced after it was upsized from $600 million originally.

A second trader located the bonds around 101 5/8 bid, calling them down 1/8 point, on volume of more than $26 million.

Indicators stay mixed

Overall, a trader said, “it was a really slow day. Nothing moved more than 1 or 2 points, and volume – away from the new issues – was light.”

Even though the Easter and Passover holidays are now history, he said that “there were still people out, their kids are on vacation in some places. That cut down on activity.”

“Price action wasn’t much,” a second trader said.

Statistical indicators of junk market performance were mixed for a fifth straight session on Tuesday.

The KDP High Yield Daily Index gained 4 basis points to end at 71.74, its third straight rise, which was also its 10th such advance in the last 11 sessions and its 15th rise in the last 17 sessions. On Monday, the index had moved upward by 5 bps.

Its yield declined by 2 bps to 5.17%, its third straight narrowing and seventh such tightening in the last eight sessions. On Monday, the yield had eased by 4 bps.

However, the Markit Series 24 CDX North American High Yield Index posted its third straight loss, its fourth in the last five sessions. It eased marginally on the day to end at 107½ bid, 107 17/32 offered. Monday, the index was down by 7/32 point.

And even the Merrill Lynch U.S. High Yield Master II Index suffered a loss – its first such downturn after 11 straight sessions on the upside, going back to March 27, and after 16 such improvements in the previous 17 sessions. It fell back by 0.011%, versus Monday’s 0.115% increase.

That left its year-to-date return at 3.517% down from Monday’s 3.528%, which had been its fourth consecutive new peak level for the year so far.

© 2015 Prospect News.
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