HCA two-part drive-by, Vantage megadeal lead nearly $6 billion day; new issues trade up

By Paul Deckelman and Paul A. Harris

New York, Oct. 16 - After a relatively quiet session on the pricing front on Monday, the high-yield primary market saw one of its busiest days of the year on Tuesday as $5.775 billion of new dollar-denominated, purely junk-rated paper from domestic and developed-country issuers came to market in eight tranches.

Hospital operator HCA Inc. had the big deal of the day, a quickly shopped and upsized $2.5 billion two-part offering of 10.5-year senior secured and unsecured notes.

There was also a $1.15 billion regularly scheduled forward calendar offering of seven-year senior secured notes from offshore contract energy driller Vantage Drilling Co.

Besides those two giants, there were smaller deals from CNH Global NV, IMS Health Inc., Mood Media Corp., Dematic Holding Sarl and Radio Systems Corp.

When they were freed for aftermarket dealings, IMS Health's new issue and CNH Global's deal were each quoted up more than a point from their par issue price. Mood Media and both halves of the HCA deal firmed modestly from issue. No aftermarket activity was immediately seen in Vantage Drilling, Dematic or Radio Systems' new deals.

Price talk emerged on Albea Beauty Holdings SA's upcoming issue, while the forward calendar continued to grow with the addition of prospective deals from metals producer Aleris International Inc. and snack food manufacturer Shaearer's Foods Inc.

Away from the new deals, secondary activity was limited, but with a decidedly firmer tone. Statistical market performance measures were better across the board.

HCA massively upsizes

In the primary market, four of the eight tranches were upsized, and the timeline for deals in the market remained brisk.

Executions remained tight, although perhaps slightly less tight than was the case at the beginning of the month. Two of Tuesday's seven tranches came at the tight end of price talk, three came on top of talk while two came at the wide end of talk. And one came wide of talk.

HCA priced the session's biggest deal, a massively upsized $2.5 billion issue of non-callable 10.5-year senior secured notes in secured and unsecured tranches.

Both tranches were upsized to $1.25 billion from $1 billion.

The senior secured notes (Ba2/BB) priced at par to yield 4¾%, at the tight end of the 4¾% to 4 7/8% yield talk.

The senior unsecured notes (B3/B-) priced at par to yield 5 7/8%, at the wide end of the 5¾% to 5 7/8% yield talk.

Bank of America Merrill Lynch, Barclays, Citigroup, Deutsche Bank, Goldman Sachs, J.P. Morgan and Wells Fargo were the joint bookrunners for the quick-to-market deal, the overall size of which was increased from $2 billion.

The Nashville-based hospital operator will use proceeds for general corporate purposes, which may include the repayment of HCA's existing term loan B-1 facility due November 2013 and the financing of a dividend to stockholders of HCA Holdings, Inc. The additional $500 million of proceeds, resulting from the upsizing, will be used to put cash on the balance sheet and for general corporate purposes.

Vantage prices $1.15 billion

Vantage Drilling priced a $1.15 billion issue of seven-year senior secured first lien notes (B3/B-) at par to yield 7½%, at the wide end of the 7¼% to 7½% yield talk.

Citigroup was the left bookrunner. Jefferies, RBC and Deutsche Bank were the joint bookrunners.

Proceeds will be used to tender for the company's existing $2 billion of 11½% senior secured notes due 2015 and to fund growth capital expenditures.

CNH massively upsizes

CNH Capital LLC priced an upsized $750 million issue of non-callable three-year senior notes (Ba2/BB) at par to yield 3 7/8%, on top of price talk.

Credit Suisse, Bank of America Merrill Lynch and Barclays were the joint bookrunners for the drive-by deal, which was upsized from $500 million.

The subsidiary of CNH Global NV will use proceeds, including the additional proceeds resulting from the upsizing, to refinance existing debt and for general corporate purposes.

IMS Health at tight end

In one of three Tuesday deals to price at the conclusion of a roadshow, IMS Health priced a $500 million issue of eight-year senior notes (B3/B) at par to yield 6%.

The yield printed at the tight end of the 6% to 6¼% yield talk.

Goldman Sachs, Bank of America Merrill Lynch, Deutsche Bank, HSBC and J.P. Morgan were the joint bookrunners for the dividend deal.

Mood Media wide of talk

In another roadshow deal, Mood Media priced a $350 million issue of eight-year senior notes (B3/B-) at par to yield 9¼%.

The yield printed 25 basis points beyond the wide end of the 8¾% to 9% yield talk.

Credit Suisse and Jefferies were the joint bookrunners.

The Toronto-based in-store music, visual and scent media specialist plans to use the proceeds to repay existing debt under its first-lien credit facility, to repay its second-lien credit facility in its entirety, to finance the Independence Media, Inc. acquisition and for general corporate purposes.

Dematic PIK dividend deal

Dematic priced an upsized $275 million issue of four-year senior PIK notes (Caa2/CCC+) at par with a cash yield of 9%.

The reoffer price and cash yield both came on top of price talk.

The PIK coupon is 9½%. The PIK yield is 9.307%

J.P. Morgan and Barclays were joint bookrunners for the quick-to-market deal, which was upsized from $200 million.

Proceeds will be used to fund a cash dividend.

Radio Systems seven-years

Radio Systems priced a $250 million issue of seven-year senior secured second-lien notes (B3/B-) at par to yield 8 3/8%.

The yield printed in the middle of the 8¼% to 8½% yield talk.

Bank of America Merrill Lynch, Fifth Third and BMO were the joint bookrunners for the debt refinancing deal, which also ran a brief roadshow.

Albea talks two-part deal

Looking to the Wednesday session Albea Beauty Holdings set price talk for its $650 million-equivalent multi-currency offering of seven-year senior secured notes (B2/B+).

The dollar-denominated notes are talked with a yield in the 8½% area, and the euro-denominated notes are talked to yield 8¾% to 9%.

Tranche sizes remain to be determined.

Joint physical bookrunner Bank of America Merrill Lynch will bill and deliver for the dollar notes. JPMorgan, also a joint physical bookrunner, will bill and deliver for the euro-denominated notes.

Barclays is the joint bookrunner.

Aleris starts roadhow

Aleris International started a roadshow on Tuesday for its $400 million offering of eight-year senior notes (expected ratings B2/B).

Pricing is expected on Thursday.

J.P. Morgan, Barclays, Deutsche Bank, Credit Suisse, Goldman Sachs and Bank of America Merrill Lynch are the joint bookrunners.

Proceeds will be used for general corporate purposes, including working capital, capital expenditures and/or funding the completion of construction of an aluminum rolling mill in China. In addition, proceeds will be used to fund potential acquisition opportunities.

Also, after March 31, 2013, proceeds could be used to fund one or more cash dividends to Aleris Corp.

CNH up despite low coupon

When CNH's new 3 7/8% notes due 2015 were freed for secondary dealings, the new deal - actually brought to market via the company's CNH Capital LLC subsidiary - was seen by a trader to have "performed nicely."

He saw the Burr Ridge, Ill.-based heavy equipment manufacturer's issue moving up to a 101 5/8 to 101 7/8 context, after having priced at par post-upsizing.

The trader noted that the upside came even though the issue carried a very small coupon by junk-market standards, and yet, "They upsized it from $500 million to $750 million."

In his memory, it was one of the smallest coupons ever seen in Junkbondland, probably exceeded only by one or two of Ford Motor Credit Co.'s deals "back when they were still junk."

It was, he said, "Yuck - I don't know how to describe it better." But still, it's a reflection of the new junk bond market, which in recent months has seen a fair number of deals coming in with coupons that would have been laughed out of the market in the past - yields of under 6%, or in some cases, even under 5% or 4%.

"It seems like the calendar is coming hot and heavy, and guys are either trying to get their allocation in the calendars. And whatever they can't [get], they try to buy really short-duration paper. But spreads are getting tighter and yields are getting lower - it's kinda crazy," he stated.

Taking a longer view, he opined, "A junk investor used to be a sort of value investor. Now, everyone's buying junk bonds as kind of a macro-investor, trying to just grab yield. So far, it's working out."

A second trader added that he was "trying to figure out when it all comes undone."

"To me, this stuff [i.e., very low-coupon bonds] doesn't represent any value. But then again, if your options are a 10-year [Treasury] note with a 1 5/8% coupon or whatever, and you're a pension fund and you need 7%," even the relatively small coupons of issues like CNH or others not much higher in the 4% or 5% range "are not that bad."

New HCA, IMS deals firm up

Also falling into that category of the new junk market paradigm of increasingly low coupons was the day's biggest deal, the $2.5 billion quick-to-market two-part offering from Nashville-based hospitals giant HCA.

A trader saw its $1.25 billion of 4¾% senior secured notes due 2023 at 100 1/8 bid, 100 3/8 offered, up from the par level at which those bonds had priced after having been upsized from an originally announced $1 billion.

He saw the company's identically sized and upsized 5 7/8% senior unsecured 10.5-year notes at 100 5/8 bid, 101 offered, also after a par pricing.

A second trader declared his belief that "a lot of that went to [investment-grade] guys, despite the rating and everything else."

In today's relatively tight-yielding fixed-income markets, he said: "A 10-year bullet with a 5 7/8% coupon - maybe you miss your [target] by only 2%."

Elaborating on his point that such an issue would attract some crossover interest from the high-grade precincts, he suggested, "If you were to take a look at the portfolios of a lot investment-grade mutual funds, they're probably weighted in high yield, whatever the maximum is that they're allowed, if it's 20% of the portfolio or whatever," as everyone continues to chase yield.

Also in that same health care sector, a trader saw the new 6% notes due 2020 from IMS Health initially quoted as high as 102¼ bid, after the Parsippany, N.J.-based health care industry technology and information provider's $500 million deal priced at par.

After that, he said, the bonds dropped back to levels in a 1011/4-to-102¼ context.

"They were 102¼ bid. A broker came in and showed them a 2½ offering," after which the quotes retreated, he said.

He allowed that he did not know how much actual trading went on in the new issue.

A second trader saw them going home in a 1013/4-to-102¼ range.

The only other one of the day's new deals seen trading around - Toronto-based Mood Media's 9 14% senior secured notes due 2020 - went out at 100½ bid, 101¼ offered, after the $350 million forward calendar deal priced at par.

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