Tenet, NXP drive-bys lead $5.5 billion primary, Informatica busiest; SandRidge gyrations continue

By Paul A. Harris and Paul Deckelman

New York, June 2 – After a sleepy session on Monday, the high-yield primary arena more than made up for it on Tuesday, which turned out to be one of the busiest new-issue sessions so far this year.

Seven tranches of new U.S. dollar-denominated, fully junk-rated paper from domestic or industrialized-country issuers came to market from five issuers via seven tranches, far surpassing the tally on Monday, when just one deal priced, a single-tranche $300 million offering.

Tuesday’s efforts added up to $5.54 billion of new paper clattering down the chute – surpassing the $4.95 billion that had priced in six tranches just this past Thursday to take over as the fourth-busiest session so far this year, according to data compiled by Prospect News. It was the most new junk priced in any one day since the $5.9 billion that got done in nine tranches on May 14, according to the data.

A pair of opportunistically timed and quickly-shopped megadeal-sized offerings set the pace.

Hospital operator Tenet Healthcare Corp. brought an upsized $2.8 billion two-part deal to market, consisting of five- and eight-year paper, while Dutch semiconductor manufacturer NXP BV priced $1 billion total of five- and seven-year notes, with the latter seen firmer in the aftermarket.

Also driving by was movie theater operator AMC Entertainment Inc., with $600 million of 10-year senior subordinated notes, which were among the busier credits in secondary dealings.

But by far the busiest was another one of the day’s new deals, this one a regularly scheduled – and downsized – forward calendar offering of $650 million eight-year notes from business software provider Informatica Corp., which was seen having moved up when it was freed to trade.

Propane distributor Ferrellgas, LP rounded out the busy session with a late-pricing and upsized $500 million eight-year notes off the calendar.

There meantime was continued brisk activity in recently priced deals, such as Friday’s big three-part transaction from European cable operator Altice SA.

But even busier than that was Thursday’s upsized megadeal from oil and natural gas exploration and production company SandRidge Energy Inc. Those five-year secured notes have struggled, gyrating around well below their issue price in active dealings over the past few sessions, with market participants weighing in with possible explanations for the credit’s sub-par aftermarket performance.

Statistical indicators of junk market performance were lower across the board on Tuesday, after having been mixed for three consecutive sessions before that, and for six sessions in the previous seven trading days

Tenet upsizes

Dealers throttled up the new issue machine on Tuesday.

Five issuers brought a total of seven dollar-denominated tranches to raise an overall $5.54 billion of proceeds.

Two of those issuers upsized their offerings and one of them downsized.

Three of the five came with drive-bys.

Executions were a mixed bag, with one deal pricing at the tight end of yield talk, one – the day's sole floating-rate tranche – pricing at the tight end of spread talk and on top of price talk, one pricing toward the tight end of yield talk, one pricing on top of talk and the remaining three tranches pricing at the wide ends of talk.

Tenet priced an upsized $2.9 billion two-part high-yield note offering in a quick-to-market transaction.

Tenet Healthcare Corp. sold an upsized $900 million tranche of Libor plus 350 basis points five-year senior secured floating-rate notes (Ba2/BB-) at 99.5. The tranche was increased from $500 million. The spread came at the tight end of the Libor plus 350 to 375 bps spread talk. The reoffer price came on top of price talk.

In addition THC Escrow Corp. II, a special-purpose vehicle, priced $1.9 billion of non-callable 6¾% eight-year senior unsecured notes (B3/CCC+) at 99.5 to yield 6.832%. The yield came toward the tight end of the 6¾% to 7% yield talk.

The overall deal size was increased from $2.4 billion.

Barclays was the lead left bookrunner. Citigroup, Deutsche Bank, Goldman Sachs, RBC and SunTrust were the joint bookrunners.

Tenet will use the proceeds to refinance the senior secured and senior unsecured bridge loans, and 364-day term loan it obtained in connection with a joint venture with Welsh, Carson, Anderson & Stowe and United Surgical Partners International combining Tenet’s and United Surgical’s short-stay surgery and imaging-center assets, and the acquisition of Aspen Healthcare Ltd. from Welsh Carson.

The additional proceeds resulting from the upsizing of the deal will be used to repay $400 million of term loans outstanding under the interim loan agreement, to temporarily reduce amounts outstanding under the credit agreement and, if any net proceeds remain, for general corporate purposes which may include the payment of a portion of the cash consideration of the acquisition.

NXP re-sizes deal

NXP BV and NXP Funding LLC priced $1 billion of non-callable senior notes (Ba3/BB) in two re-sized tranches.

The Eindhoven, Netherlands-based signal electronics company priced an upsized $600 million tranche of five-year notes at par to yield 4 1/8%. The tranche was increasd from $500 million. The yield printed at the wide end of yield talk in the 4% area.

NXP also priced a downsized $400 million tranche of seven-year notes at par to yield 4 5/8%. The tranche was reduced from $500 million. The yield printed at the wide end of yield talk in the 4½% area.

Credit Suisse, Barclays, Deutsche Bank, BofA Merrill Lynch and Morgan Stanley were the joint bookrunners for the quick-to-market transaction.

Proceeds, together with cash on hand and/or other available financing, will be used to help fund the cash portion of the company’s acquisition of Freescale Semiconductor, Ltd., as well as to refinance Freescale debt and to repay amounts that may be drawn upon Freescale’s revolver for the merger. In addition proceeds will possibly be used to repay NXP’s revolver.

If the merger does not close, NXP intends to use the proceeds to repay debt and for general corporate purposes.

Informatica prices tight

Informatica priced a downsized $650 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 7 1/8%.

The buyout deal was cut by $100 million, and the proceeds were shifted to a concurrent bank loan.

The yield printed at the tight end of yield talk that had been set in the 7¼% area.

Goldman Sachs was the left bookrunner. BofA Merrill Lynch, Credit Suisse, Macquarie, Morgan Stanley, Nomura, RBC and Deutsche Bank were the joint bookrunners.

AMC prices drive-by

AMC Entertainment priced a $600 million issue of 10-year senior subordinated notes (B3/B) at par to yield 5¾% in a quick-to-market transaction.

The yield printed on top of yield talk.

Citigroup, BofA Merrill Lynch, Barclays, Credit Suisse and HSBC Bank were the joint bookrunners for the debt refinancing.

Ferrellgas upsizes

Ferrellgas, LP, the operating subsidiary of Ferrellgas Partners, LP, and its subsidiary, Ferrellgas Finance Corp., priced an upsized $500 million issue of eight-year senior notes (B2/B+) at par to yield 6¾%.

The deal, which was announced late Monday, was expanded from $400 million.

The yield printed at the wide end of the 6½% to 6¾% yield talk.

J.P. Morgan, BofA Merrill Lynch and Wells Fargo were the joint bookrunners.

Proceeds will be used to help fund the acquisition of Bridger Logistics, LLC and its subsidiaries. The additional $100 million of proceeds resulting from the increase in size will be used to offset a decrease in proceeds from an offering of common units and to reduce borrowings under the secured credit facility required to consummate the acquisition of Bridger Logistics, with remaining proceeds to be used to repay borrowings under the company’s secured credit facility.

CEB sets roadshow

CEB Inc. plans to start a roadshow on Wednesday in New York for a $250 million offering of eight-year senior notes.

SunTrust Robinson Humphrey is the left bookrunner. BofA Merrill Lynch and HSBC Bank are joint bookrunners.

Moody’s Investors Service assigns its Ba2 corporate family credit rating to the company. Standard & Poor’s rates CEB’s corporate family credit at BB. Issue ratings remain to be determined.

The Arlington, Va.-based business solutions company plans to use the proceeds to refinance its existing credit facility.

DuPont Fabros to roadshow

DuPont Fabros Technology, LP plans to start a roadshow on Wednesday in New York for a $250 million offering of 10-year senior notes (expected ratings Ba1/BB).

SunTrust is the left bookrunner. Goldman Sachs, KeyBanc, RBC, Regions and Stifel are the joint bookrunners.

The Washington, D.C.-based company plans to use the proceeds to repay revolver borrowings and for general corporate purposes.

Pizza Express taps 6 5/8% notes

In the European market, PizzaExpress Financing 2 plc priced a £55 million add-on to its 6 5/8% senior secured notes due Aug. 1, 2021 (B2) at 105.25 to yield 5.6%.

The reoffer price came on top of price talk.

Sole physical bookrunner Goldman Sachs will bill and deliver. Deutsche Bank and JPMorgan were joint bookrunners.

The London-based restaurant group plans to use the proceeds to finance the acquisition of Pizza Express (Hong Kong) Ltd.

Informatica up in heavy trading

Back in the domestic secondary market, traders said that the busiest credit of the day was one of the day’s new deals – the 7 1/8% notes due 2023 issued by special financing vehicle Italics Merger Sub Inc. as part of the funding for the $5.3 billion acquisition of Informatica Corp., a Redwood City, Calif.-based provider of enterprise data integration software, by Permira funds and Canada Pension Plan Investment Board.

A market source estimated that over $85 million of those new bonds had changed hands, topping the day’s Most Actives list. He pegged the bonds at 100¼ bid, versus the par level at which that $650 million of paper had priced after the scheduled forward calendar deal was downsized from an originally shopped $750 million.

At another desk, a trader saw the bonds moving around between par and 100 ¼, while yet another saw them a little better than that, in a 100 3/8 to 100 5/8 context going home.

AMC, NXP deals trade around

Two of the day’s other new issues were also seen fairly active in the aftermarket on Tuesday.

Leawood, Kan.-based movie theater operator AMC Entertainment’s 5¾% senior subordinated notes due 2025 “were trading into a par bid,” a trader said.

Another said that the new credit moved up just slightly, to around 100 1/16 bid, though on volume of over $50 million, after that quickly shopped $600 million deal priced at par.

At another shop, a trader quoted a more expansive par to 101 range.

NXP’s 4 5/8% notes due 2022 were seen having gotten as good as 100 3/8 bid when they were freed for secondary dealings, after pricing at par.

More than $12 million of the notes circulated in initial aftermarket dealings Tuesday.

There were no levels immediately seen on the other half of that unscheduled deal, the 4 1/8% notes due 2020.

Tenet, Ferrellgas unseen

Traders said that owing to the lateness of the hour at which the deals priced, they did not see any initial secondary dealings in either the new 6¾% notes due 2023 from Overland Park, Kan.-based propane provider Ferrellgas or in Tenet Healthcare’s two tranches of new notes – its senior secured floating-rate notes due 2020 and its 6¾% senior unsecured notes due 2023.

However, Dallas-based hospital operator Tenet’s existing 8 1/8% notes due 2022 were seen down 3/8 point on the session at 109 5/8 bid, with more than $12 million traded.

Its 5% notes due 2019 lost 5/8 point on the day, a trader said, seeing the notes going out at 99 3/8 bid on volume of more than $10 million.

Tenet’s 6% notes due 2020 eased by ¼ point to 107¼ bid on volume of just over $1 million.

SandRidge struggle continues

Among the recently priced issues, a trader noted that SandRidge Energy’s 8¾% senior secured second-lien notes due 2020 remain “among the volume leaders.”

Over $210 million of the notes changed hands on Friday, with another $62 million seen having traded on Monday and over $60 million during Tuesday’s session.

He noted that the Oklahoma City-based oil and gas E&P operator’s bonds – which had priced at par on Thursday in a quickly shopped $1.2 billion transaction – had traded as low as 96¾ bid on Monday, despite the new bonds’ secured status, their rank above existing issues in the company’s capital structure, the deal’s ample liquidity and the generous coupon

He did not have a ready explanation for that big slide, although he pointed out that the company’s unsecured bonds, such as its 7½% notes due 2021, 8 1/8% notes due 2022 and 7½% notes due 2023 were all trading around in the 50s. “So I don’t know if there’s a lot of enthusiasm behind the credit overall.”

Another trader was a little more blunt. He said that when the deal came to market, the company and its underwriters “pushed the price, upsized the deal” – which had originally been shopped around at $1 billion – “and then they stopped supporting it around 98.5.”

Besides that, he noted that a there was “lots of fast money in the deal” – fickle in-and-out plungers looking to grab a piece of the volatile action, flip it for a profit and then exit. He said that these “had been hyping the deal to others for 24 hours pre-pricing, saying ‘it will be a blowout, make some quick money.’’

At another shop, a trader noted that the company’s recent liquidity transactions “just layered all the unsecured bonds” with secured debt. “It provides liquidity – but unless the landscape changes, it’s not necessarily a good thing.”

Last week, SandRidge announced that in addition to the new bond deal, it was also revising its first-lien credit facility, lowering its initial borrowing base availability from its current $900 million to $500 million, subject to maintenance of a first-lien leverage ratio of not more than 2.0 times (senior first lien secured debt/ LTM pro forma EBITDA) and a minimum current ratio (including available borrowing capacity) of at least 1.0 times.

It said that the new terms were less restrictive than the previous terms had been.

It was also pointed out that even prior to the new issue, SandRidge was already laboring under high debt levels. Although proceeds from the deal were slated to pay down a revolving credit facility, that does very little to combat a significant cash burn, modestly lower production – at least in the first quarter – and volatile oil prices.

However, oil prices were better on Tuesday, with the benchmark U.S. crude grade, West Texas Intermediate, rising to its highest levels seen since December, gaining $1.13, or 1.88%, to $61.33 per barrel in trading on the New York Mercantile Exchange, while the European Brent benchmark crude improved 74 cents, or 1.14%, to $65.62.

A trader said that may have helped the bonds bounce back from their Monday lows and from their early Tuesday levels around 97½; he saw them going out at 98 3/8 bid, 98¾ offered.

Another trader quoted them at 98¾ bid, calling that up a deuce on the day from their late-Monday levels.

Global Partners little changed

Elsewhere, a trader said Global Partners LP’s new 7% notes due 2023 “didn’t really do anything,” seeing them perhaps in a 100¼ to 100½ bid context.

That $300 million drive-by offering from the Waltham, Mass.-based midstream energy logistics and marketing company priced at par late in the session on Monday.

Altice trades actively

A trader said that the new 5 3/8% senior secured notes due 2023 issued by Luxembourg-based cable, wireless and broadband operator Altice SA via its Altice US Fin I Corp. financing subsidiary “was the active one” among the company’s three tranches of new bonds that it priced on Friday, but he said that “it doesn’t look like it’s going too far,” holding around 100¼ bid.

A second trader saw the bonds holding just over the par level at which that $1.1 billion tranche of bonds had priced, as part of Altice’s overall $1.72 billion three-part regularly scheduled forward calendar transaction.

He said they were down 5/8 point on the day, with over $35 million having changed hands.

Indicators turn lower

Statistical indicators of junk market performance were lower across the board on Tuesday, after having been mixed for three consecutive sessions before that, and for six sessions in the previous seven trading days

The KDP High Yield Daily Index was down by 4 basis points Tuesday to end at 71.46, after having risen by 1 bp on Monday. Tuesday’s loss was its second setback in the last three sessions.

Its yield was unchanged at 5.31%, after having come in by 1 bp on Monday. It was the second unchanged yield in three sessions.

The Markit Series 24 CDX North American High Yield Index eased by 1/32 point on Tuesday, ending at 107 1/16 bid, 107 1/8 offered. It had been up by the same 1/32 point on Monday, after having been unchanged on Friday.

The Merrill Lynch North American Master II High Yield Index meanwhile registered its second straight loss on Tuesday, after six consecutive gains. It declined by 0.092%, after Monday’s 0.03% downturn. On Friday, it had firmed by 0.036%.

Tuesday’s setback lowered the index’s year-to-date return to 3.954% from 4.05% on Monday, which in turn was down from Friday’s 4.062%, its peak level for the year so far.

-Stephanie N. Rotondo contributed to this review

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