NFP add-on prices; recent Rose Rock, Cascades, HCA deals busy; market tone soft; Conns climbs

By Paul A. Harris and Paul Deckelman

New York, May 12 – The high-yield world saw a quieter primary session on Tuesday, as just one new deal priced: an upsized $275 million add-on to existing notes due 2021 from financial services company NFP Corp.

That was in contrast with Monday’s session, when $899 million of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers had priced in four transactions brought by three issuers, according to data compiled by Prospect News.

Traders did not see any initial aftermarket trading of note in the new NFP bonds, while there was considerable activity in at least two of Monday’s deals, from energy company Rose Rock Midstream, LP and Canadian packaging, paper and recycling company Cascades Inc.

The most actively traded junk issue was also a recently priced offering – last week’s megadeal-sized add-on from hospital operator HCA Inc.

All of those recently priced new issues were seen lower on the day, in line with an early pullback in the bond, stock and Treasury markets, traders said, although the latter two staged impressive late-day comebacks. Junk, too, came off its earlier lows, closing unchanged to a little lower for most issues.

Away from the deals that have actually priced, syndicate sources heard high-tech company Blue Coat Holdings Inc. and charter airline operator VistaJet Holding SA shopping new issues around to prospective investors, the latter company through a finance subsidiary.

Away from the new deals, Rosetta Resources Inc.’s bonds traded actively for a second straight session, following Monday’s news that the energy operator is to be acquired.

Conns Inc.’s bonds and shares both firmed smartly as an analyst suggested the retailer might sell its customer credit portfolio for as much as $1.2 billion.

Statistical market performance indicators turned lower across the board on Tuesday after having been mixed on Monday and higher all around on Friday.

NFP upsizes

NFP priced the only deal to clear the market on Tuesday, an upsized $275 million add-on to its 9% senior notes due July 15, 2021 (Caa2/CCC+) that came at 99.5 to yield 9.103%.

The deal was upsized from $250 million.

The reoffer price came at the cheap end of the 99.5 to par price talk.

BofA Merrill Lynch was the left bookrunner. Deutsche Bank, Jefferies, Morgan Stanley, UBS, MCS and RBC were the joint bookrunners.

The New York-based provider of benefits, insurance and wealth management services plans to use the proceeds to fund current, pending or future acquisitions, with any remaining proceeds to be used for general corporate purposes.

Blue Coat roadshow

Blue Coat Holdings is roadshowing $570 million of eight-year notes through the end of the week.

The offer, which is in the market via sole bookrunner Jefferies, is expected to price early in the week ahead.

Proceeds will be used to help fund the buyout of the Sunnyvale, Calif.-based cyber security company by Bain Capital LLC from Thoma Bravo LLC in an all-cash transaction valued at about $2.4 billion.

VistaJet 6½% area

VistaJet Malta Finance is guiding a non-rated $400 million offering of five-year senior notes with a yield in the 6½% area, according to a market source.

The deal is expected to price on Thursday.

J.P. Morgan and Jefferies are the joint bookrunners.

The Baar, Switzerland-based airline plans to use the proceeds to repay debt and fund aircraft purchases.

Flows turn positive

Cash flows of the dedicated high-yield funds were positive on Monday, the most recent day for which data was available at press time, a market source said.

High-yield exchange-traded funds saw $423 million of inflows on the day.

Actively managed funds saw $50 million of inflows.

And bank loan funds saw $55 million of inflows on Monday.

Softer market seen

In the secondary market, “things were weaker this morning,” a trader opined, “with Treasuries selling off and equities selling off.”

“That kind of took everything [in junk] lower,” he added. “Then Treasures ended up rallying, and equities rallied along with it. Oil rallied today, all day.”

In the junk space, he said, “We ended up a touch softer to unchanged – that’s kind of where we were ending up.”

Another trader agreed that “the market was off a bit. Things were lower. People were showing bids lower.”

He said that while equities – from which junk was taking its cues – “ended down for the day, they were much lower earlier.”

New NFP not seen

Among specific names, traders did not see any meaningful aftermarket activity in the new NFP 9% add-on notes due 2021, which priced fairly late in the session at 99.5.

The company’s existing 9% notes were most recently seen having traded last week, with a smallish piece seen around 102, while the most recent round-lot transaction for those notes took place nearly a month ago, in mid-April, around the 103 3/8 bid level.

Monday deals move around

Among the issues that came to market on Monday, a trader saw the new Rose Rock Midstream 5 5/8% notes due in November of 2023 trading in an 98½ –to-98¾ offered context, versus the 98.345 level at which the Tulsa, Okla.-based midstream energy partnership had priced its $350 million drive-by deal to yield 5 7/8%, after having upsized the transaction from $300 million originally.

A second trader pegged the bonds at 98 11/16 bid, down 1/8 point on the day, on volume of more than $15 million, placing the issue well up on the day’s Most Actives list.

And another trader quoted the bonds around 98½ bid, 99 1/3 offered.

Cascades’ 5¾% notes due 2023 were seen by a trader at the 99½ bid level, off from their par issue price.

A second trader also said that the Kingsey Falls, Quebec-based paper, packaging and recycling company’s quick-to-market $250 million deal ended at 99½ bid, which he called down ½ point on the day, with more than $16 million having traded.

A third market source said the bonds had fallen all the way back to 99 bid early on, amid the overall market weakness, but had managed to come back later to a 99½-to-par context.

HCA heavily traded

Probably the most active junk issue on the day, a trader said, was Nashville-based hospital operator HCA’s 5 3/8% notes due 2025, with over $72 million seen having changed hands on Tuesday.

He quoted the bonds at 102 1/16 bid, down about 3/16 on the session.

The quickly shopped $1.6 billion issue had priced at 103 last Wednesday to yield 4.98%, as an add-on to the company’s existing bonds.

It had pretty much stayed around that 103 area in subsequent heavy trading.

But on Tuesday, another trader said, “It opened around 101-to-101¼, in line with the weakness seen earlier.”

He saw the notes finishing up around 102¼. While that was down from the 102½-to-103 range at which the HCA notes had changed hands on Monday, “they were up 1 point on the day from their early lows.”

HCA’s established 5% notes due 2024 meantime were down 1 1/8 point on the day, going home at 104¼ bid, on volume of more than $15 million.

Rosetta remains busy

Away from the new or recently priced deals, there was sizable trading activity for a second straight session in Rosetta Resources bonds, although unlike Monday – when the bonds shot up by anywhere from 6 to 9 points across the capital structure on the news that the Houston-based energy company will be acquired – Tuesday saw the bonds edge downward from the highs they had reached on Monday, though still holding onto most of their gains.

A trader saw the company’s 5 7/8% notes due 2024 in a 108 context and its 5 5/8% notes due 2021 in a 106 context and said there was “not too much movement,” calling them essentially unchanged on the day.

Another trader said that the 5 5/8s were down about ½ point on the day at 106¼ bid, with over $15 million traded, while the 5 7/8s were ending down 3/8 point at 108½, on $190 million of turnover.

On Monday, Rosetta had been the big gainer in Junkbondland, with its 5 7/8s jumping more than 9 points on the day to the 109 bid level, with over $25 million of the bonds traded and the 5 5/8s seen up nearly 7 points, to 106¾ bid, on volume of over $12 million.

The bonds zoomed on the news that Rosetta had agreed to be acquired by high-grade credit Noble Energy Inc., which will pay $2.1 billion for Rosetta in an all-stock transaction and assume the latter’s $1.8 billion of net debt.

Conns climbs on recommendation

Away from the new deals, a trader said that Conns’ 7¼% notes due 2022 were among the biggest upside movers on the day, gaining more than 4 points on the day.

At another desk, a market source saw the bonds going home at 96¼ bid, which he called a 4 5/8-point gain.

Still another trader, who also saw them up more than 4 points at that 96¼ level, said that more than $7 million of the notes had traded.

The first trader noted that the company’s Nasdaq-traded shares were also “up big time,” jumping by $1.49, or 4.1%, to end at $37.80 on volume of 1.32 million shares, about 1½ times the usual turnover.

He said the bonds and the shares were likely up in response to a Monday research note from Piper Jaffray, suggesting that the specialty retailer, based in the Woodlands, Texas, and operating 89 appliance, furniture and home electronics stores in the Southern and Southwestern part of the United States, might sell its customer credit portfolio for as much as $1.2 billion, leaving the company with net cash of $450 million.

Piper Jaffray – which upped its stock price target on the company to $45 from $38, while maintaining the shares as an overweight – also said that Conns might further improve its financial standing and eliminate all balance-sheet risk by setting up a “forward-flow” arrangement to sell off all receivables immediately after underwriting.

Doing this, the brokerage projected, would allow the company to generate “significant EPS and EBITDA multiple expansion, as ‘CONN’ would get valued more like a high-growth retailer.”

“I guess that’s what moved the stock and also the bonds,” the trader said.

Affinion turns higher

Another notable gainer on the day was Affinion Group Holdings Inc., whose 7 7/8% notes due 2018 “were up a few” points on the day,” a trader said.

“There was buying interest in those 7 7/8s,” he declared.

Another market participant said the bonds were up by about 2 1/8 points, at just under 67 bid.

A third trader located the bonds at 66¾ bid, up a deuce on the day, on volume of over $12 million.

No one had any thoughts on what might be the driver behind the gain.

There was no fresh news seen out on the Norwalk, Conn.-based provider of marketing services and loyalty programs, which released its 2015 first-quarter earnings nearly two weeks ago, back on April 30.

Indicators turn lower

Statistical market performance indicators turned lower across the board on Tuesday after having been mixed on Monday and higher all around on Friday. But there had been three lower sessions before that, making Tuesday’s the fourth such session in the last six.

The KDP High Yield Daily index dropped by 13 basis points on Tuesday to end at 71.44, its first loss after two consecutive gains, including Monday, when it had edged up by 1 bp, on top of Friday’s 10-bps jump, which broke a two-session losing streak.

Its yield rose by 6 bps to 5.28%, its first widening after two straight narrowings; it had come in by 2 bps on Monday and by 3 bps on Friday, after having widened out over the two sessions before that.

The Markit Series 24 CDX North American High Yield eased by 1/16 point on Tuesday to close at 106¾ bid, 106 25/32 offered, its second straight loss. It had also dropped by 15/32 on Monday, after having firmed on Friday. Tuesday’s fall was its fifth loss in the last six sessions.

The Merrill Lynch North American Master II high-yield index was also lower on the day, retreating by 0.316%, its first setback after two straight advances. On Monday, it had finished up by 0.006%, on top of Friday’s 0.239% improvement.

Tuesday’s downturn lowered its year-to-date return to 3.551% from 3.879% on Monday. It also remained below its peak level for the year of 3.952%, set on April 27.

© 2015 Prospect News.
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