Hub drives by with secured deal, bonds climb; recent deals strong; Centene two-parter ahead

By Paul Deckelman and Paul A. Harris

New York, Jan. 27 – Another day, another deal for the high-yield market.

The junk bond primary arena – which finally began pricing new issues again about a week ago, following a 10-day layoff during a period of intense market volatility – churned out its fifth offering in as many sessions on Wednesday, when insurance brokerage Hub International Ltd. came to market with $300 million of five-year secured paper.

As has been the case with all of those recent deals, the quick-to-market transaction was well oversubscribed, and the new bonds were seen having firmed smartly in initial aftermarket dealings.

Traders meantime saw continued strength in recently priced credits from GFL Environmental Corp., Lamar Advertising Co., GCP Applied Technologies Inc. and TreeHouse Foods, Inc. All of them continued to trade at solid premiums to their respective par issue prices, with GFL and Lamar in particular showing notable volume.

Away from the deals that have already priced, primaryside sources said that health-care operator Centene Corp.’s pending $2.27 billion two-part offering is continuing to pick up steam, with pricing expected in the late part of the week. Barring the unlikely surprise appearance of a huge, quickly shopped offering from another issuer in the interim, the Centene deal, when it comes, will be the biggest issue to hit the high-yield market so far in the new year, the first megadeal-sized offering and the first multi-tranche transaction of 2016.

Statistical measures of junk market performance turned mixed on Wednesday after having been higher across the board on Tuesday. It was their second mixed session in the last three trading days.

Hub prices secured notes

Hub International priced Wednesday's sole deal, a $300 million issue of five-year senior second-lien secured notes (B3/CCC+) that came at par to yield 9¾% in a drive-by.

The yield printed on top of yield talk.

All but $50 million of the deal was spoken for by just four accounts, a portfolio manager said.

The deal played to $1 billion of demand from 50 accounts, the source added, noting that the new notes were 102 5/8 bid in late Wednesday trading.

Morgan Stanley & Co. LLC was the bookrunner.

The Chicago-based insurance brokerage plans to use the proceeds for general corporate purposes including future acquisitions and to pay down all revolving credit loans under its senior secured credit facilities.

Endurance starts roadshow

Endurance International Group Holdings Inc. plans to start a roadshow on Thursday in New York for a $350 million offering of eight-year senior notes.

The full roadshow is scheduled to wrap up on Feb. 3.

Goldman Sachs & Co. is the left bookrunner. Credit Suisse Securities (USA) LLC and Jefferies LLC are the joint bookrunners.

The note proceeds, an expected $735 million incremental term loan and cash on hand from the balance sheets of Constant Contact Inc. and Endurance will be used to refinance Endurance’s existing revolver and to fund the acquisition of Constant Contact.

Centene, a blowout

On deck for the late part of the week is Centene with a $2.27 billion two-part offering of senior notes (expected ratings Ba2/BB/).

The market awaits official tranche sizes and price talk.

However, a tranche of five-year notes is guided at 6½%, while a tranche of eight-year notes is being guided at 7%, according to a buyside source.

The deal is a blowout, according to the buysider who added that talk is almost certain to tighten.

Wells Fargo Securities LLC is the left bookrunner. Barclays, Citigroup Global Markets Inc. and SunTrust Robinson Humphrey Inc. are the joint bookrunners.

The St. Louis-based managed care and specialty health-care services provider plans to use the proceeds to fund the acquisition of Health Net Inc. and to refinance certain debt.

Mixed flows

The cash flows of the dedicated high-yield funds were mixed on Tuesday, the latest session for which data was available at press time, according to a market source.

High-yield exchange-traded funds saw $299 million of inflows on the day.

However, asset managers were basically flat on the session, sustaining $30 million of outflows.

Bank loan funds, meanwhile, saw $100 million of outflows on Tuesday.

New Hub bonds higher

In the secondary market, the new Hub International 9¼% second-lien notes due 2021 – the first senior secured bond deal of the new year – were heard by traders to have moved up in their initial aftermarket dealings.

One quoted the bonds at 101 bid, well up from their par issue price. He did not immediately see any offers for the new paper, suggesting that “it means the bid will probably move higher.”

Sure enough, a second trader a little later pegged the bonds at 101¾ bid, while yet another market source put them at 102 5/8 bid.

Recent issues staying strong

The traders saw continued firm levels following their initial aftermarket dealings for the quartet of new offerings that came to market late last week and earlier this week, ahead of the Hub International deal.

GFL Environmental’s 9 7/8% notes due 2021 were seen by one trader in a 100¾-to-101 3/8 bid context, although he later said the bonds had tightened a little to 101 bid, 101¼ offered. Over $17 million of the notes changed hands, putting the credit among the day’s more active junk bonds.

He said the bond was helped in the aftermarket by “its very nice coupon” of nearly 10%.

Another trader saw them at 101 bid, which he called down ½ point on the day.

The Vaughn, Ont.-based waste-disposal company, along with co-issuer GFL Escrow Corp., had priced its $300 million transaction at par on Tuesday, a day after the deal surfaced in the market.

It was upsized from an originally announced $250 million.

Another busy issue was Lamar Advertising’s 5¾% notes due 2026, with over $13 million traded.

One of the traders saw the bonds in a 101 7/8-to-102½ context, while a second called them 3/8 point higher, getting as good as 102½.

The Baton Rouge, La.-based billboard company had priced its $400 million quick-to-market offering at par on Monday.

Going back a little further, Friday’s $525 million offering from GCP Applied Technologies traded at 103½ bid, 104¼ offered on Wednesday.

Last Thursday’s 6% notes due 2024 from TreeHouse Foods were seen at 102¼ bid, 103 offered.

Indicators turn mixed

Statistical measures of junk market performance turned mixed on Wednesday after having been higher across the board on Tuesday. It was their second mixed session in the last three trading days.

The KDP High Yield Daily index rose by 10 basis points on Wednesday to end at 62.78, its fifth straight gain and sixth such advance in the last 13 sessions, a stretch that included a seven-session losing streak; on Tuesday, it had been up by 14 bps.

Its yield, meantime, eased by 2 bps on Wednesday to close at 7.29%, its fifth consecutive narrowing and sixth such tightening over the last 13 sessions. It had come in by 7 bps on Tuesday.

However, the Markit Series 25 CDX North American High Yield index lost ¼ point on Wednesday, going out at 98¾ bid, 98 7/8 offered, its first loss after one gain and its second setback in the last three sessions. On Tuesday, it had improved by ½ point.

The Merrill Lynch North American High Yield Master II index put up its fifth consecutive gain and seventh rise in the last eight sessions, firming by 0.175%, on top of Tuesday’s 0.126% advance.

Wednesday’s improvement cut the index’s year-to-date loss to 2.166% from 2.337% on Tuesday, continuing its improvement from the 4.095% deficit seen last Wednesday – its worst level for the year so far.

© 2015 Prospect News.
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