Rose Rock, HRG, Cascades drive by, calendar builds; recent deals trade; Rosetta up on Noble news

By Paul A. Harris and Paul Deckelman

New York, May 11 – The high-yield market began the new week on Monday on a busy note, with three deals collectively worth about $900 million having priced, all of them opportunistically timed and quickly-shopped drive-by transactions.

Rose Rock Midstream, LP, an energy limited partnership company, brought an upsized 8.5-year note issue to market.

Diversified holding company HRG Group, Inc. priced a pair of add-ons to its existing secured 2019 bonds and its unsecured 2022 paper, totaling $300 million.

And Cascades, Inc., a Canadian paper, packaging and recycling company, did a $250 million issue of eight-year notes.

At the same time, syndicate sources said the forward calendar was growing, with CNO Financial Group, Energizer SpinCo Inc., PPL Energy Supply, LLC and NFP Corp. all heard hitting the road to market prospective new issues.

Traders did not see any significant immediate aftermarket activity in the day’s new deals.

However, they did see considerable turnover in recently priced deals, including Friday’s offering from Sterigenics-Nordion Holdings LLC, as well as Thursday’s issues from A. Schulman Inc. and Range Resources Corp., and Wednesday’s transactions from HCA Inc. and Constellis Holdings LLC.

Away from the new deals, Rosetta Resources Inc.’s bonds shot up on the news the energy company is to be acquired by investment grade-rated Noble Energy, Inc. in a deal valued at $3.9 billion, including debt assumption.

Statistical market performance indicators turned mixed on Monday after having been higher across the board on Friday and lower all around for three consecutive sessions before that.

Rose Rock upsizes

The dollar-denominated primary market saw three issuers bring four tranches in drive-by deals on Monday, raising an overall total of $899 million, in a session that generated a heavy volume of news.

Two of the four tranches were upsized and one was downsized.

Executions were a mixed bag, with one tranche pricing at the tight end of talk, two pricing on top of talk, and one coming at the wide end.

Rose Rock Midstream, LP and Rose Rock Finance Corp. priced an upsized $350 million issue of 5 5/8% 8.5-year senior notes (B1/B) at 98.345 to yield 5 7/8%.

The deal was increased from $300 million.

The yield printed at the tight end of the 5 7/8% to 6% yield talk.

Wells Fargo was the left bookrunner. Barclays, Citigroup, Credit Suisse, Deutsche Bank, RBC and UBS were the joint bookrunners.

The Tulsa, Okla.-based limited partnership, which has a diversified portfolio of midstream energy assets, plans to use the proceeds, including those resulting from the $50 million upsizing of the deal, to repay bank debt and for general partnership purposes.

HRG does two tack-ons

HRG Group priced a $300 million two-part tack-on deal which saw a $10 million amount of face value shifted to the secured tranche from the unsecured tranche.

Both parts came on top of price talk.

An upsized $160 million tack-on to the issuer’s 7 7/8% senior secured notes due July 15, 2019 (Ba3/B+) priced at 104.50 to yield 6.011%. The tranche was increased from $150 million. Proceeds will be used to fund working capital and general corporate purposes

A downsized $140 million tack-on to the 7¾% senior unsecured notes due Jan. 15, 2022 (Caa1/CCC+) priced at 98.51 to yield 8.04%. The tranche was reduced from $150 million. Proceeds will be used to make an equity investment in Spectrum Brands Holdings, Inc., a subsidiary of HRG, in connection with Spectrum Brands’ acquisition of Armored AutoGroup Parent Inc.

Credit Suisse, Deutsche Bank and Jefferies were the joint bookrunners.

Cascades drives by

Cascades priced a quick-to-market $250 million issue of eight-year senior notes (Ba3/B+) at par to yield 5¾%.

The yield printed at the wide end of the 5 5/8% to 5¾% yield talk.

Wells Fargo was the left bookrunner. National Bank of Canada, Scotia, CIBC and BofA Merrill Lynch were the joint bookrunners for the debt refinancing deal.

CNO starts roadshow

The Monday session saw a sizable buildup of the active forward calendar.

CNO Financial Group began a roadshow for an $800 million two-part bullet deal.

It features non-callable notes due 2020 and notes due 2025 which feature a par call three months prior to maturity but which are otherwise non-callable.

Tranche sizes remain to be determined.

Initial guidance has the 10-year notes pricing at a yield of 5¼% to 5½% and the five-year notes coming 75 basis points inside the 10-year notes, according to a trader.

Goldman Sachs is the left bookrunner. RBC is the joint bookrunner.

The Carmel, Ind.-based financial services company plans to use the proceeds, together with proceeds from a new revolver, to repay its existing credit agreement and senior secured notes in full, with any remaining proceeds to be used for general corporate purposes, including share repurchases.

Energizer to start marketing

Energizer SpinCo plans to start a roadshow on Tuesday for a $600 million offering of 10-year senior notes, a deal that is expected to price late in the present week.

Initial guidance has the deal to fund a spinoff coming in the high-5% to low-6% yield context, the trader said.

BofA Merrill Lynch, J.P. Morgan, Citigroup, Goldman Sachs and MUFG are the joint bookrunners.

PPL Energy starts roadshow

PPL Energy Supply started a roadshow on Monday in New York for a $600 million offering of 10-year senior notes (expected ratings Ba3/BB.

Initial guidance has the debt refinancing deal coming in the mid-6% yield context, the trader said.

Citigroup, BNP Paribas, BofA Merrill Lynch, Goldman Sachs, J.P. Morgan and Morgan Stanley are the joint bookrunners.

NFP to tap 9% notes

NFP Corp. plans to conduct a Monday-Tuesday roadshow for a $250 million add-on to its 9% senior notes due July 15, 2021 (existing ratings Caa2/CCC+).

Initial guidance has the deal coming at par, the trader said.

BofA Merrill Lynch is the left bookrunner. Deutsche Bank, Jefferies, Morgan Stanley, UBS, MCS and RBC are 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.

Autodistribution’s €60 million

As forecast, volatility pegged primarily to the Greek sovereign financial situation kept the European high-yield market quiet on Monday, sources said.

France-based Autodistribution Group priced a €60 million add-on to its 6½% senior secured notes due Feb. 1, 2019 (B2/B+) at 103.25 to yield 5.518%.

The quick-to-market add-on priced at the rich end of the 103 to 103.25 price talk.

JPMorgan ran the books.

The Arcueil, France-based supplier of automobile and truck parts plans to use the proceeds to fund a distribution to equity holders and for general corporate purposes.

Mixed flows on Friday

Cash flows for dedicated high-yield funds were mixed on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $315 million of inflows on Friday, while actively managed funds sustained $75 million of outflows.

This source, who watches the ETFs closely, said that they were selling on Monday, and expects to see news of an outflow on Tuesday.

Day’s deals little seen

In the secondary arena, traders said that there was little activity in the day’s newly priced issues, owing to the relatively late hour at which most of that pricing got done.

They did see some dealings in the existing HRG Group 7 7/8% senior secured notes due 2019 and in the 7¾% senior unsecured notes due 2022 that the New York-based diversified holding company had issued back when it was still known as Harbinger Group Inc.

The latter issue had traded at 100¾ bid as recently as last Saturday, but had slid down to 98¼ bid by Monday’s close – not too far from the add-on’s 98.51 pricing level – on volume of over $6 million.

That was also the approximate volume of trading in the 7 7/8% notes. They had last traded around the 105½ mark back in April – but eased to around 104¾ bid on Monday, near the add-on’s 104.5 issue price.

Recent deals trade busily

There was plenty of activity, however, in some of the new issues which had come to market last week.

For instance, a trader said that Sterigenics-Nordion’s 6½% notes due 2023 were “pretty active” around the 100¾ to 101 level, which he called essentially unchanged on the day.

At another desk, a market participant said that Sterigenics was probably the busiest purely junk issue on the day, seeing more than $33 million of the notes traded at around 100 7/8 bid, down ¼ point on the day.

The Oak Brook, Ill.-based provider of contract sterilization services, gamma technologies and medical isotopes had priced its $450 million issue at par on Friday as a regularly scheduled forward calendar deal. The bonds had gotten up to a 101 bid trading level on initial volume of over $45 million.

The A. Schulman 6 7/8% notes due 2023 were being quoted down by around 3/16 point at 101¼ bid, on about $18 million of volume.

The Fairlawn, Ohio-based plastics manufacturer had priced its $375 million offering at par on Thursday. The bonds had moved up by 1½ points in brisk trading on Friday when over $42 million of the issue changed hands.

Range Resources’ 4 7/8% notes due 2025 were off by ½ point at 100¼ bid, with over $14 million traded.

The Fort Worth, Texas-based energy company’s drive-by deal priced at par on Thursday after it was upsized to $750 million from $500 million originally. The bonds firmed to around 100¾ bid on Friday, a 5/16 point improvement, with over $25 million traded.

Wednesday’s issue of 5 3/8% notes due 2025 from HCA were seen down nearly 1 point in Monday’s activity, closing at just below 102½ bid, a trader said, with over $19 million traded.

The Nashville-based hospital operator’s drive-by megadeal – a $1.6 billion add-on to its existing bonds – had priced at 103 to yield 4.98%, but had pushed up to around the 103½ level in heavy trading on Thursday and Friday.

A trader saw Wednesday’s issue of 9¾% senior secured notes due 2020 from Constellis Holdings LLC at par on Monday, up about ¼ point, on volume of over $13 million.

The Reston, Va.-based risk-management solutions company priced its $450 million quick-to-market deal at 99.513 to yield 9 7/8 bid.

On the traders said that with the exception of Constellis, most of the new deals “were trending lower, in line with the overall weakness in the market.”

Rosetta rockets up

The exception to the rule Monday, and thus, Junkbondland’s standout performer, was Rosetta Resources, whose bonds jumped between 6 and 8 points from their previous levels around par on the news that the Houston-based energy company had agreed to be acquired by high-grade credit Noble Energy. Noble will pay $2.1 billion for Rosetta in an all-stock transaction and assume the latter’s $1.8 billion of net debt.

“Rosetta was way up on the deal news,” said one trader.

He saw its most active issue, the 5 7/8% notes due 2024, jump more than 9 points on the day to the 109 bid level, with over $25 million of the bonds traded.

Its 5 5/8% notes due 2021 gained nearly 7 points to 106¾ bid on volume of over $12 million.

Indicators turn mixed

Statistical market performance indicators turned mixed on Monday after having been higher across the board on Friday and lower all around for three consecutive sessions before that.

The KDP High Yield Daily Index edged up by 1 basis point on Monday to close at 71.57, its second straight gain. On Friday, it had risen by 10 bps, breaking a two-session losing streak before that.

Its yield came in by 2 bps to 5.22, its second consecutive narrowing; on Friday the yield had declined by 3 bps after widening out the two previous sessions.

But the Markit Series 24 CDX North American High Yield Index dropped by 15/32 on Monday to end at 106¾ bid, 106 7/8 offered, after having firmed by 21/32 point on Friday. Monday’s fall was its fourth loss in the last five sessions.

However, the Merrill Lynch North American Master II high yield index posted its second straight gain on Monday, as it finished up by 0.006% on top of Friday’s 0.239% improvement.

Monday’s gain lifted its year-to-date return to 3.879% from 3.872% on Friday, although it remained below its peak level for the year of 3.952%, set on April 27.

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