Primary quiet; GameStop shops deal; HCA jumps in heavy trading; steel makers up on trade ruling

By Paul Deckelman and Paul A. Harris

New York, March 2 – Syndicate sources said the junk bond primary sphere fell silent on Wednesday after four consecutive sessions during which new high-yield deals came to market – three of those in the megadeal-sized category.

Those sources did see one bit of news. Video game retailer GameStop Corp. began shopping a $400 million offering of five-year notes around to investors, with pricing expected later in the week.

Among recently priced new deals, Tuesday’s big transaction from hospital operator HCA, Inc. was just what the doctor ordered, adding to the solid gains that the issue had already notched in initial aftermarket dealings after pricing. It was also the most actively traded credit in Junkbondland.

Traders also saw continued firming, in active dealings, in Monday’s megadeal from auto insurance software provider Solera, LLC and in Friday’s new issue from homebuilder Lennar Corp.

Away from the new or recently priced credits, domestic steel makers such as AK Steel Holdings Corp. and United States Steel Corp. strengthened on a favorable ruling from federal trade authorities, who found that a number of overseas producers had violated anti-dumping laws on cold-rolled flat steel.

Statistical market performance measures were higher across the board for a fifth consecutive session on Wednesday.

GameStop brings five-year deal

The news flow slowed to a trickle in the primary market on Wednesday, with just a single news item.

GameStop is marketing a $400 million offering of five-year senior notes (Ba1).

The deal is expected to come with a yield in the 6% range and price later this week.

BofA Merrill Lynch is the bookrunner.

The Grapevine, Texas-based electronic game retailer plans to use the proceeds for general corporate purposes that will likely include acquisitions and, potentially, dividends and stock buybacks.

Big Tuesday inflows

The dedicated high-yield bond funds saw substantial inflows on Tuesday, a trader said.

High-yield exchange-traded funds saw $419 million of inflows on the day.

Actively managed funds saw a whopping $825 million of daily inflows on Tuesday.

However, the dedicated bank loan funds saw $83 million of outflows on the day.

HCA heads higher

In the secondary arena, the new HCA 5¼% senior secured notes due June 2026 “were really active today,” a trader said, adding that “they were up quite a bit.”

He saw the notes trading in a 102-to-102¼ bid context late in the day, “on really heavy volume.”

A second trader estimated the day’s volume in the credit at over $400 million, easily dominating the high-yield Most Actives list.

He saw the bonds finishing at 102 1/8 bid, calling that up 1 1/8 points on the session.

Yet another trader saw them trading in a 101¾-to-102 bid context.

HCA Holdings, Inc., a Nashville-based hospital operator, priced $1.5 billion of the notes on Tuesday in a quickly shopped transaction via its wholly owned HCA Inc. subsidiary.

The bonds priced at par after the issue was upsized from the originally announced $1 billion.

They moved up to 101 bid in initial aftermarket activity Tuesday following the pricing, on volume of over $50 million.

HCA’s existing 5 7/8% notes due 2026 – which on Tuesday had lost ¾ point to close at 102¼ bid, with over $12 million traded – recovered almost all of that on Wednesday, gaining 11/16 point to close just below 103 bid, on volume of over $11 million.

Its 5 3/8% notes due 2025 – which lost 7/8 point Tuesday on volume of more than $14 million – more than made up for it on Wednesday with a 9/16 point gain, ending at 101 9/16 bid, with over $11 million of the notes traded around.

Solera improves

A trader said that the new Solera 10½% notes due 2012 were trading in a 96¾-to-97 bid context.

He saw the bonds later on in a 96½ to 96¾ range, with the last trade that he saw at 96¾ bid.

A second trader, though, saw the notes ending at an even 97 bid, up 1/8 point on the day, with over $15 million having changed hands.

Solera, a Westlake, Texas-based automobile insurance claims software provider, and its Solera Finance Inc. subsidiary priced $1.73 billion of those new notes on Monday at a seriously discounted 95, yielding 11.47%.

The roadshow for the deal had actually wrapped up a week earlier, but the offering did not finally appear until Monday. When it did, the bonds had been resized from the $2.03 billion originally announced and the issue had been restructured, with a proposed tranche of euro-denominated notes having been dropped, leaving only the dollar bonds.

Investors had also forced the issuer to make some covenant changes and to price the bonds at a big discount to fatten the yield in order to get the deal done.

Lennar moves up

Also among recently priced issues, a trader said that Friday’s offering of new 4¾% notes due 2021 from Lennar Corp. ended at 101 3/8 bid on Wednesday, a gain of 9/32 point on the session.

More than $12 million of the notes traded.

A second trader saw the notes up ¼ point on the day at 101¼ bid, 101¾ offered.

Lennar, a Miami-based homebuilder, priced $500 million of the notes at par in a quick-to-market transaction on Friday.

Traders quoted the new bonds later on in that session between par and 100¼ bid.

The bonds firmed to around a 100¾-to-101 bid context on Monday, with over $20 million having traded, and were seen around the 101 mark on Tuesday on volume of over $15 million.

Steel strengthens on ruling

Away from the new or recently priced issues, AK Steel and U.S. Steel saw their debt improving on Wednesday after the U.S. Commerce Department issued preliminary findings that showed companies from seven different countries had violated an anti-dumping law on cold rolled flat steel.

One trader said AK Steel’s 7 5/8% notes due 2020 were finishing in a 63-to-63¼ bid context, which he saw up from 62½ on Tuesday.

A second trader saw the West Chester, Ohio-based specialty steel manufacturer’s paper “very active,” trading up to a “63 handle.” That compared with “62ish” on Tuesday and levels in a 59 to 60 context on Friday. More than $20 million of the notes traded.

The trader also deemed Pittsburgh-based U.S. Steel’s 7 3/8% notes due 2020 “fairly active,” trading up “a couple points” to 67½.

Another market source pegged AK Steel’s 7 5/8% notes due 2021 at 56¼ bid, up almost 2 points on the day with more than $11 million traded. U.S. Steel’s 7% notes due 2018 were seen jumping over 6 points to 85¾.

Based on the information produced by the International Trade Administration, the Commerce Department is calling on the U.S. Customs and Border Protection Agency to “require cash deposits” on cold rolled steel from Brazil, China, India, Japan, Korea, Russia and the United Kingdom.

Certain exporters from China, Japan and Russia could also be faced with retroactive duties.

Indicators’ rise continues

Statistical market performance measures were higher across the board for a fifth consecutive session on Wednesday, a winning streak that started last Thursday after the indicators had been lower last Wednesday. It was their sixth higher session in the last eight trading days.

The KDP High Yield Daily index jumped by 51 basis points on Wednesday to finish at 64.55, its fifth straight gain and sixth in the last seven sessions. It had been up by 33 bps on Tuesday.

Its yield came in by 15 bps, ending at 6.90%, after having tightened by 10 bps on Tuesday. Wednesday marked its fifth successive tightening, which followed four straight sessions before that in which the yield had widened out. It was also the first time this year that the yield had narrowed to a level below 7%. The previous low level for the year had been Tuesday’s 7.05%. The yield’s 2016 high point was 7.73% on Feb. 11. It had closed out 2015 at 7.28%.

The Markit Series 25 CDX North American High Yield index improved by 3/16 point on Wednesday, ending at 100 1/8 bid, 100 3/16 offered, its fifth consecutive gain and sixth in the last eight sessions. It had also zoomed by 29/32 point on Tuesday. The five straight gains followed two consecutive losses.

And the Merrill Lynch North American High Yield Master II index also posted its fifth upturn on Wednesday, advancing 0.62%, on top of Tuesday’s by 0.838% rise, which had been its second-biggest one-day improvement so far this year, trailing only the 0.984% climb seen on Feb. 22.

Wednesday marked the index’s seventh gain in the last eight sessions.

That swung the index’s year-to-date return figure back into the black for the first time this year – an 0.323% cumulative return, versus the 0.296% year-to-date loss recorded on Tuesday.

It was the first time the index’s cumulative return had closed in positive territory since Nov. 5, when it had ended at 0.166%.

The index – which had finished out 2015 with a 4.643% loss for the year, its first annual downturn since closing out 2008 with a loss above the 30% mark – started the new year down 0.325% and remained in negative cumulative territory right up through Tuesday, hitting a low point for the year of down 5.142% on Feb. 11.

Stephanie N. Rotondo contributed to this review

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