HCA lags; LifePoint, Post, APX, Buckeye, Brookfield at a premium; Whiting drops

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 12 – After putting up $8.5 billion of issuance in the first two days of the Feb. 10 week, the primary market took a breather on Wednesday.

While the calendar is thin heading into the final days of the week, it is not empty.

Hecla Mining Co. is expected to price its $475 million offering of eight-year senior notes (existing ratings Caa1/B-) on Friday.

And Zayo Group Holdings Inc.’s $3.1 billion megadeal is on deck.

Meanwhile, the secondary space was firm on Wednesday with the market in general up an eighth, sources said.

New issues continued to dominate trading activity.

New paper from Post Holdings Inc., Buckeye Partners LP, APX Group, Inc., LifePoint Health, Inc. and Brookfield Residential Properties, Inc. were all trading at a premium in the secondary space.

However, HCA Healthcare, Inc.’s newly priced 3½% senior notes due 2030 were lagging their issue price (Ba2/BB-/BB), which sources attributed to the “ridiculous,” and “unbelievable” coupon.

Whiting Petroleum Corp.’s junk bonds dropped in high-volume activity amid speculation the company was exploring a restructuring.

A Wednesday Breather

After putting up $8.5 billion of issuance in the first two days of the Feb. 10 week, the primary market took a breather on Wednesday.

Heading into the latter part of the week the new issue calendar is thin.

Hecla Mining is in the market with a $475 million offering of eight-year senior notes (existing ratings Caa1/B-), whispered at 7½% to 7¾%, and slated to price Friday.

And Zayo Group Holdings may be situated on the apron with a $3.1 billion megadeal: $1 billion seven-year senior secured notes (B1/B) and $2.1 billion eight-year senior unsecured notes (Caa1/CCC+).

At a premium

The majority of new paper to price during Tuesday’s session was putting in a strong secondary market performance.

LifePoint Health’s 4 3/8% senior secured notes due 2027 (B1/B+) were second only to HCA in terms of trading volume, a market source said.

The notes were changing hands in the par ½ to 101 context with most prints between par 5/8 and par 7/8.

In a deal that was heard to be as much as 6x oversubscribed, LifePoint Health priced a $600 million issue of the 4 3/8% notes at par in a Tuesday drive-by.

Post Holdings’ 4 5/8% senior notes due 2030 (B2/B+) were also changing hands in the par ½ to 101 context in active trading.

The notes firmed on Wednesday after falling flat on Tuesday’s break when they were seen at par bid.

Post priced an upsized $1.25 billion of the 4 5/8% notes at par in a Tuesday drive-by.

The notes were upsized from $1 billion and the deal was heard to be heavily oversubscribed.

Buckeye Partners’ two tranches were also gaining strength on Wednesday with the overall market firmer.

The 4 1/8% senior notes due 2025 and 4½% senior notes due 2028 (B1/BB/BB) were both changing hands in the par ¾ to 101 context on Wednesday, a market source said.

Buckeye priced a $500 million tranche of the 4 1/8% notes and a $500 million tranche of the 4½% notes at par on Tuesday.

Both tranches were heard to be as much as 2x oversubscribed.

While new paper from APX Group, the parent of Vivint Inc., was not as active in the secondary as some of the other issues, the 6¾% notes due 2027 (B2/B-) maintained a large premium.

They continued to trade around 101¼ on Wednesday, a market source said.

The notes saw a strong break, trading up to 101 bid, 101¼ offered soon after breaking for trade.

APX Group priced a $600 million issue of the 6¾% notes at par on Tuesday.

Brookfield Residential Properties’ 4 7/8% senior notes due 2030 (B1/BB-) were range bound in the secondary space with most trades between par ½ to par 5/8, a source said.

Brookfield priced a $500 million issue of the 4 7/8% notes at par in a Tuesday drive-by.

The deal was heard to be playing to $1.8 billion of orders, sources said.

HCA lags

While the majority of deals to flood the secondary space were putting in strong performances on Wednesday, HCA’s new 3½% senior notes due 2030 (Ba2/BB-/BB) were not among them.

The new notes were lagging their issue price.

They were trading in the 99½ to par context in high-volume activity on Wednesday with the majority of trades between 99 5/8 and 99 7/8.

“They haven’t traded will which is no big surprise,” a market source said.

The deal was upsized by $1.7 billion and priced with the lowest coupon for a BB issuer since 2009, sources said.

Market sources called the 3½% coupon “unbelievable,” and “ridiculous.”

However, the deal priced on the wide end of talk.

“I guess that’s what they had to do to upsize by $1.7 billion,” a source said.

HCA priced an upsized $2.7 billion issue of the 3½% notes at par on Tuesday.

Talk was for a 3¼% to 3½% yield.

The initial size of the deal was $1 billion.

Whiting sinks

Whiting Petroleum’s capital structure was under pressure on Wednesday with its junk bonds sinking as much as 8 to 10 points in intraday trading as rumors of a possible restructuring circulated the market.

Whiting’s 5¾% senior notes due 2021 traded as low as 79½ on Wednesday but rebounded to close the day at 83½.

The notes were in the low 90s heading into Wednesday’s session.

The 6¼% senior notes due 2023 traded as low as 56 but rebounded to close the day around 64.

The notes were previously trading in the low 70s.

The 6 5/8% senior notes due 2026 traded as low as 53 but closed the day at around 55, according to a market source.

Whiting’s capital structure was under pressure on Wednesday following a DebtWire article that stated the energy company had hired advisers to review its capital structure.

The article led to widespread speculation the company was considering restructuring.

However, a SunTrust analysts released a note stating the most likely course of action would be a secured debt exchange to address the company’s upcoming maturities.

Funds see $969 million Tuesday inflows

The dedicated high-yield bond funds saw a whopping $969 million of net inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $769 million inflows on the day.

Actively managed high-yield funds saw $180 million of inflows on Tuesday, the source said.

With only Wednesday's daily fund flows numbers remaining to be tallied, the combined junk funds are tracking $2.4 billion of net inflows for the week that concludes with Wednesday's close, the market source added.

Indexes mixed

Indexes were mixed on Wednesday with some flat and others posting large gains.

The KDP High Yield Daily index was flat at 71.57 although the yield dropped by 5 bps to 4.85%. The index rose 3 bps on Tuesday and shaved off 1 bp on Monday.

The ICE BofAML US High Yield index crossed the 1% threshold on Wednesday.

The index was up 11.4 bps to close the day at 1.065%. The index gained 29.5 bps on Tuesday and was up 2.3 bps on Monday.

The CDX High Yield 30 index gained 16 bps to close Wednesday at 109.48. The index was up 13 bps on Tuesday and 14 bps on Monday.

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