LifePoint, H&E price; C&S Group on deck; FirstEnergy in focus

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 30 – The domestic high-yield primary market was active on Monday with two drive-by deals clearing the market.

In a heavily oversubscribed offering, H&E Equipment Services, Inc. priced a $1.25 billion issue of eight-year senior notes (B2/BB-).

LifePoint Health, Inc. also priced a $500 million issue of senior notes due Jan. 15, 2029 (Caa1/CCC+).

C&S Group Enterprises LLC also began to market a $300 million offering of eight-year senior notes.

The deal joins U.S. LBM Holdings Inc. and United States Cellular Corp. on the forward calendar.

Meanwhile, the secondary space was equally active although largely unchanged on Monday with many accounts occupied with end-of-month activity, sources said.

While H&E’s new notes were trading at a nominal premium to their issue price on the break, CNX Resources Corp.’s recently priced 6% senior notes due 2029 continued to tick higher.

FirstEnergy Corp.’s senior notes were in focus with the capital structure improving as the notes from the recent fallen angel shifted from investment grade to high-yield hands.

Monday’s primary

The primary market was active on Monday, the final day of November 2020, following the conclusion of the Thanksgiving holiday weekend in the United States during which a significant number of market participants managed to enjoy a four-day break from work.

Two drive-by deals priced. Neither one was upsized. However, both came at par, tight to talk and significantly inside of initial guidance.

H&E Equipment Services priced a $1.25 billion issue of 3 7/8% senior notes due December 2028 (B2/BB-) in a deal was heard to be playing to a $2.4 billion order book late Monday morning.

And LifePoint Health priced a $500 million issue of 5 3/8% senior notes due January 2029 (Caa1/CCC+), playing to an order book that was heard to be three-times oversubscribed.

One deal was announced as Tuesday business.

C&S Group Enterprises kicked off a $300 million offering of eight-year senior notes on a conference call. It is in the market with early guidance in the low 5% area.

Also, on Tuesday debt financing for the buyout U.S. LBM Holdings Inc. by Bain Capital was heard to include $390 million of unsecured debt. A $1.5 billion bank deal also backing the buyout is set to launch at a Tuesday bank meeting.

And ratings from three agencies surfaced Monday on United States Cellular Corp.'s proposed senior notes (Ba1/BB/BB+), size and maturity to be determined (see related stories in this issue).

H&E’s break

H&E’s 3 7/8% senior notes due 2028 were trading with a nominal premium after breaking for trade.

The notes were changing hands in the par 1/8 to par ½ context heading into Monday’s close, a source said.

There was about $34 million of the bonds on the tape.

CNX ticks higher

While volume was light, CNX Resource’s 6% senior notes due 2029 continued to tick higher on Monday.

The notes gained about ¼ point to close the day at 101¼, a source said.

The 6% notes climbed to a 101-handle shortly after pricing.

CNX priced a $500 million issue of the 6% notes at par last Tuesday.

FirstEnergy in focus

FirstEnergy’s capital structure was in focus on Monday with the recent fallen angel’s senior notes on the rise as they switched from investment-grade to high-yield hands.

FirstEnergy’s 4.85% senior notes due 2047 were the most active of the capital structure.

They rose ½ point to 123 with $53 million in reported volume, according to a market source.

The 3.9% senior notes due 2027 were also up about ½ point to 111.

The bonds saw about $43 million in reported volume.

The 7.375% senior notes due 2031 rose about 2 points to 138¾. However, the 3.4% senior notes due 2050 were largely flat at 96.

“There’s probably some index buying,” a market source said of the trading activity.

Moody’s Investors Service downgraded the electric utility company to Ba1 from Baa3 last week.

The downgrade was due to the company’s bribery scandal where a former official paid Ohio state legislators involved in the passage of a bailout package for two of company’s nuclear power plants, which will increase the company’s regulatory risk.

Moody’s also downgraded the company due to its decision to draw down $2 billion from its credit facilities which it viewed as “unusual behavior for an investment-grade utility holding company,” the rating agency said in a press release.

S&P also further slashed FirstEnergy’s credit rating to BB from BB+ last week after downgrading the company to junk earlier in the month.

$375 million Friday outflows

The dedicated high-yield bond funds saw $375 million of net daily outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $455 million of outflows on the day.

However actively managed high-yield funds were positive on the day, posting $80 million of inflows on Friday, the source said.

Indexes

The KDP High Yield Daily index shaved off 1 bp to close Monday at 67.93.

The CDX High Yield 30 index closed Monday at 109.

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