Acadia, James Hardie price; Dollar Tree ahead; energy names bounce; funds jump $2.67 billion

By Paul A. Harris and Paul Deckelman

New York, Feb. 5 – The high-yield primary sphere had only a moderately busy session on Thursday – but participants were gearing up for what promises to be a wild and woolly Friday, with over $6 billion of new paper from a variety of issuers seen possibly pricing.

Clearing the decks for the anticipated action, two regularly scheduled eight-year forward calendar issues totaling $697 million of proceeds priced on Thursday – an upsized $375 million of notes from Acadia Healthcare Co. Inc. and $325 million from Irish building materials producer James Hardie International Group Ltd. On Wednesday, the market had seen $900 million of dollar-denominated, fully junk-rated new paper come to market in a pair of opportunistically timed drive-by transactions.

Traders said the new Acadia Healthcare bonds performed robustly in the aftermarket.

Market participants meanwhile were getting ready for a memorable Friday, a session that will be led by deep-discount retailer Dollar Tree, Inc.’s upsized $3.25 billion two-part offering, part of the financing for its takeover of industry rival Family Dollar Stores Inc.

Besides that big deal, about an equal amount of paper is expected to come to market on Friday from five other issuers.

In the secondary market, there was once again brisk trading in recently priced credits such as Altice International, H.J. Heinz Co. and Netflix, Inc.

And energy names like California Resources Corp. remained on their roller-coaster ride; that company’s bonds, and other sector peers like SandRidge Energy Inc., had sizzled on Tuesday only to fizzle on Wednesday, both in line with oil-price gyrations. Along with crude, they were back on the upside on Thursday.

Statistical indicators of junk performance were better across the board on Thursday for the third time in the last four sessions after having turned mixed on Wednesday.

High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – saw their second giant-sized inflow in as many weeks, taking in a net $2.67 billion of fresh investor cash, putting those flows on a solidly positive footing for the year to date.

Acadia upsized and tight

Amid heavy news volume, two issuers each brought a single dollar-denominated tranche of junk, raising a combined total of $697 million on Thursday.

Acadia Healthcare priced an upsized $375 million issue of eight-year senior notes (B3/B-) at par to yield 5 5/8%.

The deal was upsized from $300 million.

The yield printed at the tight end of yield talk in the 5¾% area.

BofA Merrill Lynch was the left bookrunner. Jefferies LLC, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. were the joint bookrunners.

The Franklin, Tenn.-based provider of inpatient behavioral health-care services plans to use the proceeds to fund a portion of the purchase price for the planned acquisition of CRC Health Group, Inc. The additional $75 million of proceeds that resulted from the upsizing of the deal will be used to finance the purchase in lieu of anticipated borrowings under the company's revolver, according to a market source.

James Hardie at a discount

Dublin-based building materials company James Hardie priced a $325 million issue of 5 7/8% eight-year senior notes (Ba2/BB-) at 99.213 to yield 6%.

The yield printed at the wide end of yield talk in the 5 7/8% area.

BofA Merrill Lynch was the left bookrunner for the debt-refinancing deal. HSBC and Wells Fargo were the joint bookrunners.

Big demand for Dollar Tree

As the dust was settling on the Thursday session, the primary market looked toward what is shaping up to be a mammoth finish to the week.

The final session of the Feb. 2 week could see north of $6.5 billion of issuance should the market clear all the deals that, earlier in the week, had been expected to price by Friday's close.

The center ring, however, belongs to Dollar Tree, sources say.

Dollar Tree upsized its offering of senior notes (Ba3/B+) to $3.25 billion from $2.5 billion with the addition of a new $750 million tranche of five-year notes on Thursday.

The five-year notes are talked to yield in the 5 3/8% area.

Dollar Tree left in place its original $2.5 billion offering of eight-year notes and talked them to yield 5¾% to 6%.

The talk on the eight-year notes comes 50 basis points to 75 bps tighter than initial guidance in the mid 6s, which circulated early Wednesday morning, according to market sources. Talk tightened to 6% to 6¼% on Wednesday afternoon, and by the Wednesday close bookrunners were targeting 6%, according to a trader who added that the deal, then sized at $2.5 billion, was playing to $6 billion of demand.

Books were scheduled to close Thursday, and pricing is set for Friday morning.

And the buzz in the market has those books bursting with around $10 billion of orders, a trader said shortly after Thursday's close.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC, Bank of America Merrill Lynch, RBC Capital Markets LLC and U.S. Bank NA are the joint bookrunners for the acquisition financing.

Citgo gives 11¾% area talk

Also in the billion-plus club as possible Friday business is Citgo Holding, Inc.

The refiner talked its $1.5 billion offering of 5.5-year senior secured notes (Caa1/B-/B+) to yield in the 11¾% area inclusive of four to five points of original issue discount on Thursday.

Books close at noon ET Friday.

Deutsche Bank and BTG Pactual are the leads.

Elsewhere, Western Refining Logistics, LP and its wholly owned subsidiary, WNRL Finance Corp., talked their $300 million offering of eight-year senior notes (B3/B) to yield 7½% to 7¾%.

BofA Merrill Lynch and Wells Fargo are the joint global coordinators. Credit Agricole, RBS and Stifel Nicolaus are the joint bookrunners.

In addition to those there are four other dollar-denominated deals that could clear by Friday's close. However, no talk was available for any of them at press time Thursday.

Among those, Blackboard Inc. is marketing a $75 million add-on to its 7¾% senior notes due Nov. 15, 2019 (Caa1/CCC+). Unofficial talk has the deal coming together at a reoffer price of 93, a trader said Thursday.

American Tire Distributors, Inc. has been on the road with $805 million of seven-year senior subordinated notes (Caa1/CCC+), which are guided in the 9% area.

And Amira Nature Foods Ltd. is looking to place $225 million of five-year second-lien senior secured notes. Unofficial talk is in the low 10s, a trader said.

Adler Pelzer at the rich end

In Europe, HP Pelzer Holding GmbH priced a €50 million add-on to its 7½% senior secured notes due July 15, 2021 (B2/B+) at 104 to yield 6.723% on Thursday.

The reoffer price came at the rich end of the 103.5 to 104 price talk.

JPMorgan was the bookrunner for the quick-to-market deal.

Proceeds will be used to put up cash collateral for existing debt, make an intercompany loan to the parent company Adler Group and for general corporate purposes.

Picard on roadshow

France-based frozen food company Picard started a European roadshow on Thursday for a €770 million two-part offering of high-yield notes.

Picard Groupe SAS is offering a €345 million add-on to its senior secured floating-rate notes due Aug. 1, 2019 (expected ratings B1/B+).

Meanwhile Picard Bondco SA is offering €425 million of new five-year senior unsecured fixed-rate notes (expected ratings B3/B-).

Credit Suisse and JPMorgan are the joint bookrunners for the debt refinancing and dividend-funding deal.

Acadia up in aftermarket

In the secondary arena, Acadia Healthcare’s new 5 5/8% notes due 2023 jumped more than a point when they were freed for aftermarket activity. Several traders saw the bonds moving around in a 101¼-to-101½ bid context, versus their par pricing level.

One said that he had seen “decent volume” in the new credit.

Traders did not report seeing any immediate aftermarket dealings in the day’s other new deal, James Hardie International’s 5 7/8% notes due 2023.

Horton hangs in

Among other recently priced issues, a trader said that D.R. Horton, Inc.’s 4% notes due 2020 “didn’t move too much from where they went out yesterday [Wednesday],” seeing that paper at 100½ bid, 101 offered.

A second trader saw the Fort Worth, Texas-based homebuilder’s bonds up ¼ point at 100¾ bid, 101¼ offered.

The company had priced $500 million of the notes at par on Wednesday. The issue was upsized from $350 million originally.

A trader saw XPO Logistics, Inc.’s 7 7/8% notes due 2019 “a little better,” trading around 104¾ bid.

XPO, a Greenwich, Conn.-based provider of freight forwarding and supply-chain services to various industries, priced a $400 million add-on to its existing bonds at 104 to yield 6.591%. The issue was upsized from $350 million originally. Like D.R. Horton, the XPO deal was a quick-to-market transaction.

Altice remains active

As had been the case on Wednesday, Altice International’s several tranches of new bonds were being actively traded on Thursday.

The 6 5/8% senior secured notes due 2023 from its Altice Financing SA unit were seen by a market source down 5/8 point at 101 7/8 bid, on volume of over $31 million, putting it near the top of the Most Actives list.

Its Altice SA 7 5/8% notes due 2025 gained ¾ point to finish at 102¾, on volume of more than $13 million.

Altice, a Luxembourg-based cable and telecommunications company, had priced $2.06 billion of the senior secured eight-year paper last Friday at par in a regularly scheduled forward calendar offering as part of a $5.47 billion equivalent five-tranche behemoth of a bond deal – the biggest so far this year in the junk space – that included both dollar- and euro- denominated secured and unsecured notes.

It also priced $1.48 billion of the unsecured 10-year notes at par last Friday. That particular tranche was downsized from an originally announced $1.775 billion.

And it also priced another $385 million of the 7 5/8% 10-year notes at par in a separate tranche via another subsidiary, Altice Finco SA.

H.J. Heinz Co.’s 4 7/8% senior secured second-lien notes due 2025 gained ¼ point to close at 100¾ bid, with over $13 million trading.

The Pittsburgh-based packaged foods giant had priced $2 billion of the notes at par on Jan. 26 in a quick-to-market transaction.

Monday’s two-tranche deal from Netflix was also among the most actives, with its 5 7/8% notes due 2025 seen up 1 point at 102¼, with over $11 million changing hands.

A trader saw its 5½% notes due 2022 up ¾ points at 101½ bid, with $11 million of volume.

“Both traded up ½ to ¾ point,” another trader said.

Netflix, a Los Gatos, Calif.-based distributor of movies, television shows and other entertainment content to its subscribers, priced $700 million of the seven-year bonds and $800 million of the 10-years, both at par, in a quick-to-market deal on Monday. The total offering size was upsized from an originally announced $1 billion.

Energy keeps gyrating

Away from the new issues, a trader said that “there was a snap-back in oil, and so there was a snap-back in the energy space as well.”

Crude prices had slid by more than $4.00 per barrel on Wednesday, or 8.7%, causing the energy bonds to slide off the highs they had hit on Tuesday. They gained $2.03, or 4.2%, to $50.48 a barrel in Thursday trading on the New York Mercantile Exchange.

California Resources’ 6% notes due 2024, which had nosedived by about 1 3/8 points on Wednesday, more than made up for it on Thursday with a better-than-2½-point climb on Thursday to end at 87 bid, on volume of over $39 million, tops in the junk space.

SandRidge Energy, whose 7½% notes due 2021 had lost 1¼ points Wednesday to end at 71¼ bid, were 3-point winners Thursday at 74¼ bid.

Indicators turn higher

Statistical indicators of junk performance were better across the board on Thursday for the third time in the last four sessions after having turned mixed on Wednesday.

The KDP High Yield Daily index jumped by 15 basis points to end at 71.36, its fourth straight gain. On Wednesday, it had risen by 8 bps.

Its yield came in by 6 bps to 5.36%, its fourth straight tightening. On Wednesday, it had declined by 1 bp.

The Markit Series 23 CDX North American High Yield index improved by 15/32 point to go home at 106 3/8 bid, 106½ offered, in contrast to Wednesday’s 3/8-point loss. Thursday’s advance was the third in the last four sessions.

The Merrill Lynch U.S. High Yield Master II index just kept rolling along to a 14th consecutive gain, pushing upwards by 0.22% after having risen by 0.131% on Wednesday.

The latest gain lifted its year-to-date return to 1.381%, its 10th consecutive new peak level for 2015, up from the previous high point, Wednesday’s 1.159% reading.

Funds gain big, again

High-yield mutual funds and ETFs saw their second giant-sized inflow in as many weeks, market sources said Thursday, putting those flows on a solidly positive footing for the year to date.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $2.67 billion more came into those funds than left them during the week ended Wednesday.

That was almost as large as the $2.77 billion cash surge reported last Thursday for the week ended Jan. 28. (See related story elsewhere in this issue.)

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