United Rentals brings two-part add-on drive-by deal, new bonds busy; Community Health climb continues

By Paul Deckelman and Paul A. Harris

New York, Feb. 22 – The high yield primary arena on Wednesday saw its first new deal pricing of the week, as $500 million of new U.S. dollar-denominated and fully junk-rated paper came to market in two quickly-shopped tranches. It was the first such transaction to price since last Thursday.

Construction equipment and tools rental service United Rentals (North America) Inc. priced a pair of $250 million add-on tranches to its existing 2026 and 2027 bonds.

Both tranches of those new notes were heard by traders to have firmed from their respective issue prices in active dealings.

Syndicate sources said that was about it for news out of the Junkbondland dollar market. They did hear that Quintiles IMS Holdings Inc. was shopping around a euro-denominated eight-year note offering – the second domestic company in as many days to be marketing a euro deal, following in the footsteps of Levi Strauss & Co., which began roadshowing such a deal on Tuesday.

Back among the domestic dollar deals, there was only limited aftermarket activity Wednesday in last week’s new offerings, with Aecom’s 10-year bonds moving up on some volume, but considerably less turnover in the recent issues from NGL Energy Partners LP and Gateway Casinos & Entertainment Ltd.

For a second straight session, Community Health Systems Inc.’s bonds firmed smartly in active trading after the hospital operator reported better-than-expected quarterly results and said that it would increase the number of facilities it plans to sell to bring down its debt.

Statistical market performance measures were higher across the board for a second consecutive session on Wednesday; they had turned upward on Tuesday after having been lower all around on Friday and mixed for two straight sessions before that. The market was closed on Monday in observance of Presidents Day. Wednesday marked the sixth higher session in the last nine trading days.

United Rentals comes rich

The dollar-denominated primary market reopened on Wednesday with a two-part drive-by deal.

The execution appeared to carry forward the 2017 primary market's general trend toward tight pricings.

United Rentals (North America), Inc. priced $500 million of senior notes (B1/BB-) in two add-on tranches.

The deal included a $250 million add-on to the 5 7/8% senior notes due Sept. 15, 2026, which priced at 104.625 to yield 5.253%. The reoffer price came on top of final price talk, and rich to earlier official talk of 104.25 to 104.5.

In addition United Rentals priced a $250 million add-on to its 5½% senior notes due May 15, 2027 at 101.375 to yield 5.324%. The reoffer price came on top of final price talk and rich to earlier official talk of 101 to 101.25.

Wells Fargo was the left bookrunner. BofA Merrill Lynch, Morgan Stanley, Barclays, Citigroup, Deutsche Bank, JP Morgan, MUFG and Scotia were the joint bookrunners for the acquisition financing.

The new deal market is expected to continue to operate during the remainder of the week, as BofA Merrill Lynch and JP Morgan are both believed to be preparing transactions.

The primary market will open up as U.S. issuers with calendar year-ends get their 2016 audits done, a debt capital markets banker said on Wednesday.

Quintiles brings €850 million

For the second consecutive day a U.S.-based issuer rolled out a euro-denominated bond deal.

Quintiles IMS Holdings, Inc. disclosed plans to price €850 million of eight-year senior notes (expected ratings Ba3/BB+) on Thursday.

Joint bookrunner JP Morgan will bill and deliver. Barclays, BofA Merrill Lynch, Goldman Sachs, HSBC and Wells Fargo are also joint bookrunners.

The Danbury, Conn.-based health care data services provider plans to use the proceeds, in addition to a refinancing of $3,065,000,000 equivalent of dollar- and euro-denominated term loans and a $600 million increase to the term loan B and an extension to 2024, to refinance debt and for general corporate purposes which may include share repurchases and future acquisitions.

Quintiles follows to market Levi Strauss & Co.

The San Francisco-based apparel maker launched a €450 million offering of 10-year senior notes (existing ratings Ba2/BB+) on Tuesday. That roadshow wraps up on Thursday.

Superior Plus upsized, oversubscribed

Also for the second consecutive session there was news out of the Canadian dollar-denominated primary market.

Superior Plus LP priced an upsized C$250 million issue of seven-year senior notes (BB/DBRS BB low) at par to yield 5¼%.

The issue size was increased from C$200 million.

The yield printed at the tight end of yield talk in the 5 3/8% area.

The deal played to strong demand, according to the source who added that the order book was four-times covered.

CIBC was the left bookrunner for the acquisition financing. Scotia, BMO, NBF, TD, Canaccord, Casgrain, Cormark and Raymond James were the joint bookrunners.

On Tuesday Crew Energy Inc. announced a roadshow of a Canadian dollar-denominated offering of seven-year senior notes, the size of which remains to be disclosed.

NBF and Scotia are the joint bookrunners.

TD and BMO are the co-lead managers.

New United Rentals firmer

In the secondary sphere, traders saw modest improvements, on brisk volume, in the new add-on notes from Stamford, Conn.-based equipment and tool rental company United Rentals.

A trader pegged its 5 7/8% notes due in September of 2026 at 104 7/8 bid, up from their 104.625 issue price, with some $13 million having changed hands.

A second trader quoted them at 104¾ bid, 105 offered, while a third saw them at 104¾ bid, 105½ offered.

The add-on brought the total amount of those notes outstanding to $1 billion; the company had sold the original $750 million last April.

URI’s new 5½% notes due in May of 2027 gained around ½ point in the aftermarket, to 101 7/8 bid, a market source said, versus their 101.375 issue price. More than $21 million traded.

Another trader located the notes in a 101¾ to 102¼ bid context, while at a different shop, they were quoted at 101¾ bid, 102½ offered.

This add-on also brought the total amount of those notes outstanding to $1 billion, with the company having sold the original $750 million last October.

Aecom improves

Among the recently priced issues, a trader saw Aecom’s 5 1/8% notes due 2027 up 5/16 point on the day, finishing at 100 15/16 bid, on volume of more than $11 million, tops among last week’s new deals.

They had edged up by around 1/8 point on Tuesday on similar volume levels.

The Los Angeles-based engineering company had priced $1 billion of those notes at par last Wednesday, after the quick-to-market issue was upsized from an originally announced $750 million.

There was less activity on Wednesday in last week’s other two deals.

A trader said that “maybe around $3 million” of NGL Energy Partners’ new 6 1/8% notes due 2025 had traded during the session, easing by 3/8 point to end at 99 7/8 bid. The bonds had gained 1/8 point on Tuesday with volume of over $8 million.

The Tulsa, Okla.-based vertically integrated energy limited partnership company had priced $500 million of those notes last Thursday at par via its NGL Energy Finance Corp. subsidiary, after that regularly scheduled forward calendar offering had been upsized from an originally shopped $450 million.

A market source meantime saw only a few odd-lot trades on Wednesday in Burnaby, B.C.-based gaming concern Gateway Casinos & Entertainment’s new 8¼% second-priority senior secured notes due 2024, although he said the issue moved up to 101¾ bid from prior levels around 101 1/8 bid.

On Tuesday, the bonds had finished unchanged on $5 million of turnover.

Gateway priced $255 million of those notes at par last Wednesday in a regularly scheduled offering off the forward calendar.

Community Health higher again

For a second straight session, Community Health Systems’ bonds rose in response to the better-than expected fourth-quarter results from the Franklin, Tenn.-based hospital operator.

“The news was out on these guys,” a trader said, noting that “there had been a lot of scare about repealing Obamacare and the bonds traded off [ahead of the financial results]. When they came out with that kind of [favorable] news, it was very good and the bonds were up about 5 points” in Tuesday’s trading.

He saw them “unchanged to maybe 1 point higher” in Wednesday’s dealings.

At another shop, a market source saw the company’s most actively traded issues, its 6 7/8% notes due 2022, up by more than 2½ points on Wednesday ending at 86½ bid, on top of their more than 8-point jump on Tuesday. Wednesday’s volume was over $57 million, in addition to the more than $69 million changing hands on Tuesday.

The source saw the company’s 8% notes due 2019 up 3 points, to 98¾ bid, following Tuesday’s gain of some 5½ points. More than $32 million of the notes traded on Wednesday, on top of Tuesday’s more than $29 million of turnover.

The bonds rose after the company reported fourth-quarter adjusted earnings of 46 cents per share – far better than the 12 cents per share Wall Street had been looking for.

And the company said that “significant progress has been made in our work to divest certain hospitals and other operations, enabling a reduction in our debt and the opportunity to reshape our portfolio into a stronger, more sustainable organization.”

Indicators stay higher

Statistical market performance measures were higher across the board for a second consecutive session on Wednesday; they had turned upward on Tuesday after having been lower all around on Friday and mixed for two straight sessions before that. The market was closed on Monday in observance of Presidents Day. Wednesday marked the sixth higher session in the last nine trading days.

The KDP High Yield index gained 7 basis points Wednesday to close at 72.49, a new high point for the year and over the past 52 weeks. That was its second straight advance after one loss and six gains in a row before that. It had pushed upward by 8 bps on Tuesday.

Its yield came in by 3 bps to end at 5.01%, its third narrowing in the last four sessions, after having tightened by 2 bps on Tuesday.

The Markit CDX Series 27 High Yield index edged up by 1/16 point on Wednesday to finish at 107 11/16 bid, 107¾ offered, its second successive gain after four straight losses and its sixth advance in the last 10 sessions. The index had firmed by nearly 7/32 point on Tuesday.

The Merrill Lynch High Yield index rose by 0.143% on Wednesday, its third consecutive improvement after one loss and its eighth such upturn in the last 10 days. The index had improved by 0.203% on Tuesday.

Wednesday’s gain upped its year-to-date return to 2.503%, its third straight new peak level for 2017, up from the previous zenith of 2.358% on Tuesday.

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