Manitowoc, Sunoco price; Teva gains; CenturyLink jumps; Consolidated Communications drops

By Abigail W. Adams

Portland, Me., March 11 – The domestic high-yield primary saw two deals clear the market on Monday amid an improved tone in capital markets.

After carrying over from Friday’s session, Manitowoc Co. Inc. priced a $300 million issue of seven-year senior secured second lien notes (B2/B) at par to yield 9%.

Sunoco LP priced an upsized $600 million issue of eight-year senior notes (B1/BB-/BB) at par to yield 6% in a quick-to-market Monday trade, according to market sources.

Target Hospitality talked its $340 million offering of five-year senior secured notes (B2/B) with pricing expected on Tuesday.

Meanwhile, the secondary space remained quiet on Monday with trading volume light while the overall space firmed after a soft ending to last week.

Teva Pharmaceuticals’ junk bonds saw minor gains in high-volume activity on Monday.

CenturyLink, Inc.’s junk bonds were also on the rise on Monday with the notes on an upward trajectory since the company’s fourth-quarter earnings report.

However, Consolidated Communications Holdings Inc.’s saw a multipoint drop on Monday following a ratings downgrade.

Manitowoc prices

In a deal held in the market over the weekend, Manitowoc priced a $300 million issue of seven-year senior secured second lien notes (B2/B) at par to yield 9%.

Guidance on the debt refinancing deal backed up to the 9% area from initial guidance in the low 8% area, sources said.

J.P. Morgan managed the sale which had been expected to be completed last Friday.

Sunoco upsizes

Sunoco priced an upsized $600 million issue of eight-year senior notes (B1/BB-/BB) at par to yield 6% in a quick-to-market Monday trade, according to market sources.

The issue size increased from $500 million.

The yield printed in the middle of yield talk in the 6% area and tight to initial talk in the low 6% area.

Left lead bookrunner Goldman Sachs will bill and deliver. Mizuho was also a lead bookrunner.

The Houston-based wholesale distributor of motor fuels, retailer of motor fuels and operator of convenience stores plans to use the proceeds to pay down its revolving credit facility.

Target Hospitality talk 9% area

Target Hospitality talked its $340 million offering of five-year senior secured notes (B2/B) to yield in the 9% area.

Official talk comes slightly wide of initial guidance in the high 8% area, a trader said.

Books close a 10:30 a.m. ET Tuesday, and the offering is set to price thereafter.

Credit Suisse, Barclays, BofA and Deutsche Bank are the joint bookrunners.

Teva active

Teva Pharmaceuticals junk bonds were making nominal gains in high-volume activity on Monday with Teva’s 6¾% senior notes due 2028 brushing par.

The 6¾% notes rose almost ½ point to close Monday just south of par at 99.9, according to a market source. More than $17.5 million of the bonds were on the tape by the late afternoon.

Teva’s 3.15% senior notes due 2026 rose 3/8 point to 80 7/8 with more than $13.5 million of the bonds on the tape, according to a market source.

The notes have been under pressure and trading down alongside the broader market for much of last week.

Prior to last week, the 6¾% notes were trading in the 102 to 103 range.

The 3.15% notes were trading north of 83.

Teva and Insilico Biotechnology announced on Monday they were collaborating to apply Insilico’s technology to Teva’s production processes for biopharmaceuticals to increase their efficiency, according to a company news release.

CenturyLink jumps

CenturyLink’s junk bonds were on the rise on Monday, continuing the upward momentum they’ve seen since the telecommunications provider reported fourth-quarter earnings.

CenturyLink’s 7½% senior notes due 2024 rose 1¾ points to 105 7/8, according to a market source. More than $13 million of the bonds were on the tape by the late afternoon.

CenturyLink’s 5 5/8% senior notes due 2025 rose almost 2 points to 95¾. More than $4.5 million of the bonds changed hands.

Both issues were trading down alongside the broader market last week but recovered on Monday.

CenturyLink has seen positive upward momentum since reporting fourth-quarter earnings in mid-February.

While the company missed analyst expectations for EBITDA, it reported strong guidance for 2019 and plans to reduce its leverage to 2.75x to 3.25x.

Consolidated Communications downgrade

Consolidated Communications’ 6½% senior notes due 2022 saw a significant drop on Monday following a ratings downgrade from S&P.

The 6½% notes dropped 2.4 points to 89.375, according to a market source. More than $11 million of the bonds changed hands during Monday’s session.

S&P lowered all ratings for the broadband provider by one notch including its issuer credit rating, which was reduced to B from B+, Prospect News reported. (See related article in this issue.)

The ratings downgrade was due to the expectation that Consolidated Communications’ leverage will remain above 5x for the foreseeable future.

The company’s prospects are not expected to improve due to industry pressures that may result in a continued decline in revenue, the ratings agency said.

Friday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Friday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $309 million of outflows on the day.

Actively managed high-yield funds saw $130 million of outflows on Friday, the trader said.

Looking at early fund flow totals for the week that will conclude with Wednesday's close, with Thursday's and Friday's totals reported the combined funds are tracking $220 million of outflows.

Indexes

Indexes were posting gains on Monday after closing out last week with cumulative losses.

The KDP High Yield Daily index rose 5 basis points on Monday to 69.53 with the yield now 6.13%.

The index saw a cumulative loss of 43 bps on the week.

After sinking below 6% year-to-date returns on Friday, the ICE BofAML US High Yield index popped back above it on Monday.

The index rose 19.7 bps on Monday with the year-to-date return now 6.029%.

The index saw a cumulative loss of 57.5 bps on the week last week.

The index initially shot past 6% returns on Feb. 25 after passing 5% returns on Feb. 12.

The CDX High Yield 30 index rose 57 bps to close Monday at 106.07.

The index was down 93 bps on the week last week.

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