D.R. Horton, XPO Logistics drive by; new Horton bonds active; energy names shed gains

By Paul Deckelman and Paul A. Harris

New York, Feb. 4 – Opportunistically timed and quickly shopped drive-by deals dominated the high-yield primary market on Wednesday, with syndicate sources citing a pair of such issues that priced, generating $916 million of proceeds.

Homebuilder D.R. Horton, Inc. led the pricing parade with an upsized $500 million issue of five-year notes.

Traders said that those new bonds firmed slightly when they hit the aftermarket, where they were among the most actively traded Junkbondland names of the day.

Freight brokerage and transportation provider XPO Logistics, Inc. also did an upsized deal, in this case a $400 million add-on to the company’s existing 2019 bonds that it sold last year.

The day’s tally of new paper was about double the $450 million that had priced in two deals on Tuesday, from energy operator CrownRock, LP and from auto body repair provider Service King Collision Repair Centers. CrownRock’s new bonds were among the day’s busiest issues, holding onto most of the gains notched in Tuesday’s initial secondary market dealings.

Other energy credits, however, such as California Resources Corp. and Linn Energy, LLC – which had firmed solidly on Tuesday in line with a rise in the price of oil – were mostly in retreat on Wednesday, as crude prices came down from those Tuesday highs.

Statistical market performance indicators turned mixed on Wednesday after having been higher across the board for previous two sessions.

D.R. Horton upsized and tight

Two issuers completed single tranche dollar-denominated drive-by deals on Wednesday.

Both deals were upsized.

One came at the tight end of talk and the other on top of talk.

D.R. Horton launched and priced an upsized $500 million issue of five-year senior notes (Ba1/BB) at par to yield 4%.

The deal was upsized from $350 million.

The yield printed at the tight end of the 4% to 4 1/8% yield talk.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, RBS Securities Inc. and Wells Fargo Securities LLC were the joint bookrunners.

The Fort Worth-based homebuilder plans to use the proceeds for general corporate purposes.

XPO taps 7 7/8% notes

XPO Logistics priced an upsized $400 million add-on to its 7 7/8% senior notes due Sept. 1, 2019 (B1/B-) at 104 to yield 6.591%.

The quick-to-market deal was upsized from $350 million.

The reoffer price came on top of price talk.

Morgan Stanley & Co. was the sole bookrunner.

The Greenwich, Conn. asset-light provider of transportation logistics services plans to use the proceeds for general corporate purposes, including future acquisitions.

Big book for Dollar Tree

Meanwhile the market is focused on the big Dollar Tree Inc. $2.5 billion of eight-year senior notes (Ba3/B+) set to price late in the week, a trader said on Wednesday.

The deal, said to be playing to a $6 billion order book, was whispered in the mid-6s early Wednesday, the trader recounted.

Later in the session, talk tightened to 6% to 6¼%.

“Now they appear to be targeting 6% on the bonds,” said the loan trader.

Books closed early on the concurrent bank loan, which also saw spread talk tight to 375 basis points from earlier talk of 375 to 400 bps.

It's a big deal that people have had the time to get to know, a trader said.

Elsewhere, American Tire Distributors, Inc. is expected to price $805 million of seven-year senior subordinated notes (Caa1/CCC+) on Friday.

As the market awaits formal price talk, the deal is being guided with a yield in the 9% area, the source added.

BofA Merrill Lynch, Goldman Sachs & Co., Wells Fargo Securities, Deutsche Bank Securities, JPMorgan, SunTrust Robinson Humphrey and UBS Investment Bank are the joint bookrunners.

The notes come with three years of call protection.

The Huntersville, N.C.-based company plans to use the proceeds to fund the redemption of all $425 million of its outstanding 11½% senior subordinated notes due 2018 (being redeemed at 102 on Feb. 11), to pay a cash dividend to its parent company, American Tire Distributors Holdings, Inc., and to enable the ultimate parent to fund a cash dividend or other payment to some of its security holders.

American Tire Distributor is an independent supplier of tires to the North American replacement tire market.

Labco taps 8½ notes

In the European market, France's Labco SAS priced a €100 million add-on to its 8½% senior secured notes (B3/B+) at 103.75 to yield 7.188%.

The reoffer price came on top of price talk, which richened from earlier talk of 103 to 103.5.

The managers were Deutsche Bank, which will bill and deliver, as well as Morgan Stanley, Barclays, HSBC and Natixis.

The Paris-based clinical laboratory operator plans to use the proceeds to repay bank debt.

D.R. Horton heads higher

In the secondary market, traders saw the new 4% notes due 2020 from D.R. Horton having pushed up a little when they were freed for aftermarket activity.

One quoted the bonds at 100 3/8 bid, 100 5/8 offered, seeing some $40 million of the notes having changed hands. That put the new deal high up on the day’s Most Actives list.

A second market source, who also saw $40 million of the notes traded, had them up ¼ point from their par issue price earlier in the session.

And at another desk, a trader pegged the bonds in a 100½-to-101 bid context.

Meanwhile, there was no immediate aftermarket action reported in the day’s other pricing, XPO Logistics’ add-on to its 7 7/8% notes due 2019.

CrownRock is rock-steady

Tuesday’s offering of 7¾% notes due 2023 from CrownRock LP and its CrownRock Finance, Inc. subsidiary was seen pretty much holding onto the gains those bonds had notched in initial trading, despite a generally weaker tone among energy credits.

A trader saw more than $16 million of the notes having changed hands, putting them among the day’s Most Active issues. He quoted the notes at 101 bid, calling that unchanged on the day.

Another trader said that the bonds “didn’t move around too much,” seeing them going home essentially unchanged at 101, while a third placed them in a 100¾-to-101 bid context.

CrownRock, a Midland, Texas-based oil and gas-producing joint venture of CrownQuest Operating and Lime Rock Partners focusing on operations in the Permian Basin region of western Texas, priced $350 million of those notes on Tuesday at 98.536 to yield 8%, after the offering was increased from the originally announced $300 million. The notes jumped to around the 101 level in post-pricing trading on Tuesday.

That session’s other deal – Service King’s add-on to its 7 7/8% notes due 2022 priced back in September – moved up ¼ point on Wednesday, a trader said, locating the bonds at 96¾ bid, 97¾ offered.

The Richardson, Texas-based operator of a chain of auto-body repair shops had priced the $100 million add-on to the 7 7/8% senior notes due 2022 (Caa1/CCC+) on Tuesday at 96, for a yield to maturity of 8.596%. They pushed up to 96½ bid, 97 offered after being freed to trade later Tuesday, the trader said.

Altice sees action

Among other recently priced offerings, Altice International’s several tranches of new bonds saw considerable activity on Wednesday, with the 6 5/8% senior secured notes due 2023 from its Altice Financing SA unit the day’s volume leader, a market source said, as over $52 million of those notes were seen having traded. He quoted the notes around a 102¾ bid level. The company had priced $2.06 billion of that 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 this year in the junk space – that included both dollar- and euro-denominated secured and unsecured notes.

The Altice SA unit’s 7 5/8% senior unsecured notes due 2025 were trading at 102 on Wednesday, down 1/8 point, on volume of more than $32 million. Some $1.48 billion of those notes priced at par last Friday, after that particular tranche was downsized from an originally announced $1,775,000,000.

Both of those tranches, as well as a $385 million tranche of the 7 5/8% 10-years from another subsidiary, Altice Finco SA, had initially traded up smartly after pricing at par. Then they seemed to ease a little from their highs in the 102-103 area before firming again earlier this week.

Other recently priced deals seen trading on solid volume included H.J. Heinz Co.’s 4 7/8% senior secured second-lien notes due 2025, which finished off 1/8 point on the day at 100½ on $43 million of turnover. The Pittsburgh-based ketchup and canned-beans king had priced $2 billion of the notes at par on Jan. 26 in a quick-to-market transaction.

And there was brisk trading on Wednesday in both halves of Monday’s two-tranche deal from Netflix, Inc. The company’s 5½% notes due 2022 were seen at 100¾ bid, down 1/8 point on the day, on volume of over $21 million, although that was only about one-quarter of Tuesday’s turnover of more than $83 million.

Its 5 7/8% notes due 2025 were seen by a trader having gained ½ point to go home at 101¼ bid, with around $17 million traded – although that paled in comparison with Tuesday’s market-leading volume of more than $88 million.

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 after upsizing the total offering size from an originally announced $1 billion.

Oil names on the downside

A famous and venerable bit of folk wisdom is: “What goes up, must come down,” and that was certainly true of the oil and natural gas sector on Wednesday. Traders noted that the sector’s bonds – which had posted some handsome gains on Tuesday in line with a rise in recently beleaguered crude oil prices – gave up much of those gains on Wednesday as crude prices resumed their slide.

“Call it ‘the empty gas-can bounce,’” a trader said of Tuesday’s atypical strength. On Wednesday, he said, “the usual names were down 1 to 2 points, as oil was coming down.”

“Oil was down $4 today,” a second trader said, “and so CalRes [i.e., California Resources Corp.] was one of the top volume traders, down about 1½ points from last night, since they move in sync with oil prices.”

The Los Angeles-based exploration and production operator’s benchmark 6% notes due 2024 ended around the 84 3/8 bid level – down from Tuesday’s close around 86 bid – with more than $40 million traded.

Another widely watched oiler, Houston-based Linn Energy, was likewise lower, with its 6½% notes due 2019 down a deuce at 79¾ bid on volume of over $13 million.

Nuverra gains on asset sale

Away from the E&P names, Nuverra Environmental Solutions, Inc.’s bonds jumped on Wednesday, a trader said, on the news that Nuverra had agreed to sell its Thermo Fluids Inc. used-oil recycling subsidiary to Clean Harbors, Inc. in an $85 million all-cash transaction.

He pegged Nuverra’s 9 7/8% notes due 2018 “up about 9 points – but not on large volume, though,” quoting the bonds at 62½ bid. The bonds had finished Tuesday around 54 bid.

A market source at another desk said that while there was “busy” trading in smallish odd-lot pieces, there were only a few large-sized trades and just one round-lot trade, at around 59 bid, although that was up from the most-recent prior round-lot transaction on last Thursday, when the bonds had been trading at around 50 bid.

Clean Harbors’ 5¼% notes due 2020 saw only a few mostly smallish trades, with just one round-lot transaction, pushing the notes up by 1/8 point to 101 7/8 bid.

Nuverra, a Scottsdale, Ariz.-based provider of environmental services to companies in the shale oil and natural gas industry, agreed to sell Thermo Fluids, which recycles used oil, used oil filters, antifreeze products and solvents, to Norwell, Mass.-based Clean Harbors, a provider of environmental services to the chemical, energy and manufacturing sectors, in a transaction expected to close in March.

Indicators turn mixed

Statistical indicators of junk performance turned mixed on Wednesday after having been higher across the board for previous two sessions.

The KDP High Yield Daily index gained 8 basis points to end at 71.21, its third straight gain; it had also risen by 12 bps on Tuesday and had edged up by 1 bp on Monday.

Its yield declined by 1 bp on Wednesday to 5.42%, its third consecutive narrowing, after having come in by 5 bps on Tuesday and having tightened by 1 bp on Monday.

But the Markit Series 23 CDX North American High Yield index lost 3/8 point to finish at 105 31/32 bid, 106 offered, after having risen for a second consecutive session on Tuesday, when it pushed upward by 9/16 point, on top of Monday’s 5/16 point gain.

However, the Merrill Lynch U.S. High Yield Master II index defied superstition and posted its 13th straight gain on Wednesday, finishing up by 0.131%. It had risen by 0.301% on Tuesday.

The latest gain lifted its year-to-date return to 1.159%, its ninth consecutive new peak level for 2015, up from the previous high point of 1.027% on Tuesday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.