VeriSign, Venator lead busy day; Rite Aid up on sale plan; funds dive $1.74 billion

By Paul Deckelman and Paul A. Harris

New York, June 29 – The high-yield primary market continued to crackle with activity on Thursday as five issues priced – though none of them terribly large – generating a total of $1.79 billion of new dollar-denominated and fully junk-rated paper.

Internet security and services provider VeriSign, Inc. had the big deal of the day, an upsized and quickly shopped $550 million of 10-year notes.

Also from the tech sphere, communications infrastructure provider Zayo Group, LLC likewise drove by with a $300 million add-on to its existing 2027 notes.

There was also a trio of regularly scheduled issues pricing off the forward calendar – chemical maker Huntsman Corp.’s spinoff Venator Materials plc’s upsized $375 million of eight-year notes, metal recycler Commercial Metals Co.’s $300 million of 10-year notes, and energy exploration and production operator Carrizo Oil & Gas, Inc.’s $250 million eight-year issue.

Traders saw brisk aftermarket trading at mostly higher levels in the day’s new issues.

But they said that Wednesday’s megadeal from Exela Technologies continued to struggle.

Away from the new deals, Rite Aid Corp.’s bonds jumped on the news the drugstore chain had canceled its planned merger with larger rival Walgreens Boots Alliance, Inc. and instead will sell nearly half of its stores to Walgreens for more than $5 billion, slating most of the proceeds from that sale for debt paydown.

Energy names such as California Resources Corp., Chesapeake Energy Corp. and Halcon Resources Corp. moved up in busy trading as world crude oil prices continued to firm for a fifth straight session.

Statistical market performance measures were mixed for a third consecutive session on Thursday. They had turned mixed on Tuesday and have stayed that way since then, after having been higher across the board last Friday and again on Monday. Before that, the indicators had been mixed last Thursday, following two straight downside sessions.

Another numerical indicator – flows of investor cash into or out of high yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – fell deeper into the red this week, the flows’ second downturn in a row after three straight weeks before that of gains, according to numbers released on Thursday. Some $1.74 billion more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, June 28, on top of last week’s $128 million net outflow (see related story elsewhere in this issue).

VeriSign upsized and tight

Five issuers completed single tranche dollar-denominated deals on Thursday, raising an overall total of $1.79 billion during a busy session in the new issue market.

Two of the five issuers brought drive-by deals. Another cut short its roadshow.

Two issuers upsized their deals.

Executions appeared solid with two deals pricing at the tight end of talk – and one of them was also upsized – and the remaining three pricing on top of or in the middle of talk.

VeriSign, Inc. priced an upsized $550 million issue of 10-year senior notes (Ba1/BB+) at par to yield 4¾%.

The yield printed at the tight end of the 4¾% to 5% yield talk, which was also the initial guidance.

JP Morgan was the lead.

The Reston, Va.-based internet security and services provider plans to use the proceeds for general corporate purposes including share repurchases.

Venator upsizes

Huntsman Corp. and Venator Materials priced an upsized $375 million issue of eight-year senior notes (B2/BB-) at par to yield 5¾%.

The issue size was increased from $350 million.

The yield printed at the tight end of the 5¾% to 6% yield talk.

Citigroup was the left bookrunner for the spinoff deal. BofA Merrill Lynch, JP Morgan, Barclays, HSBC, PNC, RBC, Goldman Sachs and SunTrust were the joint bookrunners.

A concurrent term loan was also upsized to $375 million from $350 million.

Proceeds will initially be placed into escrow pending an initial public offering and will then be used to repay inter-company debt owed to Huntsman and to pay a dividend to Huntsman and its subsidiaries. The transactions are part of the spinoff of Venator from Huntsman. The additional proceeds resulting from the upsizing of the bonds and loan will be used to fund a dividend to Hunstman.

Zayo taps 5¾% notes

Zayo Group, LLC and Zayo Capital, Inc. priced a $300 million add-on to their 5¾% senior notes due Jan. 15, 2027 (B3/B) at 104.25 to yield 5.063%.

The reoffer price came on top of price talk and rich to initial guidance of 104.

Morgan Stanley, Barclays, Goldman Sachs, RBC, Citigroup, JP Morgan and SunTrust were the joint bookrunners for the debt refinancing deal.

Commercial Metals refinances

Commercial Metals priced a $300 million issue of 10-year senior notes (Ba2/BB+) at par to yield 5 3/8%.

The yield printed in the middle of the 5¼% to 5½% yield talk.

Citigroup was the left bookrunner for the debt refinancing deal. Wells Fargo, BofA Merrill Lynch, BBVA and PNC were the joint bookrunners.

Carrizo accelerates timing

Carrizo Oil & Gas priced a $250 million issue of eight-year senior notes (B3/B+) at par to yield 8¼%.

The yield printed on top of yield talk that had been set in the 8¼% area.

Timing on the acquisition financing deal was move ahead, as it had been previously slated to price on Friday.

Citigroup was joint global coordinators and left bookrunner. BofA Merrill Lynch was a joint global coordinator and joint bookrunner. Wells Fargo, Capital One, RBC, Credit Agricole, SG, BBVA, Compass, BMO, Scotia and ABN Amro were also joint bookrunners.

With some market participants eyeing an extended weekend ahead of Tuesday’s July 4 market close, Friday and Monday could be washes in the dollar-denominated primary market, sources said.

Thursday’s burst of action nearly cleared the calendar.

Late Thursday the market was waiting for word on Hecla Mining Co.’s $500 million offering of eight-year senior notes (B3).

An investor call was scheduled to take place Thursday morning and some were watching for the deal to price before the Thursday close. However no terms were available at press time.

The debt refinancing deal is whispered in the high 5% to 6% area, an investor said.

Banijay upsizes

In the European market, Banijay Group SAS priced an upsized €365 million issue of five-year senior secured notes (B1/B+) at par to yield 4%.

The amount was increased from €350 million.

Natixis managed the sale.

The Paris-based media company plans to use the proceeds, together with a €60 million senior term loan, to pay off its existing senior credit facilities, repay a portion of shareholder debt and fund the acquisition of Castaway Television Productions Ltd.

Manutencoop downsizes

Finally, in a deal that remained in the market almost a week after it had been expected to clear, Italy’s Manutencoop Facility Management SpA priced a downsized €360 million issue of 9% five-year senior secured notes at 98 to yield 9.519% on Thursday.

The offering was decreased from €420 million originally.

Call protection was increased to three years from two years.

JP Morgan was the lead bookrunner for the debt refinancing.

Mixed Wednesday flows

Against a backdrop of substantial weekly outflows (negative $1.735 billion) for the week to Wednesday’s close as reported by Lipper US Fund Flows, the daily cash flows for high-yield funds were mixed on Wednesday, a buyside source said.

High-yield ETFs saw $22 million of inflows on the day.

However asset managers sustained $60 million of outflows on Wednesday.

Dedicated bank loan funds were positive on the day, with $35 million of inflows on Wednesday, the source said.

Day’s issues do well

In the secondary arena, new and recently priced issues dominated the day’s Most Actives list, with most of them firming smartly in aftermarket dealings.

A market source saw VeriSign’s new 4¾% notes due 2027 at 101 bid, with over $41 million of those bonds changing hands after the upsized and quickly shopped issue priced at par.

At another desk, a trader quoted the notes in a 101 to 101¼ bid context.

The Woodlands, Texas-based chemical manufacturer Venator Materials’ 5¾% notes due 2025 were seen better by 1 point after that upsized and regularly scheduled deal priced at par.

More than $31 million of those notes traded.

A second trader saw the notes in a 101 to 101½ bid context.

Irving, Texas-based steel and metal products manufacturer and recycler Commercial Metals’ 5 3/8% notes due 2027 pushed up to 100¾ bid after that regularly scheduled deal priced at par, a trader said.

At another desk, the bonds were seen going home at even better levels, up around the 101¼ bid level, on volume of more than $27 million.

A trader pegged Zaro Group’s add-on to its existing 5¾% notes due January 2027 at 104¼ bid, 105 offered, after the Boulder, Colo.-based communications infrastructure services provider’s tap had priced at 101¼ bid.

A trader reported no immediate aftermarket dealings in Carrizo Oil & Gas’ 8¼% notes due 2025 after that issue priced at par.

However, he did see the Houston-based exploration and production company’s existing 7½% notes due 2020 up by 1 full point at 100½ bid, with more than $20 million traded, while its 6¼% notes due 2023 firmed to around 95½ bid on volume of around $12 million.

Wednesday issues in retreat

That new-deal euphoria did not extend to the bonds which had come to market on Wednesday, which were seen having come off the levels they held after pricing.

A trader saw Ascend Learning, LLC’s 6 7/8% notes due 2025 at 101¾ bid, while at another shop those notes were seen trading around the 101 7/8 bid level – which a market source said was actually down by ½ point from its immediate post-pricing peak levels.

More than $42 million of the notes traded.

The Burlington, Mass.-based provider of educational content, software and analytics solutions priced its $300 million issue at par on Wednesday following the completion of its roadshow with investors.

A trader saw Kinross Gold Corp.’s new 4½% notes due 2027 trading around par, which was off slightly from the par to 100 3/8 bid context the bonds held in Wednesday’s initial dealings.

A second trader located the notes at 99 15/16 bid, calling them down marginally from earlier levels at par, on volume of over $36 million.

The Toronto-based gold and silver mining company priced $500 million of those notes at par on Wednesday after the quickly shopped issue was upsized from an originally planned $400 million.

And a trader said that Exela Technologies’ new 10% first-priority senior secured notes due 2023 “is not doing well,” seeing those notes at 98½ bid.

A second trader, who also saw the notes at that level, said that they had slid some 1 3/8 points from their levels around par at which those bonds had gone home on Wednesday after pricing at par.

He saw more than $27 million of the bonds trade.

Exela – a transaction services provider being formed from the merger of Quinpario Acquisition Corp. 2, SourceHOV LLC and Novitex Holdings Inc. – priced its $1 billion forward calendar deal after the offering was sharply upsized from $525 million originally, while a planned tranche of seven-year unsecured notes was dropped.

Rite Aid rocks on sale plan

Away from the new and recently priced issues, traders said that the big news of the day surrounded Camp Hill, Pa. based drugstore chain operator Rite Aid.

Its bonds sizzled – though its stock fizzled – after Rite Aid and prospective merger partner Walgreens Boots Alliance announced that they had called off their planned $17 billion merger transaction, fearing that it would not pass muster with federal anti-trust authorities.

Rite Aid “was pretty busy” – a trader said – something of an understatement, as its 6¼% notes due 2023 racked up more than $150 million of volume as they moved up by 2¼ points to 97½ bid – with intraday highs as good as 99½.

Its 6¾% notes due 2021 did only about one-third of that trading volume – but that was still more than $52 million, and those bonds jumped 4 1/8 points to end at 103 bid.

The bonds got a boost from declarations by company executives that Rite Aid plans to use most of the more than $5 billion of anticipated proceeds from its sale of nearly half of its more than 4,600 stores to Walgreens to pay down debt and bring its leverage ratio of debt as a multiple of adjusted EBITDA down to around half of the 6.8 times level at which it finished its recent 2018 fiscal first quarter (see related story elsewhere in this issue).

But while that news heartened bondholders, Rite Aid’s shareholders felt left out in the cold; its New York Stock Exchange-traded shares plunged by $1.04, or 26.46% on the day, closing at $2.89. Volume of over 213 million shares was almost nine times the norm.

Energy issues march on

Elsewhere, oil and gas names continued to ride the crest of crude oil prices’ upside momentum, with August-delivery West Texas Intermediate crude up for a fifth straight session on the New York Mercantile Exchange, closing up 19 cents per barrel, at $44.93.

High yield energy bellwether California Resources’ 8% notes due 2022 were seen gaining ½ point, ending at 63 bid, with over $40 million traded.

Chesapeake Energy’s 8% notes due 2025 ended at 99 bid, up ¾ point on the day, with over $14 million changing hands.

And Halcon Resources’ 6¾% notes due 2025 moved up to 90 ¼ bid,, up 1 ¼ point, on volume of over $12 million.

Indicators stay mixed

The KDP High Yield Daily Index rebounded on Thursday after being lower on Wednesday, gaining 8 basis points to end at 72.24. On Wednesday, it had retreated by 3 bps, after three straight advances, including Tuesday’s 11 bp jump.

Its yield came in for a fourth successive session, tightening by 2 bps to finish at 4.94%, after declining by 1 bps on Wednesday and by 3 bps on both Tuesday and Monday.

The Markit CDX Series 28 High Yield Index, however, lost 13/32 point on Thursday, closing at 106 11/32 bid, 106¾ offered, after moving up by 5/16 point on Wednesday, which followed Tuesday’s 3/8 point setback.

The Merrill Lynch North American High Yield Index posted its fifth consecutive advance on Thursday, gaining 0.088% on top of Wednesday’s 0.025% upturn.

Thursday’s improvement raised the index’s year-to-date return to 4.876% from 4.867% on Wednesday, although it remained below its high point for the year to date of 5.173%, recorded on June 14.

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