DISH weakens after numbers, CEO retirement; Salix gains on Valeant merger; Toys’ bonds push up

By Stephanie N. Rotondo and Paul A. Harris

Phoenix, Feb. 23 – It was a mostly firm day for the high-yield bond market on Monday, even as oil prices waned and the equity markets drifted lower.

But despite oil prices further weakening, it wasn’t the energy sector that was dominating trading – it was recently priced deals.

Said deals were seen ending higher on the day.

Away from new issues, DISH DBS Corp. was in the news as its current chief executive announced his retirement and the company announced his replacement. The company also reported its fourth-quarter results.

DISH bonds ended weaker following the news.

Valeant Pharmaceuticals International Inc. and Salix Pharmaceuticals Ltd. were also in the news, as the former agreed to buy the latter in an all-cash deal. Salix debt jumped 3 points on the news, but Valeant debt closed softer.

At a conference in Miami on Monday, retailer Toys “R” Us Inc. released preliminary figures that showed a slight decline in sales, but a gain in adjusted earnings.

Investors seemed pleased with the numbers and pushed the company’s bonds higher.

No high-yield deals priced during an ultra-quiet Monday in the primary market.

One deal was announced.

Riverbed Technology Inc. began a roadshow on Monday for a $575 million offering of eight-year senior notes (Caa1/CCC+).

Price talk is not expected until later in the week, however early guidance has taken shape in the mid-10% yield context, a trader said.

The deal is expected to price Friday.

Citigroup, Credit Suisse, Barclays and Morgan Stanley are the joint bookrunners for the LBO deal.

The notes were originally expected to be sized at $625 million but emerged at $575 million when the company upsized its senior secured credit facility – also part of the buyout financing – to $1,675,000,000 from $1,625,000,000, shifting the proceeds to the loan from the bonds.

Valeant to bring $9.6 billion

Away from the active calendar, Valeant Pharmaceuticals spelled out plans for the debt financing it plans to use to fund its acquisition of Salix Pharmaceuticals.

It includes a whopping $9.6 billion of senior notes and $5.55 of term loan debt.

The deal, which has a total enterprise value of about $14.5 billion and is expected to close during the second quarter of this year, is bridged.

Deutsche Bank, HSBC, MUFG, DNB and SunTrust are the joint lead arrangers and bookrunners on the credit facility and bridge loans.

Daily inflows continue

An anemic forward calendar notwithstanding, there is evidence of an abundance of cash looking for a home in high-yield bonds, sources say.

The daily cash flows of the dedicated high-yield funds remained positive on Friday, the most recent day for which data was available at press time, according to a buyside source.

High-yield ETFs saw $38 million daily inflows on Friday, while actively managed funds saw $400 million of daily inflows, the source said.

Late last week, the market learned that the dedicated high-yield funds saw $1.64 billion of aggregate inflows for the week to last Wednesday's close, according to a weekly report from Lipper-AMG.

Dean Foods sees action

In a day dominated by new issues, Dean Foods Co.’s 6½% notes due 2023 was “very active,” a trader said, seeing over 50 round-lot trades during the session.

The trader said the issue closed steady at par ¾.

Another trader also deemed the issue as “pretty active,” placing the paper in a par ½ to par ¾ context.

The $700 million Rule 144A deal priced Friday via Morgan Stanley & Co. LLC, BofA Merrill Lynch, JPMorgan Securities LLC, Credit Agricole ACB and SunTrust Robinson Humphrey Inc.

Also from Friday, Nielsen NV’s $750 million add-on to its 5% notes due 2022 was quoted at 101¼ bid, 101½ offered.

The deal came at par ¾ via JPMorgan, Citigroup Global Markets Inc., Goldman Sachs & Co. and Morgan Stanley.

Sprint Nextel Corp.’s $1.5 billion of 7 5/8% notes due 2025 – priced Thursday – was called a ¼ of a point higher at par 3/8, a trader said. Another trader said the debt was “holding up around” par ½.

The deal was upsized from $1 billion. Citigroup, BofA, Goldman Sachs, JPMorgan, Barclays, Credit Agricole, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Mizuho Securities, MUFG, RBC Capital Markets, Scotia Capital and SBC Nikko were the joint bookrunners.

DISH bonds dip

DISH reported fourth-quarter earnings on Monday that showed higher profit and revenue, but a larger decline in subscribers.

Additionally, the company said its CEO Joe Clayton was retiring at the end of March.

Chairman Charlie Ergen will take over the post.

A trader said the 5 7/8% notes due 2024 fell a point to 98½. Another market source pegged the 5% notes due 2023 at 95¾ bid, down a point.

For the quarter, the satellite-TV provider lost a net 63,000 pay-TV subscribers. Gross additions were 615,000, versus 654,000 the year before.

Churn rate was 1.61%, up from 1.53% for the same quarter of 2014.

In terms of satellite broadband customer growth, the company added 24,000 net subscribers, compared to 51,000 additions the previous year.

DISH attributed the subscriber losses in part to losing 21st Century Fox programs.

Profit for the quarter was $409.9 million, or 88 cents per share. That compared to a profit of $283.2 million, or 63 cents per share.

Revenue improved 4% to $3.68 billion.

Analysts polled by Thomson Reuters had forecast earnings of 43 cents per share on revenue of $3.7 billion.

Valeant to buy Salix

Canadian pharmaceutical company Valeant has inked a deal to buy Salix for about $160 per share, it was reported over the weekend.

The all-cash deal is valued at $10.1 billion.

On the news, Salix’s 6¼% notes due 2021 jumped 3 points to 111½, according to a trader.

However, Valeant’s bonds were not so lucky.

The trader said the 5 5/8% notes due 2021 fell 2 points to 101 5/8, while the 5½% notes due 2023 dipped 1½ points to par ½.

As for the 6¾% notes due 2021, they were down almost a point at 104¾, as the 6 3/8% notes due 2020 weakened nearly half a point to 105 5/8.

The 7½% notes due 2021 closed at 108½.

Toys’ debt rises

Toys “R” Us debt got a boost Monday as the company presented preliminary quarterly figures at the JPMorgan Global High Yield and Leveraged Finance Conference in Miami.

One trader said the 7 3/8% notes due 2018 rose 2½ points to 66½. Another trader said the bonds were 2 to 3 points higher, placing the 7 3/8% notes at 66 and the 10 3/8% notes due 2017 at 83½.

A third source deemed the 7 3/8% notes up 3 points at 66½ bid.

For the quarter, the Wayne, N.J.-based retailer said net sales fell to $12.4 billion from $12.5 billion. U.S. sales dropped 4.5% and international sales improved 2.2%.

Adjusted EBITDA is expected to be about $57 million.

Among other retailers, the Gymboree Corp.’s 9 1/8% notes due 2018 were seen 3 points better at 44, a trader said.

He said there was “no specific news” to cause the gain.

Goodrich dives

Goodrich Petroleum Corp. was weaker on Monday as oil prices declined and investors prepared for the company’s earnings, out later this week.

A trader said the 8 7/8% notes due 2019 fell a point to 41 5/8.

In the preferreds, the 10% series C cumulative preferreds (NYSE: GDPPC) declined $2.09, or 21.57%, to $7.60 and the 9.75% series D cumulative preferreds (NYSE: GDPPD) dropped “big time,” losing $2.16, or 22.91%, to $7.27.

Some members of the Organization of Petroleum Exporting Countries are expressing concern about falling oil prices and are saying that while certain Middle Eastern members are not worried, others are considering an emergency meeting to discuss how to handle the situation.

The members most concerned about the price drops are Nigeria, Venezuela and Russia.

Indexes end mixed

Market indicators were mixed Monday, according to reports from market sources.

The KDP High Yield index closed at 71.73 with a 5.22% yield. That compared to Friday’s reading of 71.72 with a 5.23% yield.

The Markit Series 23 CDX North American High Yield index, however, was seen one-fifth of a point lower at 107.09 bid, 107.18 offered.

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