Upsized HCA megadeal leads $3.3 billion drive-by parade, Unity, Sensata also price; junk eases

By Paul Deckelman and Paul A. Harris

New York, Oct. 7 – The high-yield primary sphere pulled out of its recent relaxed rut on Tuesday, as $3.3 billion of new paper came to market in four tranches, all of them opportunistically timed and quickly shopped same-day deals.

That total – the biggest since the $5.62 billion of new issuance recorded in on Sept. 24 in nine tranches, according to data compiled by Prospect News – stood in stark contrast to Monday’s session, which saw just $75 million of new U.S. dollar-denominated, fully junk-rated paper get done in one tranche, also an upsized drive-by transaction.

Most of the day’s issuance was attributable to one deal – a sharply upsized $2 billion two part offering from hospital operator HCA Inc. The new bonds – split unevenly into five-year and 10.5-year tranches – were quoted marginally higher after their pricing. Some of the company’s existing bonds were meantime seen better in brisk trading.

Apart from HCA, German cable operator Unitymedia KabelBW GmbH brought a $900 million 10.25-year issue to market; the notes firmed a little in initial aftermarket dealings.

And Sensata Technologies BV, a Dutch supplier of sensing, electrical protection, control and power management solutions, did $400 million of 10-year notes. The new bonds were not seen immediately trading around afterward.

Apart from the transactions that actually priced, syndicate sources reported that supermarket operator Albertsons Holdings LLC downsized its prospective eight-year secured paper deal for a second time, opting instead to do some of its planned debt in the bank loan market. The bond deal could price on Wednesday.

Several megadeal-sized offerings joined the forward calendar, with power producer Dynegy Inc. launching a $5.1 billion three-part note deal, and Canadian copper prospector Lundin Mining Corp. heard to be on the road with a $1 billion two-part issue.

Apart from the new deals, busy names included Berry Plastics Corp. and Sirius XM Radio Inc.

Traders saw the overall junk market easier by ¼ to ½ point, citing the drag on the market from Tuesday’s equities decline.

Appropriately, statistical indicators of junk market performance were lower across the board on Tuesday, after having turned mixed on Monday and been higher all around on Friday for a third time in four sessions.

HCA massively upsized

Tuesday turned out to be the day of the mega-deal in the high-yield primary market.

HCA Inc. drove by with a massively upsized $2 billion two-part secured notes deal.

Albertsons further downsized its $1,245,000,000 secured notes offer.

And Dynegy kicked off a $5.1 billion three-part offering.

In total, the session saw $3.3 billion of issuance in four tranches.

Despite a rocky session in the stock market, executions were notable. Three of the four tranches came at the tight end of talk, while the fourth came at the wide end but within talk.

HCA priced an upsized $2 billion two-part offering of non-callable senior secured notes (Ba2//BB+) in two tranches.

The debt refinancing and general corporate purposes deal included a $600 million tranche of notes that priced at par to yield 4¼%, at the tight end of the 4¼% to 4 3/8% yield talk.

HCA also priced a $1.4 billion tranche of 10.5-year notes at par to yield 5¼%, at the tight end of the 5¼% to 5 3/8% yield talk.

The deal was increased from $1.5 billion.

BofA Merrill Lynch was the left bookrunner for the public offer.

Barclays, Citigroup Global Markets, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co., RBC Capital Markets, SunTrust Robinson Humphrey, UBS Investment Bank and Wells Fargo Securities LLC were the joint bookrunners.

Unitymedia in dollars only

Also in drive-by action, Unitymedia KabelBW priced a restructured $900 million issue of senior notes due January 15, 2025 (B3/B) at par to yield 6 1/8%.

The yield printed at the wide end of yield talk that had been set in the 6% area.

The debt refinancing deal was announced at €725 million equivalent, including a euro tranche with a target size of €250 million, and talked in the 5% area.

The euro tranche was subsequently withdrawn, with proceeds shifted to the dollar tranche.

Global coordinator Credit Suisse will bill and deliver.

Barclays, BNP Paribas, Deutsche Bank, ING, Morgan Stanley, SG CIB and Royal Bank of Scotland were joint bookrunners.

Sensata at the tight end

Sensata Technologies priced a $400 million issue of non-callable 10-year senior notes (Ba3/BB+) at par to yield 5 5/8%, at the tight end of yield talk which had been fixed in the 5¾% area.

Barclays was the lead left bookrunner for the quick-to-market acquisition financing deal. Morgan Stanley, RBC and Goldman Sachs were joint bookrunners.

Albertsons downsizes, sets talk

Albertson’s Holdings further downsized its offering of eight-year second-lien senior secured notes (B2/CCC+), this time to $1,245,000,000 from $1,375,000,000, after having previously reduced it from $1,625,000,000.

Some of the proceeds were shifted to a $300 million tack-on term loan B4, which was upsized from $250 million.

The amount of bonds offered was also reduced as a reflection of existing bonds not tendered in a tender offer.

In addition to cutting the size, dealers set price talk in the 7 7/8% area, in line with earlier guidance of 7¾% to 8%, sources said.

Books close at 10 a.m. ET Wednesday and the deal is set to price thereafter.

BofA Merrill Lynch, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC, Barclays and Deutsche Bank Securities Inc. are the joint bookrunners.

Dynegy unveils $5.1 billion

Dynegy kicked off a $5.1 billion three-part offering of senior notes (expected ratings B3/B+).

The deal is expected to price on Friday.

On offer are a tranche of 5.25-year notes which come with 2.5 years of call protection, a tranche of eight-year notes which come with four years of call protection, and a tranche of 10-year notes which come with five years of call protection.

Morgan Stanley & Co., Barclays, Credit Suisse Securities (USA) LLC, RBC Capital Markets and UBS Investment Bank are the joint bookrunners.

The Houston-based energy company, issuing via special purpose vehicles Dynegy Finance I, Inc. and Dynegy Finance II, Inc., plans to use the proceeds to fund its acquisitions of Duke Merchant Energy and EquiPower Resources Corp.

Lundin to bring $1 billion

Lundin Mining Corp. is roadshowing a $1 billion offering of senior secured notes (Ba2/B+) in a pair of $500 million tranches, according to a market source.

Pricing is set for Friday.

The deal is comprised of six-year notes which come with three years of call protection, and eight-year notes which come with four years of call protection.

Joint bookrunners BofA Merrill Lynch and Scotia Capital are leading the Rule 144A and Regulation S for life offer.

The Toronto-based mining company plans to use the proceeds to partially fund its acquisition of an 80% interest in the Candelaria and Ojos del Salado copper mine in Chile from Freeport-McMoRan, as well as to repay bank debt and fund working capital.

Heathrow prices £250 million

In the European market, Heathrow Finance plc priced a £250 million issue of non-callable 10.5-year senior secured notes (expected ratings Ba3/BB+) at par to yield 5¾% on Tuesday, according to market sources.

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

Joint physical bookrunner Morgan Stanley will bill and deliver. Deutsche Bank and Royal Bank of Scotland were also joint physical bookrunners.

Barclays, ING, Citigroup and CBA were passive bookrunners.

Proceeds will be used to refinance debt and for general corporate purposes.

The issuer is an international airport in London.

HCA quoted higher

In the secondary market, HCA’s new 5¼% senior secured notes due 2025 were seen by a trader in a par to 100 1/8 bid context when the Nashville-based hospital operator’s new issue began circulating around after its par pricing.

He also saw its 4¼% senior secured notes due 2019 in the same par to 100 1/8 level after their par pricing.

Another market source quoted the 2025 issue at 100 1/8 bid, on volume of more than $24 million, making it one of the busiest junk credits of the day.

But HCA’s existing 7¼% notes due 2020 were even busier, with over $41 million changing hands. The market source saw those outstanding bonds up ¾ point at 106¼ bid.

A trader at another shop suggested that even though the company has not specifically announced anything definite – yet – “they must be using the proceeds of this deal to take these things out, because they’re trading so rich.”

HCA did say when it announced the new offering on Tuesday morning that it would use the proceeds to take out all $1.4 billion of the 7¼% notes but did not say precisely how or when it would do that

Unitymedia bonds better

The trader said that the new Unitymedia Kabel 6 1/8% notes due 2025 traded into a 100¼ bid after pricing at par, “on pretty good size, about $5 to $10 million.”

A second trader saw the notes at 100 1/8 bid, 100 3/8 offered.

There was no aftermarket activity seen in the new Sensata Technologies 5 5/8% notes due 2024.

Recent deals seen easier

Among other deals that have recently priced, a trader said that Halyard Health, Inc.’s 6¼% notes due 2022 were down ¼ point at 101¾ bid, 102¼ offered.

A second observed that “they were pretty much unchanged,” right around the 102 mark, but with just $2 million having traded.

The Alpharetta, Ga.-based producer of surgical and infection prevention products and medical devices priced its $250 million deal at par on Thursday.

Proceeds from the bond deal will help to finance Halyard’s spin-off from health and hygiene consumer products company Kimberly-Clark Corp. The financing also includes $640 million of bank debt. The spin-off transaction is expected to close by the end of this month.

Elsewhere, a trader saw Zebra Technologies Corp.’s 7¼% notes due 2022 off by 1/8 point at 103¾ bid, 104 offered.

A second trader also saw the bonds down 1/8 at 103½ bid, 104 offered.

The Lincolnshire, Ill.-based printing technologies company had priced $1.05 billion of the notes at par on Sept. 30 after the deal was downsized from the originally planned $1.25 billion.

The new bonds quickly moved up to the 102 bid area when they were freed for the aftermarket, and eventually firmed smartly to around the 104 bid area.

Non-new deals ease

Away from the new deals, traders saw a generally lackluster market, with most names lower.

Evansville, Ind.-based Berry Plastics’ 5½% notes due 2022 eased by 1/8 point to finish at 98 7/8, with over $23 million of the bonds having traded.

New York-based satellite radio broadcaster Sirius XM’s 6% notes due 2024 fell by 13/16 point to end at 102¾ bid.

More than $16 million of the notes changed hands.

Overall market down

Looking at the junk market as a whole, a trader declared that “in general, stuff across the board was down ¼ to ½ [point]. There was nothing too exciting anywhere.”

A second trader agreed, opining that “the market feels heavy. Generically, it’s probably off from this morning anywhere from ¼ to ½ point in some cases.”

He called the retreat “broad-based, with equities down as much as they are” – the bellwether Dow Jones Industrial Average swooned by 272.52 points, or 1.60%, to close at 16,719.39, with other major indexes like the S&P 500 and the Nasdaq Composite also down more than 1.5% on the day.

He also cited the rally in Treasuries, which saw the 10-year note’s yield tighten by 10 basis points to 2.34%, fueled by global growth concerns as Germany released sharply lower industrial production numbers.

Against that backdrop, “stuff just weakened across the board.”

He said that energy credits “got hit particularly hard, with oil trading below $89 per barrel.”

For instance, Oklahoma City-based oil and natural gas exploration and production operator SandRidge Energy, Inc.’s 7½% notes due 2021 lost some 1¾ points to end at 96½ bid, on volume of more than $9 million.

Indicators head south

Statistical indicators of junk market performance were in retreat on Tuesday; they had moved into mixed territory on Monday, after having been higher across the board on Friday for the third time in four sessions.

The KDP High Yield Daily Index saw its first loss after two straight big gains, dropping by 9 basis points to end at 72.40, after having jumped by 28 bps on Friday and then by another 25 bps on Monday.

Its yield rose by 4 bps to 5.56% on Monday after five straight sessions before that of decline, including Monday’s 8 bps narrowing.

The Markit CDX Series 22 index was off for a second straight session on Tuesday, falling by 7/16 point to close at 106 13/32 bid, 106 7/16 offered. It had also eased by ¼ point on Monday, after having been higher for four sessions before that.

The Merrill Lynch High Yield Master II Index suffered its first loss after five straight gains, going down by 0.155%, in contrast with Monday’s 0.287% improvement.

That loss dropped its year-to-date return to 4.297% from 4.458% on Monday. The cumulative return remained well down from its peak level of the year so far, 5.847%, set on Sept. 1, when the index was published even though the junk market was essentially closed due to the Labor Day holiday break.

According to the Finra-Bloomberg Active US High Yield Index, Tuesday’s junk market volume was $3.114 billion, down from $3.318 billion on Monday. The index closed with a total return of 315.91 versus Monday’s 316.65 reading – its first decline after five consecutive gains. Its yield rose on Tuesday to 5.94% from Monday’s 5.89%.

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