High-yield opens week with mixed tone; Supervalu sees strides on Save-A-Lot sale; Sprint builds on momentum

By Colin Hanner and Paul A. Harris

Chicago, Oct. 17 – In Monday trading, high yield bonds traded mixed off news of positive U.S. industrial figures and whirling speculation on oil’s output trajectory.

U.S. industrial production increased by 0.6% from August to September, the new data showed. September saw a 0.1% increase in total industrial production, making it the third out of the past four months to achieve positive production.

The new report also showed that the mining sector was improving. The space saw the biggest jump from August to September, from negative 1% to 0.4%. Yet the industry remains down 9.4 %year-over-year.

“Gains for oil and gas well drilling and servicing, for coal mining, and for nonmetallic mineral mining and quarrying outweighed a drop in crude oil extraction,” a report said. “The output of mining increased at an annual rate of 3.7% in the third quarter following six consecutive quarterly decreases.”

As for the day’s dealings, Supervalu Inc. debt was on the rise on news the grocery store chain was selling off its Save-A-Lot stores.

Sprint Corp. was another high-yield gainer. The name has been topical since last week when it was announced that the telecommunications company planned to raise $3.5 billion via a three-part securitization deal. On Monday, it was announced that the three-parter had been reduced to a single issue.

Sprint consolidates deal

In Monday's primary market Sprint consolidated the $3.5 billion of its planned senior secured notes securitization deal (expected ratings Baa2/BBB) into a single tranche of class A-1 five-year notes, an informed source said.

The consolidation removed previously planned tranches of A-2 seven-year notes and A-3 10-year notes.

Timing is accelerated. The new schedule had the roadshow in New York on Monday, then in Boston on Tuesday, and in Los Angeles and San Francisco on Wednesday, with the notes set to price thereafter. The previous schedule had the deal roadshowing through the entire week.

Goldman Sachs & Co. is the global coordinator and left lead bookrunner for the deal, which is coming in a joint effort on the part of the high yield-, investment grade- and structured products syndicate desks. Mizuho Securities and J.P. Morgan Securities LLC are the joint lead bookrunners.

The Rule 144A and Regulation S for life notes feature four years of call protection, a three-year weighted average life, interest-only payments for one year (amortizing at 25% annually thereafter), and final maturity of March 2021.

The notes are secured by broadband spectrum leases.

The Overland Park, Kan.-based wireless telecommunications services and internet carrier holding company plans to use the proceeds for general corporate purposes, which may include retirement of debt and network densification and optimization.

The notes are being issued off a $7.5 billion shelf.

The issuing entities are Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC and Sprint Spectrum Co III LLC.

NGL Energy roadshow

NGL Energy Partners LP and NGL Energy Finance Corp. began a roadshow on Monday in New York for a $400 million offering of seven-year senior notes (existing ratings B2/BB-), according to a market source.

The roadshow moves to Los Angeles and San Francisco on Tuesday.

One-on-one investor calls are scheduled to take place on Wednesday.

The Rule 144A and Regulation S with registration rights notes offer is set to price thereafter.

Barclays is the lead left bookrunner. Mizuho Securities, RBC Capital Markets, BofA Merrill Lynch, BNP Paribas, PNC Capital Markets, TD Securities, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co., HSBC, SunTrust Robinson Humphrey, UBS Investment Bank and Wells Fargo Securities LLC are the joint bookrunners.

ABN Amro, BMO Securities, Citizens, MUFG and SG CIB are the co-managers.

The notes become callable after three years at par plus 50% of coupon and feature a three-year 35% equity clawback and a 101% poison put.

The Tulsa-based vertically integrated energy company plans to use the proceeds to pay down its revolver.

Supervalu succeeds

Supervalu’s 7¾ % notes due 2022 were up “3½ to 4” points from last time they were trading, on Oct. 13, according to a market source.

The company’s 6¾% notes due 2021 were the one of the day’s biggest gainers, up 2¼ to 99¾.

The gains came as the Eden Prairie, Minn.-based grocery store operator said that it will sell its Save-A-Lot stores – valued at $1.3 billion – to Onex Corp., a Toronto-based private equity firm. The deal, which will close in January, is expected to use the net proceeds to prepay at least $750 million against its outstanding term loan balance.

“It provides us with a stronger balance sheet that will allow us to further build on our core strengths and growth opportunities,” Supervalu president and chief executive officer Mark Gross said in a press release.

Riding Sprint

Sprint – still riding momentum of interest in the $3.5 billion three-part securitization deal – continued to be active given it’s “a topical name with the new deal in the market,” said one trader.

The 7 1/8 % notes due in 2024 were trading around “97½, 98 going out,” after trading “around 96” during Friday’s session.

The 7 7/8 % notes due in 2023 were trading 101½ to 102, “around par.”

The 7¼% notes due 2021 were up 1 to 102¾, one of the day’s biggest gainers.

“Depending upon flavor, some of those things were up a 1 [to] 1½” points, the trader said.

Around the block

Intelsat SA’s Luxembourg 8 1/8 % notes were trading around 31½, “down about a half,” a trader said.

The company’s Jackson 7¼% notes due 2019 were “not overly active” and finished trading at 80½, down 1 point on the day.

Valeant Pharmaceuticals International Inc.’s 5 7/8 % notes were meantime down about a “half a point” to 82½.”

“That’s definitely a good half-point lower,” a trader said.

Valeant announced that it would release its third quarter results on Nov. 8.

Indexes mixed

Market indicators were once again mixed come Monday trading.

The KDP High Yield Daily index showed a slight increase in price on Monday, rising 2 bps from Friday’s levels to 71.26.

Yield dropped 2 bps from the previous session and ended at 5.41%.

As for the Markit CDX Series 27 index, it was off a touch at 104.03 bid, 104.13 offered, according to a market source.

© 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.