Frontier, Springleaf lead year’s busiest day; new issues busy; funds lose $525 million

By Paul Deckelman and Paul A. Harris

New York, March 8 – The high-yield primary market remained on fire for a third consecutive session on Thursday, in fact racking up the heaviest new issue volume so far this year.

Syndicate sources said that Frontier Communications Corp. had the big deal of the day, with the wireline telecommunications company pricing $1.6 billion of eight-year senior secured paper in a forward calendar transaction.

They said that consumer lender Springleaf Finance Corp. brought a quick-to-market offering of seven-year notes, twice upsized to a final volume of $1.25 billion.

Retailer J.C. Penney Co., Inc. stepped in with a quickly shopped and upsized $400 million of seven-year secured notes.

And CSI Compressco LP, a provider of compression services to the oil and natural gas industry, came in with a $350 million secured forward calendar offering.

In the secondary market, traders said that new issues were the dominant force, with Frontier’s big new deal easily topping the day’s Most Actives list.

They said that the J.C. Penney and Springleaf offerings were both among the top volume names on the session, as were other recent offerings from Ball Corp. and CIT Group Inc.

Frontier’s existing bonds were also very active, as has been the case all week, but were mixed on the session.

Statistical market performance measures turned mixed on Thursday after being lower all around on Wednesday.

Another numerical indicator – the flow of investor cash into or out of high-yield mutual funds and exchange-traded funds, which is considered a reliable barometer of overall junk market liquidity trends – remained in negative territory for an eighth straight week after two weeks in a row on the plus side to begin the year. Some $525 million more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, which followed a $703 million net outflow reported last Thursday for the seven-day period ended Feb. 28 (see related story elsewhere in this issue).

Frontier tight to the tights

In a busy Thursday primary market session, Frontier Communications priced a $1.6 billion issue of eight-year second lien secured notes (B2/B+/BB) at par to yield 8½%.

The deal came at the tight end of the 8½% to 8¾% official price talk, which had been downwardly revised from 8¾% to 9%.

The deal came with initial guidance in the 9% area, a level at which it generated $5 billion of interest among investors, including $1 billion of reverse inquiry.

However dealers pushed Frontier’s pricing too hard, traders said, as the bonds broke for trading.

The new notes were at 99½ bid, par offered, according to one trader who added that it was not doing great in the secondary.

Another trader had the bonds as low as 99¼ bid, 99¾ offered.

JP Morgan had the lead.

The Norwalk, Conn.-based provider of communications services plans to use the proceeds to finance a tender offer for senior notes maturing in 2020, 2021, 2022 and 2023.

Springleaf massively upsized

Springleaf Finance Corp., which does business as OneMain Financial Holdings Inc., priced a massively upsized $1.25 billion amount of seven-year senior bullet notes (B2/B/B) at par to yield 6 7/8% in a quick-to-market trade, according to market sources.

The deal was announced at $500 million and subsequently upsized to $750 million before upsizing again to its final amount.

It priced at the tight end of the 6 7/8% to 7% yield talk and tight to initial guidance in the 7% area.

Barclays was the left bookrunner for the public offer. Morgan Stanley & Co., Citigroup Global Markets, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co., RBC Capital Markets LLC and SG CIB were the joint bookrunners.

The Evansville, Ind.-based lender plans to use the proceeds for general corporate purposes, which may include a partial redemption of OneMain Financial Holdings’ 7¼% senior notes due 2021 and other debt repurchases and repayments.

JC Penney oversubscribed

In a deal from the battered retail sector that the market had been looking for, JC Penney Co., Inc. and JC Penney Corp., Inc. priced an upsized $400 million issue of seven-year senior secured second priority notes (B2) at par to yield 8 5/8% in a drive-by.

The amount was increased from $350 million.

The deal priced richer than the 8¾% to 9% yield talk.

It was 10-times oversubscribed, according to a trader who saw trades in the secondary at 101.

JP Morgan, BofA Merrill Lynch, Barclays, Goldman Sachs & Co. and Wells Fargo Securities LLC were the joint bookrunners.

The Plano, Texas-based department store chain plans to use the proceeds to fund a tender for portions of its 8 1/8% senior notes due 2019 and 5.65% senior notes due 2020 and/or for general corporate purposes which may include further retirement of existing notes including untendered securities.

Compressco at the wide end

CSI Compressco LP and CSI Compressco Finance Inc. priced a $350 million issue of seven-year senior secured first lien notes (B1/B+) at par to yield 7½%.

The yield printed at the wide end of the 7¼% to 7½% yield talk.

The deal was playing to $460 million of orders on Thursday morning, a bond trader said.

BofA Merrill Lynch managed the sale.

The Woodlands, Texas-based storage company plans to use the proceeds to repay all of the outstanding borrowings under its revolving credit facility and for general partnership purposes, including the expansion of its compression fleet.

Friday’s three offers

Looking to Friday’s session, there are three deals on deck.

USA Compression Partners, LP is marketing $725 million of eight-year senior notes (B3/B+/BB-) talked at 6¾% to 7%, dramatically tighter than the 7 1/8% to 7 3/8% initial guidance.

Travelport Worldwide Ltd. plans to sell $650 million of eight-year senior secured notes (B1/B+) talked to yield in the 6% area.

CNX Midstream Partners LP is selling $400 million of eight-year notes talked at 6½% to 6¾%.

Year’s heaviest session yet

Thursday’s four deals rolled up total new issue volume of $3.6 billion, making it the biggest day the primary has seen so far this year, according to data compiled by Prospect News.

It took over the top spot from the previous volume leader, the $3.35 billion of new issuance from domestic or industrialized-country junk borrowers that got done in three tranches back on Feb. 20, spearheaded by Vancouver, B.C.-based mining concern First Quantum Minerals Ltd.’s two-part $1.85 billion issue of new six- and eight-year notes, and by Overland Park, Kan.-based wireless operator Sprint Corp.’s $1.5 billion issue of eight-year paper.

It was the biggest volume seen in Junkbondland since Nov. 28 of last year, when four issuers combined for six tranches totaling $3.7 billion, the data indicated.

New Frontier incredibly busy

In the secondary market, traders said that the new Frontier Communications 8½% secured notes due 2026 easily topped the day’s volume charts, with one market source seeing more than $230 million of the notes having changed hands by the close.

But the traders said that the issue failed to catch fire, price-wise, despite its generous coupon – at least relative to other recent deals – and secured status.

One quoted the bonds, which had priced at par, in a 99½ to 100 1/8 bid range, while a second located them between 99 3/8 and 99 7/8 going home.

At another shop, the notes were quoted around 99 7/8 bid.

Penney paper pops

Thursday’s new deal from J.C. Penney, meantime, was also very busily traded, with a trader estimating volume of over $90 million.

Unlike the Frontier bonds, which struggled to just stay at or above their par issue price, the Penney paper found buyers who took it higher. A trader pegged the bonds at 101 bid late in the session.

A second saw those 8 5/8% second-priority senior secured notes due 2025 trading between 100 7/8 and 101 1/8 bid.

Springleaf springs ahead

The traders also saw the new Springleaf 6 7/8% notes due 2025 firming smartly on very busy volume of more than $65 million.

One trader saw the finance company’s new deal trading between 101 and 101½ bid, while a second saw it finishing the day around 101 bid.

Teva trades around

A trader said that Teva Pharmaceutical Finance Netherlands III BV 6% notes due 2024, which priced on Wednesday, were trading around the 100 1/8 bid level, “so there was not much going on there.”

In contrast, he said the 6¾% notes due 2025 “have traded well,” calling them up over 1 point on the day to 101¾ bid on “very heavy volume.”

The unit of the Israel-based drug manufacturer priced $1.25 billion of each tranche at par on Wednesday, as part of an upsized $4.5 billion equivalent forward calendar offering that also included a pair of euro-denominated tranches.

Ball stays busy

Ball Corp.’s new 4 7/8% notes due 2026 edged up 1/8 point to 100 3/8 bid on Thursday while volume was a brisk $22 million.

On Wednesday, the issue had been the clear volume leader on the day, with over $87 million having circulated by the close and the bonds settling around 100¼ bid.

The Broomfield, Colo.-based maker of packaging products had priced its quick-to-market $750 million deal at par after upsizing it from an originally announced $500 million.

CIT adds to gains

A trader saw CIT Group’s new 6 1/8% subordinated notes due 2028 up more than ½ point on the day at 104 3/8 bid.

The New York-based banking company had priced $400 million of the notes at par on Tuesday as part of a three-part $1.4 billion deal. Traders saw the new bonds firm solidly when they hit the aftermarket later Tuesday and again on Wednesday.

Indicators turn mixed

Statistical market performance measures turned mixed on Thursday after being lower all around on Wednesday. The indicators had also been mixed for three straight sessions before that, starting with last Friday and continuing through Tuesday.

For a second straight session, the KDP High Yield Daily Index lost 4 basis points on Thursday, matching Wednesday’s decline to close at 70.48. Those two losses followed Tuesday’s 9 bps rise, which had been its first improvement after four straight downturns, including last Friday’s 17 bps slide.

Its yield moved up by 2 bps to 5.81%, its seventh straight widening. The yield had also risen by 1 bp on Wednesday and by 3 bps on Tuesday.

However, the Markit CDX Series 29 High Yield Index firmed by almost 3/32 point on Thursday, closing at 106 19/32 bid, 106 5/8 offered. That gain followed two straight losses, of about 1/16 point on Wednesday and almost 5/32 point on Tuesday, which had come after two sessions before that on the upside.

The Merrill Lynch High Yield Index also turned northward on Thursday, improving by 0.033%, its third upturn in the last four trading days. The index had ended off 0.129% on Wednesday, after gaining 0.222% on Tuesday and 0.184% on Monday to break a four-session losing streak.

Thursday’s rise cut the index’s year-to-date deficit to 0.522% from 0.555% on Wednesday.

Those loss levels were still in from the 1.248% cumulative red ink posted on Feb. 9, its second straight new widest deficit level for the year.

Its peak cumulative gain for the year so far was 0.936%, established on Jan. 26.

© 2015 Prospect News.
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