Crestwood, Masonite, HealthSouth drive by; calendar builds massively; Whiting jumps on sale talk

By Paul A. Harris and Paul Deckelman

New York, March 9 – The high-yield primary arena opened the new week on Monday on a busy note, in contrast to Friday’s session, when no new dollar-denominated and fully junk-rated issues priced.

Syndicate sources saw three such deals come to market on Monday, totaling some $1.45 billion, all of them opportunistically timed and quickly shopped eight-year transactions.

Energy operator Crestwood Midstream Partners LP had the big deal of the day, a $700 million offering of notes. Masonite International Corp., a maker of interior and exterior residential doors, priced $475 million of new paper, while hospital company HealthSouth Corp. did $300 million of bonds.

Traders said the new Masonite issue firmed smartly in busy initial secondary dealings, but they did not see any immediate aftermarket activity in the Crestwood or HealthSouth issues.

The forward calendar, meanwhile, was greatly pumped up on news that Canadian drugmaker Valeant Pharmaceuticals International Inc. – recently on a shopping spree with announced deals to acquire sector peers Dendreon Corp. and Salix Pharmaceuticals Ltd. – will bring nearly $10 billion equivalent of new dollar- and euro-denominated junk paper to market in a four-tranche offering.

There were also announcements about upcoming dollar deals from Tronox Ltd. and Surgical Care Affiliates, Inc., while European issuers Faurecia, Wind Acquisition Finance and Moto Hospitality were heard to be shopping deals around in the euro-denominated market and, for Moto, the sterling-denominated market.

Away from the new deals, Whiting Petroleum Corp.’s bonds jumped on news reports that the energy exploration and production company – the biggest producer in North Dakota’s rich Bakken Shale geological formation – is putting itself up for sale to potential buyers and has hired an investment bank to line up potential suitors.

Statistical market-performance measures were lower across the board for a second consecutive session and for a fourth time over the last five sessions.

Crestwood at the tight end

Three issuers brought single-tranche, dollar-denominated deals as drive-bys into Monday's primary market, raising a combined total of $1.45 billion.

There were no upsizings. Executions were notably tight, however, with two of the three coming at the tight ends of talk and the other coming atop talk.

All three deals priced inside of initial guidance, according to a trader.

Crestwood Midstream Partners priced a $700 million issue of eight-year senior notes (B1/BB) at par to yield 6¼%.

The yield printed at the tight end of the 6¼% to 6½% yield talk.

Initial guidance had the deal pricing with a yield in the mid-6s, according to a trader.

BofA Merrill Lynch was the left bookrunner.

Barclays, Citigroup, J.P. Morgan, Morgan Stanley, RBC, SunTrust and Wells Fargo were the joint bookrunners.

The Houston-based master limited partnership plans to use the proceeds to fund the redemption of all its outstanding 7¾% senior notes due 2019, as well as to pay down its revolver and for general partnership purposes.

Masonite drives by

Masonite priced a $475 million issue of eight-year senior notes (B2/BB-) at par to yield 5 5/8%.

The yield printed at the tight end of yield talk in the 5¾% area and inside of the 5¾% to 6% initial guidance.

BofA Merrill Lynch was the left bookrunner for the debt refinancing deal. RBC, Wells Fargo, Barclays and Deutsche Bank were the joint bookrunners.

HealthSouth atop talk

HealthSouth priced a $300 million issue of eight-year senior notes (Ba3/expected BB-) at par to yield 5 1/8%.

The yield printed on top of yield talk and tight to initial guidance in the 5¼% area.

SunTrust was the left bookrunner for the debt refinancing. Barclays, BofA Merrill Lynch, Citigroup, Goldman Sachs, J.P. Morgan, Morgan Stanley, RBC and Wells Fargo were the joint bookrunners.

Valeant kicks off

The forward calendar saw a massive build-up on Monday.

Valeant Pharmaceuticals plans to start a roadshow on Tuesday for a $9.6 billion-equivalent four-part offering of senior notes (expected ratings B1/B), which are coming in dollar- and euro-denominated tranches.

The deal features a tranche of dollar denominated notes due March 2020, as well as tranches of dollar- and euro-denominated notes due September 2023 and a tranche of dollar-denominated notes due March 2025.

An investor call is scheduled for noon ET on Tuesday.

The deal set to price at the end of the present week.

Deutsche Bank is the left bookrunner for the acquisition financing. HSBC, MUFG, DNB, SunTrust, Barclays, Morgan Stanley, RBC and Citigroup are the joint bookrunners.

Tronox starts roadhow

Tronox began a roadshow on Monday in New York for a $600 million offering of seven-year senior notes.

The roadshow wraps up Tuesday in Boston, and the deal is set to price thereafter.

UBS is the lead left physical bookrunner for the acquisition financing. Credit Suisse, RBC Capital Markets, Citigroup Global Markets, Goldman Sachs & Co. and MCS Capital Markets are also joint physical bookrunners.

Surgical Care starts Tuesday

Surgical Care Affiliates plans to run a Tuesday-Wednesday roadshow for a $250 million offering of eight-year senior notes (Caa1/B-), according to a market source.

Conference calls are set to take place on Wednesday.

Goldman Sachs & Co. is the left bookrunner for the Rule 144A and Regulation S for life offer. J.P. Morgan Securities LLC, Citigroup Global Markets, Barclays, Morgan Stanley & Co., BofA Merrill Lynch and SunTrust Robinson Humphrey are the joint bookrunners. BMO Securities and TPG Capital are the co-managers.

The notes come with three years of call protection.

The Deerfield, Ill.-based surgical center operator plans to use the proceeds, together with proceeds from a new term loan, to repay its existing term loan in its entirety, with any remaining proceeds to be used for general corporate purposes.

Faurecia roadshow

The European market also generated news on Monday.

Faurecia plans to conduct a roadshow for its €500 million offering of seven-year senior notes (Ba3//BB-) through Wednesday, according to a market source.

BNP Paribas and SG CIB are the global coordinators.

The notes come with three years of call protection.

The Nanterre, France-based automotive equipment supplier plans to use the proceeds primarily to redeem its €250 million of 8¾% notes due June 2019 in full and to refinance short-term borrowings.

Wind €600 million expected

Wind Acquisition Finance is expected to bring to market a €600 million offering senior secured notes due 2020, according to market sources.

An announcement could come before the end of the week, a source said.

The Rome-based wireless, fixed-line telecom and internet provider is also in the market with an €800 million covenant-light term loan, which was scheduled to be the subject of a Monday lender call.

Proceeds will be used to refinance debt.

Moto secured deal

Moto Hospitality announced in a Monday press release that it plans to offer £175 million of second-lien notes due 2020 via Rule 144A and Regulation S.

No timing or syndicate names were disclosed.

The Toddington, Bedfordshire, United Kingdom-based operator of motorway service stations plans to use the proceeds, along with cash on hand, to purchase or redeem in full outstanding amounts under Moto’s £176 million of 10¼% second-lien notes due 2017.

Masonite moves up

In the secondary market, a trader saw Masonite International’s new 5 5/8% notes due 2023 trading in a 101 to 102 bid context, up from the par level at which the Tampa, Fla.-based manufacturer of interior and exterior doors for residential construction priced its quick-to-market $475 million issue.

At another desk, a market source pegged those bonds at 101¼ bid and estimated volume at a brisk more than $14 million, putting them among the day’s most active issues.

Traders did not see any significant initial aftermarket activity in Birmingham, Ala.-based hospital operator HealthSouth’s new 5 1/8% notes due 2023 and also did not see action in the new Crestwood Midstream Partners 6¼% notes due 2023.

Recent deals hanging in

Several of the last week’s new deals were seen on Monday pretty much where they had finished up on Friday.

For instance, a trader quoted Comstock Resources Inc.’s 10% senior secured first-lien notes due 2020 “basically wrapped around par,” where the Frisco, Texas-based independent oil and natural gas E&P company had priced its $700 million issue on Wednesday as a scheduled forward-calendar deal.

“They haven’t really gotten off the ground much, they’re trading right around deal price,” he said.

Another trader, though, saw the bonds actually off by ¾ of a point from where they had been on Friday, ending at 99½ bid, with over $10 million having changed hands.

Among other recently priced deals, Energy XXI Gulf Coast, Inc.’s 11% senior secured second-lien notes due 2020 were being quoted on Monday at around 99 bid.

That was little changed from Friday, but still well up from the 96.313 level at which the Houston-based oil and gas company had priced $1.45 billion issue on Thursday to yield 12% after the forward-calendar offering had been upsized from an originally announced $1.25 billion.

The bonds had come to market too late in the day for any Thursday trading, but had jumped some 3 points to above 99 bid in Friday’s busy dealings, when over $92 million of the notes had changed hands.

Peabody Energy Corp.’s 10% senior secured second-lien notes due 2022 were trading around 98 bid on Monday, up ¼ of a point on the session, on volume of more than $23 million, although that was well down from the roughly $100 million of those notes that had moved around when the St. Louis-based coal producer’s regularly scheduled forward calendar deal had begun trading on Friday. It had priced the $1 billion offering at 97.566 late Thursday to yield 10½%, and the bonds have moved a little higher than that in Friday’s dealings.

Zayo Group, LLC’s 6% notes due 2023 were at 100½ bid on Monday, up by 1/8 of a point, on volume of more than $17 million.

The Boulder, Colo.-based telecommunications fiber-optic network provider priced its $730 million add-on to its existing 2023 notes at 101 in a drive-by transaction on Wednesday, yielding 5.796%. The notes had eased from their issue price in Thursday and Friday’s dealings.

Valeant bonds lower

The news that Valeant is bringing a huge new deal to market helped to push the Laval, Quebec-based pharmaceutical company’s existing bonds lower on Monday, although there was not much volume in the name.

The 5½% notes due 2023 ended at 99¾ bid – about unchanged from Friday’s levels, but down from its earlier peak level around 100 1/8 bid, on volume of over $3 million.

Valeant had priced $1 billion of those notes at par back on Jan. 15, and they had moved as high as just under 102½ bid by mid-February. But they then came tumbling down to current levels following the company’s Feb. 22 announcement that it plans to acquire Raleigh, N.C.-based Salix Pharmaceuticals for $158 per share in cash, or a total enterprise value of about$14.5 billion, since market players correctly figured that the acquisition will require Valeant to issue a lot of new debt to fund that transaction.

The 7½% notes due 2020 dipped slightly to 104 7/8 bid from around 105 bid previously, on over $3 million traded. Those notes, too, had come down from their mid-February peak level around 105 5/8 following news of the Salix purchase.

Valeant’s 5 3/8% notes due 2021, which had peaked around 103½ bid in early February before the Salix announcement, were seen trading Monday around 100 7/8 bid, down from 101 on Friday, on volume of more than $3 million.

Senior analyst Vicki Bryan of the Gimme Credit investment research service said in a note on Monday that Valeant is already heavily levered from a series of past expensive acquisitions, with more than $15 billion of outstanding debt, a figure she calls “troublingly high,” and interest costs running north of $1 billion per year, “so Valeant has one of the weakest credit profiles by far of any major drug company.”

And Bryan warned that “it's about to get worse,” with the new debt Valeant will take on to fund the Dendreon Corp. and Salix acquisitions pushing debt levels to close to $30 billion.

Bryan said that her service maintains its “underperform” rating on Valeant’s paper.

Whiting bonds better

Away from the new deals, Whiting Petroleum’s bonds were easily the most actively traded credits in Junkbondland on Monday, up multiple points on news reports that Whiting was shopping itself around to potential buyers and had hired an investment bank to line up such a strategic transaction.

The news reports were unconfirmed as of Monday evening, with Whiting having declined comment.

There was also no immediate word on which bank – or banks – might be helping the company try to find a buyer.

One news report named Norway’s Statoil ASA as a potential buyer for the Denver-based oiler – the biggest player in North Dakota’s Bakken shale field – although that company also declined to comment.

A trader Friday cited rumors that a major investment-grade U.S.-based oil company, such as ExxonMobil Corp., might emerge as a purchaser.

He meanwhile said that the company’s bonds “were up a good four or five points” on all of that M&A speculation.

He quoted Whiting’s 5¾% notes due 2021 in a 103 to 103½ bid context, while its 5% notes due 2019 were trading between 101 and 101½.

Another trader located the Whiting 5¾% notes north of 103½, calling them up nearly 5 points on the day, with over $50 million changing hands.

He saw the 5% notes up more than 3 points on the day at 101 5/16 bid, on turnover of over $44 million.

And yet another market source put the 5¾% up by more than 5 points during the session, at 104 1/8 bid.

Whiting’s New York Stock Exchange-traded shares meantime zoomed by $3.68, or 10.81%, closing at $37.71. Volume of over 25.4 million shares was about triple the norm.

Whiting talk lifting others?

One of the traders said that the news reports indicating that Whiting is putting itself in play as a possible acquisition target could help the bonds of some sector peers, which also might attract attention from potential deep-pocketed buyers.

One such company, he said, is Oasis Petroleum Inc., theorizing that the Houston-based energy company’s notes “probably caught a bid,” although he added that “it was just a couple of [large] trades, and they were maybe up ¼ or ½ of a point, but nothing huge.”

Oasis’ 6 7/8% notes due 2023 gained 1 3/8 points on the day to 100 5/8 bid, though there was only one round-lot trade all day. Its 6½ % notes due 2021 were about ½ of a point higher, around 98 bid, on $2 million of turnover.

Indicators stay weaker

Statistical indicators of junk market performance were lower on Monday for a second straight session and for the fourth time in the last five sessions, after having been mixed on Thursday.

The KDP High Yield Daily index was off by 9 basis points to end at 71.64, its sixth consecutive loss. On Friday, it had been down by 6 bps.

The yield rose by 6 bps on Monday to 5.25%, its sixth successive widening, on top of the 1 bp gain seen Friday.

The Markit Series 23 CDX North American High Yield index fell by 11/32 of a point on Monday to 107 5/8 bid, 107 ¾ offered.

The Merrill Lynch U.S. High Yield Master II index retreated by 0.102%, its second loss in a row and its fourth setback in the last five sessions. It had been down by 0.248% on Friday.

The latest retreat dropped its year-to-date return to 2.507%, down from Friday’s 2.611% and well down from its peak 2015 level of 3.125%, set last Monday.

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