Community Health, Hilton Worldwide megadeals lead $4.7 billion session, year’s busiest; healthcare names sink

By Paul Deckelman and Paul A. Harris

New York, March 7 – The high-yield primary market had its heaviest one-day total of new issuance for the year so far on Tuesday, with some $4.7 billion of new U.S. dollar-denominated and fully junk-rated paper being priced by five issuers in a total of six tranches, junk-bond syndicate sources said.

That topped the $4.26 billion of such paper from domestic or industrialized-country borrowers that had gotten done in seven tranches on Jan. 12, according to data compiled by Prospect News, and in fact was the biggest one-day issuance total since last June.

All of the day’s issuance came in opportunistically timed and quickly shopped drive-by offerings, the sources said.

The big deal of the day came from hospital operator Community Health Systems Inc. – a sharply upsized $2.2 billion of six-year secured notes.

Hospitality provider Hilton Worldwide Holdings Inc. brought a $1.5 billion two-part offering to market, consisting of eight-year and 10-year paper.

Energy company Crestwood Equity Partners LP did $500 million of eight-year notes via a subsidiary.

A pair of $250 million deals rounded out the day’s pricing parade – a tranche of eight-year senior notes from builder Beazer Homes USA, Inc. and an issue of 10-year subordinated notes from car retailer Sonic Automotive, Inc.

Secondary market traders saw brisk activity in the new Community Health, Crestwood, Beazer and Sonic credits.

They also saw a fair amount of action in existing Community Health paper, which retreated on a combination of news about the big new deal, as well as generalized weakness in the healthcare sector as the market digested the news of the Republican congressional rollout of a plan aimed at eliminating some portions of the existing Obamacare legislation. Community Health sector peer Tenet Healthcare Corp. and drugmaker Valeant Pharmaceuticals International Inc. were also among the losers.

Statistical market performance measures were lower across the board for a second consecutive session on Tuesday; they had turned southward on Monday, after having been mixed on Thursday and then again on Friday and higher all around last Wednesday.

CHS upsizes

Five issuers priced a combined six tranches of junk to raise a whopping $4.7 billion during the busy Tuesday session.

CHS/Community Health Systems priced an upsized $2.2 billion issue of six-year senior secured notes (Ba3/BB-) at par to yield 6¼%.

The issue size was increased from $1.75 billion.

The yield printed on top of yield talk in the 6¼% area.

Credit Suisse, BofA Merrill Lynch, Citigroup, Credit Agricole, Goldman Sachs, JP Morgan, RBC, SunTrust, UBS and Wells Fargo were the joint bookrunners for the debt refinancing.

Hilton: Two tight tranches

Hilton Worldwide Holdings priced $1.5 billion of senior notes (expected ratings Ba3/BB+).

The short maturity tranche featured $900 million of eight-year notes that priced at par to yield 4 5/8%. The yield printed at the tight end of yield talk in the 4¾% area.

The long tranche features $600 million of 10-year notes that priced at par to yield 4 7/8%. The yield printed at the tight end of yield talk in the 5% area.

Goldman Sachs was the left bookrunner.

The McLean, Va.-based hospitality company plans to use the proceeds together with available cash, to redeem all $1.5 billion of its 2021 notes, with any remaining proceeds to be used for general corporate purposes.

Crestwood at the wide end

Crestwood Equity Partners priced a $500 million issue of eight-year senior notes (B1) at par to yield 5¾%.

The yield printed at the wide end of the 5½% to 5¾% yield talk.

JP Morgan, BofA Merrill Lynch, Citigroup, Wells Fargo and SunTrust were the managers for the debt refinancing.

Beazer drives by

Beazer Homes USA. priced a $250 million issue of eight-year senior notes (B3/B-) at par to yield 6¾%.

The yield printed on top of yield talk in the 6¾% area.

Credit Suisse, Goldman Sachs, Deutsche Bank and JP Morgan were the joint bookrunners for the debt refinancing deal.

Sonic sub at 6 1/8%

Sonic Automotive priced a $250 million issue of 10-year senior subordinated notes (B2/B+) at par to yield 6 1/8%.

The yield printed on top of yield talk in the 6 1/8% area.

BofA Merrill Lynch, JP Morgan and Wells Fargo were the joint bookrunners.

The Charlotte, N.C.-based automotive retailer plans to use the proceeds to redeem all of its outstanding 7% senior subordinated notes due 2022, with any remaining proceeds to be used for general corporate purposes, including the acquisition and development of dealerships and related real property, repurchases of shares of the company's class A common stock and other working capital needs.

Elsewhere Toll Brothers was to price a $300 million offering of non-callable 10-year senior notes (Ba1/BB+/BBB-) in a deal coming off the investment-grade desk.

SunTrust, Citigroup, Deutsche Bank, Mizuho and Wells Fargo were the leads.

No terms were available at press time.

Calendar continues to build

An already robust new issue calendar continued to take shape on Tuesday.

Equinix, Inc. announced that it plans to sell $1,125,000,000 of senior notes due 2027.

J.P. Morgan, BofA Merrill Lynch, RBC, Barclays, Goldman Sachs, MUFG and TD are the joint bookrunners.

And Foresight Energy LP announced that it plans to sell $500 million of senior secured second priority notes.

Goldman Sachs is leading the deal, according to a market source.

Busiest day of the year

Tuesday’s new-issue total of $4.7 billion was, as noted, the most seen in any one session so far this year, according to data compiled by Prospect News.

It exceeded the $4.2 billion done in six single-tranche offerings last Thursday, led by Blue Line Rentals’ upsized $1.1 billion of seven-year second-lien senior secured paper, as well as the $4.26 billion which had come to market on Jan. 12 in seven tranches, including Icahn Enterprises LP’s upsized $1.195 billion two-part transaction.

Tuesday was the biggest one-day new issue session seen in Junkbondland since last June 13, a session paced by Reynolds Issuer SA’s $2.9 billion three-part bond behemoth.

Community Health moves up

Traders saw Community Health Systems’ new 6¼% senior secured notes due 2023 having firmed solidly when they hit the aftermarket, with one pegging them in a 100 5/8 to 100¾ bid context, and a second seeing the Franklin, Tenn.-based hospital operator’s new deal having gotten as good as 100 13/16 bid.

More than $92 million of the notes changed hands, easily topping the high yield Most Actives list for the day.

Day’s issues are busy

The traders also saw considerable activity in some of the other new issues that came to market during Tuesday’s session.

The new Crestwood Equity Partners’ 5¾% notes due 2025, which were brought to market by the Houston-based energy company’s Crestwood Midstream Partners LP unit, were seen having stayed right around their par issue price, on volume of more than $43 million.

Beazer Homes’ new 6¾% notes due 2025 were seen by a market source to have firmed by around 7/8 point, to 100 7/8 bid, after having priced at par.

More than $25 million of the Atlanta-based homebuilder’s new bonds were traded.

And Sonic Automotive’s 6 1/8% notes due 2027 were seen having moved up to 100¾ bid at the close, versus the par level at which the issue had priced, on volume of more than $17 million.

Existing Community Health off

Traders noted that while Community Health Systems’ new bonds were sizzling, its existing paper was fizzling; one quoted its outstanding 6 7/8% notes due 2022 down 1¼ points at 86½ bid.

A second saw them down 1¼ points, with over $31 million traded.

Its 5 1/8% notes due 2021 lost ¾ point, ending at 98¾ bid.

The traders said that the existing bonds got hit with a double whammy – down on news of the huge new deal coming to market, as well as by market nervousness over possible changes that may be made in the existing Obamacare law as a result of Washington congressional maneuvering.

Healthcare not so healthy

The latter concern also pushed down other healthcare-related issues, including Dallas-based hospital operator Tenet Healthcare’s 6¾% notes due 2023, which lost 1¼ point to end at 97½ bid, with over $37 million traded.

Canadian drugmaker Valeant’s 6 1/8% notes due 2025 slid by 1 5/8 points to end at 77¼ bid, on $19 million of volume.

Indicators turn lower

Statistical market performance measures were lower across the board for a second consecutive session on Tuesday; they had turned southward on Monday, after having been mixed on Thursday and then again on Friday and higher all around last Wednesday.

The KDP High Yield Daily index plunged by 17 basis points on Tuesday to finish at 72.44, its third loss in a row after two straight advances and fourth such downturn in the last six sessions. On Monday, it had ended down by 9 bps.

Its yield rose by 6 bps, to 5.01%, its third consecutive widening out; it had moved up by 3 bps on Monday and by one bp on Friday, which had been its first such widening in nearly a month, since Feb. 8, with the yield having either come in or been unchanged in all of the sessions since then.

The Markit CDX Series 27 High Yield index swooned by 13/32 point on Tuesday to close at 107 3/8 bid, 107 7/16 offered, its third loss in the last four sessions, after having lost more than 9/32 point on Monday. On Friday, it had edged up by around 1/32 point.

The Merrill Lynch High Yield index also ended on the downside, its fourth setback in a row after eight consecutive sessions before that moving upward. It was down by 0.302% on Tuesday, on top of Monday’s 0.178% retreat.

The loss lowered its year-to-date return to 2.507% from Monday’s 2.817%, and those levels were well down from last Wednesday’s 3.19%, which had been its eighth straight new peak level for 2017.

© 2015 Prospect News.
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