Restructured XPO, DuPont Fabros price, also CEB; DISH up on M&A talk; funds up $600.8 million

By Paul A. Harris and Paul Deckelman

New York, June 4 – The high-yield primary sphere saw a resumption of busier activity on Thursday, syndicate sources said, with $2.55 billion of new fully junk-rated and dollar-denominated paper having come to market in four tranches.

That was well up from the $834 million that got done in three tranches on Wednesday, which in turn had been well down from the $5.54 billion of new junk that domestic or industrialized-country issuers had brought to market in seven tranches on Tuesday in one of the busiest sessions of the year.

Although there’s been a recent surge in quickly marketed drive-by deals – with even some up in billion-dollar-plus megadeal territory – those opportunistic borrowers were nowhere to be seen on Thursday, with all of the day’s offerings being regularly scheduled transactions off the forward calendar.

Two of the day’s deals were restructured before they finally got done – transportation logistics provider XPO Logistics Inc.’s big two-part $1.6 billion and €500 million offering of dollar- and euro-denominated notes, which saw a second euro tranche and an issue of sterling paper jettisoned, while data-centers operator DuPont Fabros Technology LP’s $250 million issue had revisions to its maturity and call protection.

The day also saw gym operator Life Time Fitness Inc.’s eight-year deal upsized to $600 million. Business solutions provider CEB, Inc.’s $250 million eight-year offering priced as expected with no changes of any kind made.

XPO’s new bonds were easily the busiest issue in Junkbondland on Thursday, trading up slightly from their issue price.

Tenet Healthcare Corp.’s new fixed-rate notes also remained actively traded at solidly higher levels.

Away from the new-deal arena, there was considerable activity in DISH DBS Corp. and T-Mobile USA Inc. bonds amid news reports that satellite broadcaster DISH and wireless provider T-Mobile were in preliminary merger talks and might hook up, which if it happens would be the latest in a recent series of merger-and-acquisition deals reshaping the landscape in the communications world.

Statistical indicators of junk market performance were lower across the board for a third consecutive session on Thursday. They had turned southward on Tuesday and had stayed down on Wednesday after having been mixed for three consecutive sessions before that.

However, high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends, made a detour from their recent mostly negative pattern this week, posting a sizable inflow, their second such gain in the past three weeks.

XPO Logistics prices restructured deal

Four issuers priced four dollar-denominated tranches on a busy Thursday, raising a combined total of $2.55 billion

Amid considerable volatility in the global capital markets, the executions appeared solid, with two of the four tranches pricing at the tight ends of talk while the other two priced on top of talk.

XPO Logistics launched and priced a restructured two-part offering of senior fixed-rate notes (B1/B) in two tranches.

The acquisition deal included $1.6 billion of seven-year notes that priced at par to yield 6½%.

The announced tranche size was $500 million minimum. The yield printed at the tight end of the 6½% to 6¾% yield talk. For the dollar-denominated notes, Morgan Stanley & Co. LLC was the left bookrunner and will bill and deliver.

In addition, the Greenwich, Conn.-based provider of transportation logistics services priced €500 million of six-year notes at par to yield 5¾%.

The announced tranche size was $500 million equivalent minimum. The yield printed at the tight end of the 5¾% to 6% yield talk. For the euro-denominated notes JPMorgan was the left bookrunner and will bill and deliver.

A proposed £300 million tranche of fixed-rate notes and a euro-denominated floating-rate notes were withdrawn, with the proceeds shifted to the dollar- and euro-denominated fixed-rate tranches.

JPMorgan and Morgan Stanley were the global coordinators.

Citigroup, Credit Suisse and Deutsche Bank were the joint bookrunners.

Life Time Fitness atop talk

Life Time Fitness priced a downsized $450 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 8½%.

The buyout-funding and debt-refinancing deal was downsized from $600 million, with $150 million of proceeds shifted to the concurrent bank loan.

The yield printed on top of final talk; earlier talk had the deal pricing in the 8¼% area.

Goldman Sachs & Co. was the left bookrunner. Deutsche Bank Securities Inc., Jefferies LLC, BMO Capital Markets, RBC Capital Markets, Macquarie Capital (USA) Inc., Nomura and Mizuho were the joint bookrunners.

CEB prices tight

CEB priced a $250 million issue of eight-year senior notes (Ba3/BB-) at par to yield 5 5/8%.

The yield printed at the tight end of yield talk in the 5¾% area.

SunTrust Robinson Humphrey Inc. was the left bookrunner. BofA Merrill Lynch and HSBC Securities (USA) Inc. were joint bookrunners.

The Arlington, Va.-based business solutions company plans to use the proceeds to refinance its existing credit facility.

DuPont Fabros restructures

DuPont Fabros Technology priced a restructured $250 million issue of 5 5/8% eight-year senior notes (Ba1/BB) at 99.205 to yield 5¾%.

In a restructuring of the deal, the maturity of the notes decreased to eight years from 10 years. Call protection decreased to three years from five years.

The yield printed on top of yield talk.

SunTrust was the left bookrunner. Goldman Sachs, KeyBanc, RBC, Regions and Stifel were the joint bookrunners.

The Washington, D.C.-based company plans to use the proceeds to repay revolver borrowings and for general corporate purposes.

Harsco for Friday

Thursday's burst of deals all but cleared the active calendar.

At the close, one deal remained to clear before the end of the week.

Harsco Corp. talked its $250 million offering of five-year senior notes (Ba1/BB/BBB-) to yield 6% to 6¼% on Wednesday.

Books were scheduled to close late Wednesday, and the deal was set for Thursday but was pushed into the Friday session, a market source said after Thursday's close.

Citigroup, Credit Suisse, HSBC, JPMorgan, MUFG, RBC and U.S. Bancorp are the joint bookrunners.

XPO bonds up in busy dealings

In the secondary realm, traders saw intense activity in the new XPO Logistics dollar-denominated 6½% notes due 2022.

A trader quoting the bonds at 100¼ bid allowed that “they certainly seemed to be active.”

As for just how active, a market source said that more than $114 million of the notes had changed hands during the session – by far and away the busiest high-yield issue on the day. He pegged the new bonds at 100 1/8 bid, up slightly from their par issue price.

A third trader saw the bonds in a 100¼-to-100½ bid context.

Another said the bonds started slowly, trading between 99¾ and 100¼ bid when they first began to trade after their pricing.

He later saw the new notes having improved to a 100¼-to-100½ bid context before settling in around 100¼.

Life Time Fitness firms

Among the day’s other issues, a trader saw Life Time Fitness’ 8½% notes due 2023 trading into a par bid.

But at another shop, a trader saw the new issue from the Chanhassen, Minn.-based operator of sports, professional fitness, recreation and spa destinations moving around at bid levels between 100¼ and 100¾ versus their par issue price earlier.

Due to the relative lateness of the hour at which they had priced, traders said that they had seen no initial aftermarket activity in CEB’s $250 million of 5 5/8% notes due 2023 or in the restructured $250 million of 5 5/8% eight-year notes from data-centers operator DuPont Fabros Technology.

Cable ONE climb continues

Among the deals that had come to market on Thursday, a trader called Cable ONE, Inc.’s new 5¾% notes due 2022 ½ point better on the day at 101¾ bid.

Earlier in the session, a trader had seen the Phoenix-based cable systems operator’s new paper having pushed up to a 101 5/8-to-102 1/8 bid context.

The company had priced its $450 million quick-to-market deal on Thursday at par; the new bonds had quickly moved up to a 101-to-101¼ bid context.

Among other issues that priced on Thursday, a trader said that he had seen Consolidated Communications Inc.’s 6½% notes due 2022 trading around 98¾ bid, but he cautioned that “it was just one trade.”

The Mattoon, Ill.-based provider of advanced communications services priced $300 million of the notes as a quickly shopped add-on to its existing issue on Thursday at 98.26, yielding 6.804%.

Tenet trading continues

There was more trading on Thursday in Tenet Healthcare’s big new issue of 6¾% notes due 2023, with a trader locating those bonds “right at the 101 level.”

At another desk, a market source quoted the notes at 101 1/8 bid, up 1/8 point on the day, with over $74 million having changed hands.

Dallas-based hospital operator Tenet had priced $1.9 billion of those notes at par on Tuesday as part of a quick-to-market $2.8 billion offering that also included $900 million of senior secured floating-rate news due 2020.

When both tranches of bonds began trading Wednesday, they were easily the busiest junk credits, with over $277 million of the fixed-rate bonds and $143 million of the floaters having traded.

DISH in demand

Away from the new-deal world, traders saw considerable upside activity in the bonds of Englewood, Colo.-based satellite broadcaster DISH DBS on the news that its parent company, DISH Network Corp., had entered into preliminary merger talks with Bellevue, Wash.-based T-Mobile USA.

The latter’s bonds were also busy but were trending mostly lower.

A trader said that there “prints all over the place” on DISH’s 5 7/8% notes due 29024, which had finished on Wednesday at around 99½ bid.

On Thursday, he said, “generically, they’re up 1 point to 1½ point.”

Another trader said the bonds were finishing around 101 bid, which he called a 1½-point gain on the session, on volume of more than $64 million.

DISH’s 5 7/8 points due 2022 were up 1 point, at 102 1/8 bid, on volume of over $28 million.

Its 5% notes due 2023 advanced by 1 3/8 points to 96 3/8 bid, with more than $15 million traded.

T-Mobile’s equity investors liked the idea of the company possibly being acquired. Its New York Stock Exchange-traded shares gained $1.01, or 2.64%, ending at $39.34, on volume of 18.9 million shares, more than four times the norm.

But the No. 4 U.S. wireless carrier’s bondholders were more wary of the potential deal. T-Mobile’s 6 3/8% notes due 2025 slackened off by 1/8 point to 103 7/8, on volume of over $31 million.

Its 6½% notes due 2024 lost 5/8 point, ending at 104 3/8 bid, with over $18 million traded.

Indicators remain lower

Statistical indicators of junk market performance were lower across the board for a third consecutive session on Thursday. They had turned southward on Tuesday and had stayed lower on Wednesday and Thursday after having been mixed for three consecutive sessions before that and for six sessions in the previous seven trading days.

The KDP High Yield Daily index plunged by 15 basis points on Thursday to 71.26, its third straight loss and fourth setback in the last five sessions. It had also lost 5 bps on Wednesday 4 bps on Tuesday after having risen by 1 bp on Monday.

Its yield ballooned out by 10 bps to 5.42%, its second straight widening, after having moved up by 1 bp on Wednesday. On Tuesday, it had been unchanged.

The Markit Series 24 CDX North American High Yield index was down by 5/32 point on Thursday to finish at 106 11/16 bid, 106¾ offered, its third straight loss, on top of downturns of 7/32 point on Wednesday and 1/32 point on Tuesday.

The Merrill Lynch North American Master II High Yield index meanwhile suffered its fourth successive loss on Thursday after six consecutive gains. It declined by 0.18% after Wednesday’s 0.155% downturn.

Thursday’s setback lowered the index’s year-to-date return to 3.606% from 3.793% on Wednesday. Those levels, in turn, were down from Friday’s 4.062%, the index’s peak level for the year so far.

Junk funds gain $600.8 million

But another numerical indicator – the flow of cash into and out of high-yield mutual funds and ETFs, considered a reliable barometer of overall junk market liquidity trends – was in solidly positive territory with a sizable inflow, the second such gain in the past three weeks.

The funds saw a net inflow of $600.8 million in the week ended Wednesday, a solid snap-back from the $111.1 million outflow those funds had posted the week before. (See related story elsewhere in this issue.)

© 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.