Sprint, T-Mobile see some movement; new Netflix, URI trade; communications ride AT&T takeover talks

By Colin Hanner and Paul A. Harris

Chicago, Oct. 25 – Newly issued notes and quarterly earnings caused some movement in Junkbondland on Tuesday but not enough to stir much volatility during the session.

The second quarter results for Sprint Corp. reported growth in net operating revenues of $8.25 billion, and a net loss of $142 million on operating income of $622 million and adjusted EBITDA of $2.35 billion.

Chief executive officer Marcelo Claure said the company was taking steps toward sustaining a profit and cash generation, as well as raising money at lower interest rates to reduce cash interest expenses, including the latest $3.5 billion issue of spectrum-backed notes, as reflected in their quarter results.

A trader said the 7¼% notes due 2021 were unchanged at 104¾ and that its newest issue, the 3.36% spectrum-backed senior notes due 2023, traded “around 101,” while another market source saw a trade as high as 101 7/8.

“We were very surprised by the tremendous demand that we had for these notes,” Claure said in a conference call.

Though Sprint has been trading, one trader expressed that there has been a shortfall, especially with the news surrounding the company.

“I’m surprised it wasn’t more active,” the trader said. “There’s not nearly as much [trading] as there’s been.”

The 6 7/8% notes due 2028 were at a “94½” context and “about in line with where it’s been,” another trader said.

The trader also saw movement in the 7 7/8% due 2023, which were “around 102.”

Claure said that the value of Sprint to outside companies has significantly grown, which also seems to be the case for T-Mobile USA Inc. in light of the proposed AT&T takeover of Time Warner Inc. for $85.4 billion.

After announcing its third quarter results on Monday, the wireless phone company’s stock jumped nearly 10%, but on Tuesday, it saw little movement, albeit some trading, on a few of its notes.

The 6½% notes due 2026 traded down 1/8 point to 111, a trader said, and the 6 5/8% notes due 2020 increased 1/8 point to 103¼.

Another trader said the 6% notes due 2023 were up ¼ point to 106 5/8 on one trade and the 6.55% notes due 2020 were unchanged at 103 3/8.

Rackspace prices tight

In Tuesday's primary market Rackspace Hosting Inc. priced a $1.2 billion issue of eight-year senior notes (B3/B+/BB-) at par to yield 8 5/8%.

The yield printed at the tight end of yield talk in the 8¾% area and well inside of early guidance in the low 9% area.

Deutsche Bank, Citigroup, Barclays, RBC and Credit Suisse were the joint bookrunners for the buyout deal.

Jack Ohio roadshow

Jack Ohio Finance LLC and its wholly owned subsidiary Jack Ohio Finance 1 Corp. plan to start a roadshow on Wednesday for a $1.05 billion two-part offering of secured notes.

The deal includes $750 million of five-year first-lien notes (B3/B+) and $300 million of six-year second-lien notes (Caa3/CCC).

The roadshow wraps up on Monday, and the deal is set to price thereafter.

Goldman Sachs is the left bookrunner. Credit Suisse, Wells Fargo and Deutsche Bank are the joint bookrunners.

The Detroit, Mich.-based gaming company intends to use the proceeds to refinance debt and provide cash for upcoming payments, with any remaining proceeds to be used to finance ongoing working capital, capital expenditures and general corporate purposes.

WIND Hellas €250 million

Crystal Almond Sarl, the parent of WIND Hellas Telecommunications SA, announced in a Tuesday press release that it intends to offer €250 million of senior secured notes due 2021.

The Athens, Greece-based telecommunications services provider plans to use the proceeds to refinance its existing senior secured facility and for the general corporate purposes of WIND Hellas, including capital expenditure investments.

Earnings and acquisitions

AK Steel Holding Corp. announced its third quarter results on Tuesday, and equities rose as a result.

The West Chester, Ohio-based steel company recorded a profit of $50.9 million during the quarter, up $6.7 million from last year, though revenue sank by 15% to $1.4 billion.

A trader said the 7 5/8% notes due 2021 were up 1 3/8 points to 97½ on “pretty good volume.” Another market source said the 7 5/8% notes due 2020 were up 2 points to 100½.

Gold, silver and copper producer Freeport-McMoRan Inc. announced its quarterly results, which fell below expectations. Its year-over-year revenue increased to $3.88 billion from $3.38 billion.

The results come a week after the company agreed to sell its California oil and gas properties for $742 million, the proceeds of which will pay down the company’s debt.

A market source listed the company’s 3 11/20% notes due 2022 up ½ point to 91½.

Its 5.45% notes due 2043 traded up 7/8 point to 82 3/8, a trader said.

Biopharmaceutical company Horizon Pharma plc announced the acquisition of Raptor Pharmaceuticals Corp. on Tuesday, a deal that will add between $20 million and $25 million to Horizon’s total net sales for 2016, a release said. The company raised its full-year 20216 net sales guidance and confirmed a full-year 2016 adjusted EBITDA guidance. It holds a revenue view of $1.03 billion for the 2016 fiscal year.

A market source said the 6 5/8% notes due 2023 remained unchanged on the day at 95 on one trade.

New issues

United Rentals, Inc. saw the “heaviest trade volume” on the day with 100 million trades on its 5½% notes due 2027, a trader said. He said the notes were up ¾ point to 100¾.

The heavy volume trading comes a day after the largest equipment rental company in the world announced the pricing of $750 million of 5½% notes due 2027.

Entertainment distributor Netflix Inc. saw “some movement,” per one trader, who saw the 4 3/8% notes due 2026 down ½ point to par after being up to par-and-a-half yesterday.

Round up

Several communication companies seem to be riding the speculation surrounding the potential AT&T takeover of Time Warner Inc., including CenturyLink Inc., which saw its 6¾% due 2023 up 1 point to 106.

Brocade Communications saw its second straight day of gains, and its 4 5/8% notes due 2023 were up ¼ point to 99¾.

On a lower frequency, iHeartCommunications Inc.’s 9% notes due 2019 were unchanged at 77½, and its 10 5/8% notes due 2023 were up 5/8 point to 73¾, on what a trader said was the result of some small asset sale news.

Kidney care company DaVita Healthcare Partners Inc.’s 5% notes due 2025 were “active,” down 1 point to 98½, a trader said, while another market source said the company’s 5 1/8% notes due 2024 were down 1½ points to 101.

Valeant Pharmaceuticals International Inc. had movement in its notes, including the 5 7/8% notes due 2023, which were unchanged at 82¾ but did experience trading throughout the day, one trader said.

The company’s 6 1/8% notes due 2025 were up a ¼ point to 82½, and the 6¾% notes due 2018 were down 1/8 point to 99 5/8.

Satellite communication company Intelsat Corp.’s Jackson-linked 7¼% notes due 2020 were “offered at 76.” The 7½% Jackson-linked notes due 2021 were “offered at 75.”

The company’s 7¾% notes due 2021 traded down to 33½, a trader said.

Steel and mining company ArcelorMittal was up ½ point to 111½, a market source said, and Chesapeake Energy Corp.’s 6 5/8% notes due 2020 were up ½ point to 98½.

Index report

The KDP High Yield Daily index showed some movement on the day, as price decreased 6 basis points to 71.78. Yield increased by 1 bp to 5.26%.

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