UPC, Catalent, Vine price deals; new attack on ACA roils hospitals

By Paul A. Harris

Portland, Ore., Oct. 13 – In Friday’s high yield market three deals cleared, bringing the week’s issuance to $6.27 billion, down significantly from the previous week’s $10.10 billion and the slowest level of activity since the holiday-shortened Sept. 4 week.

UPC Holding BV had the day’s biggest deal, a $550 million issue of 10-year senior notes (B2/B/B) that priced at par to yield 5 ½%.

Not far behind, Vine Oil & Gas LP priced $530 million of 8¾% 5.5-year senior notes at a discount to yield 8.985%, close to the high end of talk and trailing changes to covenants.

Catalent Pharma Solutions, Inc. priced a $450 million issue of eight-year senior notes (B3/B+) at par to yield 4 7/8%, the tight end of talk.

The secondary spotlight fell on the hospital sector, sending bonds lower, as the Trump administration went out with plans to choke off government payments to the health insurance companies in its latest assault on the Affordable Care Act.

Bonds in the sector initially fell 1 to 2 points but some names managed to regain part of those losses as the day progressed.

UPC drives by

UPC Holding priced a $550 million issue of 10-year senior notes (B2/B/B) at par to yield 5½% on Friday, according to a syndicate source.

The yield printed on top of yield talk that was set in the 5½% area.

Citigroup Global Markets Inc. was the global coordinator for the Rule 144A and Regulation S for life offer. Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Bank of Nova Scotia and SG CIB were the joint bookrunners.

The Schiphol-Rijk, Netherlands-based telecommunications company, a subsidiary of Liberty Global, plans to use the proceeds to refinance existing its 6¾% euro- and Swiss franc-denominated senior notes due 2023.

Vine Oil at a discount

Vine Oil & Gas LP and Vine Oil & Gas Finance Corp. priced a $530 million issue of 8¾% 5.5-year senior notes at 99 to yield 8.985%, according to a syndicate source.

Yield talk was 8¾% to 9% including a 1 point discount.

There were covenant changes to the deal.

Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, HSBC Securities, Natixis and SG CIB were the joint bookrunners.

The Plano, Texas-based oil and gas exploration and production company plans to use the proceeds to refinance debt.

Catalent oversubscribed

Catalent Pharma Solutions priced $450 million of eight-year senior notes (B3/B+) at par to yield 4 7/8%, according to market sources.

The yield printed at the tight end of talk for a yield in the 5% area.

The deal played to an order book that was six-times oversubscribed, sources said.

Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, RBC Capital Markets LLC and BofA Merrill Lynch were the joint bookrunners.

The Somerset, N.J.-based provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products plans to use the proceeds to finance the acquisition of Cook Pharmica.

CMA CGM to start roadshow

France-based container ship company CMA CGM SA plans to roadshow a €300 million offering of eight-year senior notes (expected ratings B3/B-) on Monday and Tuesday, according to a market source.

Joint global coordinator BNP Paribas will bill and deliver for the Rule 144A and Regulation S deal. HSBC is also a joint global coordinator. Credit Agricole CIB, ING, SG CIB and UniCredit Bank are the joint bookrunners.

The notes come with three years of call protection and feature a 40% equity clawback and a 101% poison put.

The company, which is headquartered in Marseille, plans to use the proceeds to repay bank debt.

Quieter week

Friday’s deals brought the week’s total to $6.27 billion, less than two-thirds of the $10.10 billion seen in the preceding week and the smallest issuance figure since the $4.86 billion of the Sept. 4 week, which was shortened by the Labor Day holiday.

However the year-to-date total continues to run well ahead of last year’s pace.

Issuance through Friday totaled $223.98 billion, 22% more than the comparable $182.75 billion figure for 2016.

In fact, this year is on track to beat the $226.78 billion total seen for full-year 2016 in the coming week if new deal activity stays at current levels.

Hospitals paper jostled

In secondary trading, hospital paper sold off on news that the U.S. Department of Health and Human Services, acting on a legal opinion from attorney general Jeff Sessions, plans to end billions of dollars in payments to insurers under the Affordable Care Act program.

The pretext for the move is an assertion that the payments lack a Congressional appropriation and are therefore unconstitutional.

Hospital names initially traded down by 1 to 2 points at Friday’s open, as the market reacted to the news, traders said.

However later in the day some retraced portions of the ground they had earlier relinquished.

Tenet Healthcare Corp. was a case in point, a trader said.

The THC Escrow Corp. III (Tenet Healthcare) 7% senior notes due August 2025 were down 1 to 2 points as trading began on Friday, at 89¼ bid, 90¼ offered.

However the bonds later bounced back to a 91 to 92 bid context, the trader said.

In distressed names Community Health Systems, Inc. sold off similarly early Friday, then came clawing back.

The FWCT-2 Escrow Corp. (Community Health Systems) 6 7/8% senior notes due Feb. 1, 2022 were at 73¼ bid, down ½ point on the day at early Friday afternoon, a trader said.

The paper got as low as 71½ bid, early in the session, the source added.

It was at 72¾ bid, 73¾ offered on Thursday.

Parsing the moves, the trader suggested that some investors sold into the Friday news that the administration of president Donald J. Trump had once again taken up the assault on his predecessor’s landmark Affordable Care Act.

Short covering was also likely involved in the moves seen in the paper, the trader added.

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