Morning Commentary: New issue market active; health care names in spotlight; Valeant up 2 points

By Paul A. Harris

Portland, Ore., Aug. 8 – A high-yield primary market that lit up on Monday, following an extended high summer hibernation, remained active on Tuesday.

Three deals were announced, two of them drive-bys.

Restaurant Brands International Inc. plans to price $1 billion of eight-year second-lien senior secured notes in a quick-to-market Tuesday trade.

Initial talk is in the 5% area.

The deal is playing to $200 million of reverse inquiry, according to an investor.

J.P. Morgan Securities LLC is leading. Proceeds are to take out the company's 6% second-lien senior secured notes due 2022.

WPX Energy, Inc. plans to price a $150 million add-on to its 5¼% senior bullet notes due Sept. 15, 2024 (expected ratings B3/B+) in a drive-by.

The public offering is being marketed without a lender call.

Although official price talk is pending, the existing 5¼% notes due 2024 were trading at 99¼ bid, par offered on Tuesday morning, an investor said.

Wells Fargo Securities LLC is the left bookrunner for the debt refinancing deal.

Elsewhere Big River Steel LLC began a roadshow on Tuesday for a $500 million offering of eight-year senior notes (B3/B) via bookrunner Goldman Sachs & Co.

The Osceola, Ark. flat-rolled steel mini-mill plans to use the proceeds to help refinance most of its outstanding debt, as well as for general corporate purposes and working capital.

Valeant up 2 points

With earnings in the spotlight high-yield bonds were trading flat on Tuesday morning, an investor said.

Bonds of Valeant Pharmaceuticals International Inc. were up as much as 2 points, the source added.

The VRX Escrow Corp. 6 1/8% senior notes due April 15, 2025 – a $3.25 billion issue – were 86¼ bid, 86¾ offered at midmorning.

The company put up good earnings and is deleveraging, as it said it would do, the investor said, adding that Valeant is not going bankrupt.

Elsewhere in the health care space, a weak earnings report from Tenet Healthcare is causing its bonds and stocks to trade lower, the source added.

Among recent issues, the freshly minted Dynegy Inc. 8 1/8% senior notes due Jan. 30, 2026 (B3/B+) were lagging new issue price at 99 bid, 99¼ offered on Tuesday, the investor said.

The upsized $850 million issue (from $600 million) priced at 99.259 to yield 8¼% on Monday.

Mixed Monday flows

The daily cash flows for dedicated high-yield bond funds were mixed on Monday, the investor said.

High-yield ETFs sustained $98 million of outflows on the day.

However asset managers saw $30 million of inflows on Monday.

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