J.C. Penney, Centene, revived Gogo lead drive-bys; recent deals busy; funds gain $748 million

By Paul Deckelman and Paul A. Harris

New York, June 9 – The high-yield primary market remained a busy place on Thursday, although the overall volume total fell sharply from Wednesday’s $6.75 billion, which had been the second-heaviest daily volume of new issues seen so far this year in Junkbondland.

Syndicate sources said that some $1.58 billion of new paper came to market in five single-tranche deals, all opportunistically timed and quickly shopped offerings.

The sources saw a trio of $500 million sales, tied for the biggest deal of the day, from retailer J.C. Penney Corp., Inc., healthcare company Centene Corp. and from Gogo, Inc. a provider of communications services to the global aviation industry. The latter deal had been shopped around the market last month and had actually priced, only to be cancelled before it could settle. Centene’s deal was an add-on to its existing notes.

Communications Sales & Leasing, Inc., a communications industry real estate investment trust, was also doing an add-on to its existing bonds.

Another communications sector issuer, West Corp., brought an offering of five-year secured notes.

Traders did not see much in the way of initial aftermarket dealings in the several new bond issues.

However, they saw heavy-volume trading in the three megadeals that came to market on Wednesday – for computer technology giant Dell, Inc., satellite television broadcaster DISH Network Corp., and liquid natural gas company Cheniere Energy Partners LP.

Statistical market performance measures turned mixed on Thursday, after having been higher for a fourth consecutive session on Wednesday. Thursday was the second mixed session in the last six trading days.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – was on the upside for a second consecutive week, with $748.153 million more coming into those weekly-reporting-only domestic funds than leaving them in the form of investor redemptions during the week ended Wednesday. That follows last week’s $145 million inflow (see related story elsewhere in this issue).

GoGo returns

Five issuers stopped at the dollar-denominated drive-through window on Thursday, each bringing a single tranche of junk, to raise an overall total of $1.58 billion.

One of the five deals was upsized.

GoGo Intermediate Holdings LLC priced an upsized $525 million issue of six-year senior secured notes (B2/B-) at par to yield 12 ½%.

The amount was increased from $500 million.

The yield printed on top of yield talk as well as initial guidance

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

The Chicago-based provider of in-flight connectivity and wireless entertainment solutions for the global aviation industry plans to use the proceeds to pay off its amended and restated senior term facility, and for working capital and other general corporate purposes, including potential costs associated with the launch and commercial rollout of next-generation technology solutions.

Thursday’s deal came 50 basis points behind the Gogo Intermediate Holdings 12% senior secured notes due June 1, 2022 which the company sold in a $525 million issue on May 23 and subsequently cancelled before settlement.

Centene prices rich

Centene priced a $500 million add-on to its 4¾% senior notes due May 15, 2022 (Ba2/BB) at 101.75 to yield 4.35%.

The reoffer price came at the rich end of price talk that had been set in the 101.5 area and inside of early guidance at 101.25.

Citigroup was the left bookrunner for the debt refinancing deal. Barclays, SunTrust and Wells Fargo were the joint bookrunners.

Penney prices tight

J.C. Penney Co., Inc. priced a $500 million issue seven-year senior secured notes (B1/B+) at par to yield 5 7/8%.

The yield printed at the tight end of both yield talk and initial guidance, which were set in the 6% area.

JP Morgan, Barclays, Wells Fargo, BofA Merrill Lynch and Goldman Sachs managed the sale.

The Plano, Texas-based apparel and home furnishings retailer plans to use the proceeds, together with funds from its amended and restated senior secured term loan facility, to pay off the $2.25 billion five-year senior secured term loan it entered into in May 2013.

West Corp. prints at 4¾%

West Corp. priced a $400 million issue of five-year senior secured notes (Ba3/BB) at par to yield 4¾%.

The yield printed on top of yield talk.

Early guidance had the deal coming with a yield in the high 4% context, a trader said.

Wells Fargo was the left bookrunner for the debt refinancing deal. Deutsche Bank Securities Inc., BofA Merrill Lynch, Citizens, BMO Securities, HSBC, JP Morgan Securities LLC, Mizuho Securities and Morgan Stanley & Co. were the joint bookrunners.

Communications Sales taps 6s

Communications Sales & Leasing priced a $150 million add-on to its 6% senior secured notes due April 15, 2023 (B1/BB-/BB+) at 99.25 to yield 6.134%.

The reoffer price came on top of price talk.

Citigroup was the left bookrunner for the quick-to-market tap. JP Morgan was the joint bookrunner.

The Little Rock, Ark.-based real estate investment trust (REIT) plans to use the proceeds to repay its revolver.

Weatherford upsizes

Weatherford International Ltd. cut short the roadshow for its new two-part offering of senior notes (expected ratings B2/BB-), and upsized the deal to $1.25 billion from $1 billion.

The deal features five-year notes talked to yield in the 7¾% area and seven-year notes talked to yield in the 8¼% area.

Tranche sizes remain to be determined.

Pricing is set for Friday, sources say. A previously announced schedule had the deal on the road until the week ahead.

Deutsche Bank and Wells Fargo Securities LLC are the joint global coordinators and bookrunners.

Direct ChassisLink talk is 9% area

Direct ChassisLink, Inc. talked its $325 million offering of seven-year senior secured second-lien notes (B3/BB-) to yield in the 9% area.

Official talk comes at the wide end of earlier guidance that was set in the high 8% to 9% range, sources say.

Books close at noon ET Friday and the deal is set to price subsequently.

Goldman Sachs is the left bookrunner. BNP Paribas is the joint bookrunner.

Tereos at a discount

In the European session France-based sugar producer Tereos priced a €400 million issue of 4 1/8% seven-year senior notes (/BB/BB) at 99.257 to yield 4¼%.

Global coordinators and physical bookrunner Natixis will bill and deliver. BNP Paribas and Rabobank were also global coordinators and physical bookrunners.

Proceeds will be used for general corporate purposes and for debt refinancing, including €170 million of bank debt at Tereos EU.

Elsewhere Outokumpu Oyj priced an upsized €250 million issue of five-year callable senior secured bonds.

The issue size was increased from €200 million.

Danske Bank A/S and Nordea Bank Finland plc are the coordinators and lead managers for the offer. OP Corporate Bank plc, Skandinaviska Enskilda Banken AB, Svenska Handelsbanken and Swedbank AB are also lead managers.

ContourGlobal talk 5 ¼% area

ContourGlobal Power Holdings SA talked its €550 million offering of senior secured notes due 2021 (/BB/BB-) to yield in the 5¼% area.

The deal is set to price on Friday.

Goldman Sachs is the sole bookrunner. BNP Paribas is the co-manager.

Add on deals improve

In the secondary market, traders were quoting the day’s two add-on deals at somewhat better levels.

One saw Centene’s 4¾% notes due 2022 having moved up to 102½ bid.

The St. Louis-based managed-care and specialty health care services provider’s new issue had priced at 101.75.

At another shop, a market source said that Communications Sales & Leasing’s 6% senior secured notes due 2023 – the first of the day’s five deals to price – had moved up to 100¼ on “decent” volume of around $17 million.

That was up from the 99.25 level at which the issue had priced.

Wednesday deals heavily traded

A trader said that “new issuance is where the focus and the activity [in the secondary market] has been,” and this was perhaps nowhere more evident than in the market’s response to Wednesday’s trio of giant-sized offerings.

“Dell and DISH were easily the most active,” he said, then correcting himself by adding Cheniere to the mix. “All three of them were the Most Actives.”

He saw Englewood, Colo.-based satellite television broadcaster DISH’s new 7¾% notes due 2026 trading in a 101 to 101¼ bid context.

At another desk, the bonds were quoted at 101 1/8 bid, which a trader said was unchanged from the initial aftermarket levels at which the notes had traded after pricing. He said that over $172 million traded on Thursday, making the credit easily the busiest junk bond name on the day

The company’s DISH DBS Corp. subsidiary had priced a quickly shopped $2 billion of the bonds at par on Wednesday, after the transaction was massively upsized from an originally announced $750 million.

There were active dealings in the two tranches of Dell’s new bonds.

Its 5 7/8% notes due 2021 were seen by a trader at 100¾ bid, which he called down ½ point from Wednesday’s initial levels. Over $121 million changed hands.

The new Dell 7 1/8% notes due 2024 were even busier, with over $139 million having traded. Unlike the first tranche, those bonds were seen having gained ½ point, closing at 102 1/8 bid.

The Round Rock, Texas-based computer and peripherals manufacturer had priced $3.25 billion of the new paper – split into identically sized $1.625 billion tranches – at par on Wednesday as a regularly scheduled forward calendar offering.

The Cheniere Energy Partners 5 7/8% senior secured notes due 2026 were seen by one trader at 100½ bid.

Another pegged the notes at 100 3/8 bid, calling them down 3/8 point on the day, on volume of over $92 million.

The Cameron Parish, La.-based developer and operator of natural gas liquefaction facilities had priced $1.5 billion of those notes at par on Wednesday in a quick-to-market transaction via its Sabine Pass Liquefaction, LLC subsidiary, after the deal was upsized from an originally announced $1 billion.

Indicators turn mixed

Statistical market performance measures turned mixed on Thursday, after having been higher for a fourth consecutive session on Wednesday. Thursday was the second mixed session in the last six trading days.

The KDP High Yield Daily Index gained 7 basis points on Thursday to finish at 68.19, its fourth straight rise and its eighth such advance in the last 12 sessions. On Wednesday, it had jumped by 24 bps to close at 68.12 – the first time the index has closed above 68.00 so far this year.

Those gains followed similar improvements of 26 bps on Tuesday and 16 bps on Monday.

Its yield, accordingly, came in by 3 bps to 5.94%, its sixth narrowing in the last seven sessions. The yield had also eased by 5 bps on Wednesday, by 8 bps on Tuesday and by 5 bps on Monday.

However, the Markit Series 26 CDX North American High Yield Index moved lower on Thursday for the first time after four consecutive higher finishes before that.

It was off by almost 13/32 point Thursday, closing at 103 3/16 bid, 103¼ offered, after having firmed by almost 5/32 point on Wednesday, by nearly 7/32 point on Tuesday and by about 9/32 point on Monday. Those recent gains, in turn, had followed six straight losses.

The Merrill Lynch North American High Yield Master II Index eased by 0.01% on Thursday, its first such loss after five consecutive days on the upside, including Wednesday, when it had firmed by 0.401%. The five gains had followed one loss, which, in turn had followed eight straight upside sessions before that. On Tuesday, it had gained 0.367%, on top of Monday’s 0.377% improvement. Thursday’s slight loss dropped the index’s year-to-date return to 9.422%, down from Wednesday’s 9.433%, which had been a fourth straight new peak level for the year so far.

Wednesday had marked the first time this year that the year-to-date return had closed above 9.00%.

And it was also the index’s highest year-to-date closing level since Dec. 31, 2012, when it had finished out that year with a 15.583% return.

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