SBA, Acadia, All Aboard Florida price; Cenveo plans deal; existing bonds up; Forest Oil rebounds

By Paul Deckelman and Paul A. Harris

New York, June 17 – The high-yield primary arena picked up its pace on Tuesday, with syndicate sources reporting that three new deals totaling some $1.45 billion had gotten done during the session.

That was in contrast to Monday, when there had been no pricings of any dollar-denominated, fully junk-rated new paper.

The day’s biggest deal was a quick-to-market $750 million issue of eight-year notes from SBA Communications Corp. The Boca Raton, Fla.-based communications antenna tower operator’s deal priced after it had been upsized.

Coral Gables, Fla.-based passenger railroad operator All Aboard Florida made a regularly scheduled stop in Junkbondland to take aboard $405 million of five-year-secured PIK notes via a pair of financing subsidiaries; that was also an upsized issue and traded around its pricing level.

Acadia Healthcare Co. Inc., a Franklin, Tenn.-based provider of inpatient behavioral health-care services, did a quickly shopped $300 million of eight-year notes, later seen trading a little above their par issue price.

The syndicate sources also saw Stamford, Conn.-based printing and communications services provider Cenveo, Inc. begin shopping a $790 million two-part offering around to prospective investors, with pricing expected later in the week. That news caused a solid gain on brisk volume in the company’s existing bonds, particularly one that is expected to be taken out using some of the bond deal proceeds.

Away from the new deals, Forest Oil Corp.’s bonds and shares – both of which got mauled on Monday – were seen having regained most of their lost ground on Tuesday.

That paper had fallen on Monday’s news reports that the Denver-based energy company had shelved a prospective bridge loan that would have funded the repayment of its current debt as part of Forest’s acquisition by Sabine Oil & Gas LLC – but rebounded on Tuesday when Sabine said that all of the necessary funding for the transaction was in place.

Overall, statistical indicators of junk market performance were mixed on Tuesday for a fifth consecutive session.

SBA upsizes

Trailing an ultra-quiet Monday, Tuesday's session in the high-yield primary market saw three issuers price single-tranche deals to raise a combined total of $1.45 billion.

Two of the three came as drive-bys.

Two of the three were upsized.

One priced at the tight end of talk, while the other two priced on top of talk.

SBA Communications priced an upsized $750 million issue of 4 7/8% eight-year senior notes (B3/B) at 99.178 to yield 5%.

The debt refinancing and general corporate purposes deal was upsized from $600 million.

The yield printed on top of yield talk.

J.P. Morgan, Wells Fargo, Deutsche Bank, RBS and TD Securities were the joint bookrunners.

All Aboard Florida’s PIK notes

All Aboard Florida priced an upsized $405 million issue of five-year senior secured PIK toggle notes at par on Tuesday, with a 12% cash yield, which came on top of yield talk.

The notes pay a 12% cash coupon that steps up by 75 basis points to 12¾% for PIK payments.

During the time the deal was in the market, buyside sources said there was some reluctance to become involved in the project financing. Hence the final terms came with some investor-friendly structural modifications (see related story in this issue).

JPMorgan and Morgan Stanley were the joint bookrunners.

Acadia at the tight end

Acadia Healthcare priced a $300 million issue of eight-year senior notes (B3/B) at par to yield 5 1/8% in a quick-to-market Tuesday transaction.

The yield printed at the tight end of yield talk in the 5¼% area.

BofA Merrill Lynch, Jefferies and Fifth Third were joint bookrunners for the acquisition financing.

Talking the deals

Looking ahead to the mid-week session, West Corp. talked its $1 billion offering of eight-year senior notes (B3/B+) to yield 5¼% to 5½% on Tuesday.

The deal is set to price Wednesday morning.

Deutsche Bank is the left bookrunner for the debt refinancing deal that is coming on a short timeline; the deal was rolled out during a Tuesday morning investor call.

Wells Fargo, BofA Merrill Lynch, BMO, Goldman Sachs, Morgan Stanley and Citigroup are the joint bookrunners.

Elsewhere, WaveDivision Holdings LLC, which launched its $150 million offering of five-year PIK toggle notes (Caa1/B-) last week, talked the deal to price with a yield in the 8 3/8% area.

Deutsche Bank, Wells Fargo, RBC and SunTrust are managing the sale.

Cenveo starts roadshow

Cenveo began a roadshow on Tuesday for a $790 million two-part offering of secured notes.

The deal is structured as a $540 million tranche of non-callable senior-priority notes due 2019 (expected ratings B3/B) and a $250 million tranche of junior-priority notes due 2022 (expected ratings Caa2/CCC), callable after three years at par plus 75% of the coupon.

Pricing is set for Thursday.

JPMorgan, BofA Merrill Lynch, Barclays and Macquarie are the joint bookrunners for the debt refinancing deal.

Acadia up from issue

In the secondary market, a source saw Acadia Healthcare’s new 5 1/8% notes due 2022 quoted in a 100½ to 101 bid context, but he said that the new issue “was not really trading around” after its par pricing.

All Aboard seen near issue

He also did not see any initial trading in the All Aboard Florida 12%/12¾% senior secured PIK toggle notes due 2019 after their par pricing.

However, another trader did see those bonds at around par bid, 101 offered.

The first trader predicted “I would image that they’ll be received pretty well,” noting both the generous coupon and the company’s pedigree as a long-time freight rail operator in Florida.

“I think they do a pretty good business,” he declared.

All Aboard Florida – which priced its deal via financing subsidiaries AAR Holdings LLC and AAF Finance Co. – is itself a unit of Florida East Coast Industries, which currently operates the Florida East Coast Railway, a Jacksonville-based freight line whose tracks run the length of the Sunshine State. All Aboard’s planned higher-speed passenger service linking Miami with Orlando will largely run on its sister company’s existing trackage and other facilities. Both railways are ultimately owned by Florida East Coast’s parent, Fortress Investment Group LLC.

At another desk, a trader opined that with its big coupon, the new Florida rail bonds “will either do well – or be trading at 50 in three months” – on the theory that the need to offer such an outsized coupon to get a deal done in the current relatively low-interest-rate environment is itself something of a red flag warning of potential trouble down the road.

For instance, he cited the case of Logan’s Roadhouse Inc.’s 10¾% notes due 2017. The money-losing Nashville-based restaurant company’s bonds had priced at par back in September of 2010, but had slid to lows around 66 bid earlier this year and, although having bounced off those lows, were most recently still trading at a huge discount to par around the 81 bid level.

That having been said, though, he noted that while conservative investors might run the other way, there were still some more adventurous investors with an appetite for risk willing to take a gamble on such speculative credits in hopes of reaping big rewards further down the road.

“With the right incentive, even ugly people can still go to the prom,” he quipped.

DaVita still busy

Among recently priced offerings, a market source saw DaVita HealthCare Partners Inc.’s 5 1/8% notes due 2024 up ½ point at 101 bid. Volume of over $24 million put the issue right near the top of the Most Actives list.

The Denver-based provider of kidney dialysis services had priced its $1.75 billion issue of the notes at par in a quick-to-market transaction a week ago.

While they traded in a 100½ to 101 bid context, volume the first several days after pricing was very heavy, with over $74 million having changed hands last Tuesday and over $113 million having traded last Wednesday.

Existing Cenveo bonds jump

The news that Cenveo will be bringing a big new bond deal and using some of the proceeds to repay its existing 8 7/8% second-lien notes due 2018 pushed those bonds up in active trading on Tuesday.

A trader saw the notes having firmed to 104 7/8 bid, a gain of 1½ points, on volume of over $12 million, second only to the DaVita bonds.

He also saw the company’s 11½% notes due 2017 also up 1½ points at 105¼, with over $9 million having traded.

“They’re trading up against their call prices,” he suggested, since certainly the 2018 bonds are expected to be called once the new deal is done.

Forest firms off lows

Away from new-issue-related action, Forest Oil’s bonds, and its shares, were seen rebounding sharply on Tuesday from the lows to which they had slid on Monday on reports that funding connected with the planned acquisition of the Denver-based oil and gas exploration and production company had run into trouble.

“They bounced back up to almost where they were before,” one trader said, seeing the company’s 7¼% notes due 2019 having firmed as much as 3½ points on the day from Monday’s intraday low to go home at 99¼ bid, 99½ offered. He noted that the bonds had traded around 99 7/8 to par before the funding concerns were raised, “so they’ve almost recovered everything.”

He saw its 7½% notes due 2020 up 2 points on the day to end at 99½ bid, 99 5/8 offered, after having traded just a little below 101 before Monday’s steep slide.

A second trader said that both of those bond issues had been seen at levels as low as 93½ to 97½ on Monday after “an erroneous report” that the funding for the acquisition of Forest by Houston-based Sabine Oil & Gas LLC had been shelved.

As it turned out, what had been postponed was syndication on a bridge loan whose proceeds would be used to repay Forest’s existing debt – but Sabine on Tuesday said that all financing for the deal was in place, “so nothing’s changed,” the trader said, “and the bonds have come right back.”

“For all intents and purposes, they’re back trading around par,” where they had been before Monday’s downside flurry, he said.

Monday’s fears that any funding delay could throw the whole Sabine deal off track had also pushed Forest Oil’s New York Stock Exchange-traded shares down nearly 18% on Monday on four times their usual volume; after Sabine’s clarification Tuesday, the Forest shares rebounded by 29 cents, or 14.43%, to close at $2.30. Volume of 9.3 million shares was about twice the norm.

Market indicators stay mixed

Statistical indicators of junk market performance meanwhile were mixed for a fifth consecutive session on Tuesday.

The KDP High Yield Daily index rose by 1 basis point to finish at 74.99 after having fallen by 5 bps on Monday.

Its yield was unchanged at an even 5% after three straight sessions in which it had come in, including Monday’s 7 bps narrowing – an unusual movement because the yield would normally rise in tandem with a fall in the index reading rather than decline.

The Markit CDX Series 22 index was down for a second straight session on Tuesday, easing by 1/16 point to end at 108 3/8 bid, 108 7/16 offered, after having fallen back by 3/32 point on Monday after an unchanged finish on Friday. Tuesday’s retreat was the index’s fifth downturn in the last six sessions.

But the widely followed Merrill Lynch High Yield Master II index showed no such signs of weakness, notching its 10th consecutive gain on Tuesday, when it was up by 0.031%, on top of Monday’s 0.074% improvement.

That lifted its year-to-date return to 5.388%, its ninth straight new peak level for 2014, eclipsing the old mark of 5.355% that had been set on Monday.

Several other index components also reached new milestones for the year on Tuesday.

The index showed an average issue price of 105.7443, its second straight new high for the year so far. That was up from the previous high of 105.7309, seen on Monday.

Its yield-to-worst declined to 4.933%, a second consecutive new low for the year and, in fact, a new all-time low. That was down from the previous 2014 and all-time low of 4.94%, recorded on Monday.

Its spread- to-worst over comparable Treasury issues tightened to a new low for the year on Tuesday at 358 bps, its second straight new nadir, narrowing from the previous tight point of 362 bps on Monday. However, although junk bond yields are currently at their all-time lows, spreads remain well above their historical tight levels around 250 bps over comparable Treasuries, first set back in 1997 and matched in 2007.

© 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.