NGPL PipeCo prices $1.4 billion two-part drive-by deal; energy climbs on crude price surge; healthcare lower

By Paul Deckelman and Paul A. Harris

New York, July 25 – The high-yield primary market saw a sizable drive-by offering get done on Tuesday, as energy pipeline operator NGPL PipeCo LLC priced $1.4 billion of new five- and 10-year notes, equally split into $700 million tranches.

Traders said the big new deal came to market too late in the session for any kind of real aftermarket activity.

They meantime saw reduced activity levels in such recently priced credits as AMC Networks, Inc. and Jefferies Finance LLC.

Away from the new-issue realm, the traders reported better levels for such oil and natural gas names as California Resources Corp., Whiting Petroleum Corp. and Continental Resources Inc., given a boost by a big jump in world crude prices during Tuesday’s session, their second straight gain.

On the downside, healthcare names such as hospital operators Community Health Systems Inc., Tenet Healthcare Corp. and HCA Inc. were all lower, against a backdrop of a Senate vote to allow debate on the possible repeal of the existing Affordable Care Act “Obamacare” law and its replacement by legislation whose provisions are at this point unknown.

Statistical market performance measures were better across the board on Tuesday, after having been mixed for two straight sessions before that, on Friday and again on Monday.

NGPL $1.4 billion drive-by

The Tuesday session in the dollar-denominated new issue market saw NGPL PipeCo LLC drive by with $1.4 billion of senior bullet notes (Ba1/BB+) in two tranches.

Pricing ground tighter and tighter throughout the session.

The debt refinancing deal included $700 million of five-year notes, which priced at par to yield 4 3/8%. The yield printed on top of final yield talk, which had tightened from earlier talk of 4 3/8% to 4 5/8%; initial guidance was 4½% to 4¾%.

The long tranche featured $700 million of 10-year notes which priced at par to yield 4 7/8%. The yield printed on top of final talk, and came through earlier talk of 5% to 5¼%; initial guidance was 5 1/8% to 5 3/8%.

Joint active bookrunner RBC will bill and deliver. Barclays was also a joint active bookrunner. Wells Fargo was the joint bookrunner. Seaport Global was the co-manager.

Aston Woods talk 6 5/8% to 6 7/8%

Looking ahead, Ashton Woods USA LLC talked a $250 million offering of eight-year senior notes (Caa1/B-) to yield 6 5/8% to 6 7/8%.

Books close at noon ET on Wednesday, and the deal is set to price thereafter.

J.P. Morgan and Wells Fargo are the joint bookrunners.

New issue players were also watching for news to surface Tuesday on the Vivint, Inc. (APX Group, Inc.) $400 million offering of seven-year senior notes (Caa2/CCC).

However news on the deal, which some were expecting to price Tuesday, was not forthcoming, and it is facing some headwinds, market sources say.

While the market awaits official talk, initial guidance was 7 7/8% to 8 1/8%.

Downsized Diversey prices tight

In the euro-denominated primary market Charlotte, N.C.-based Diversey Care priced a downsized €450 million issue of eight-year senior notes (expected ratings Caa2/B) at par to yield 5 5/8%.

The yield printed at the tight end of yield talk in the 5¾% area. There were also covenant changes.

The bond deal was downsized from €545 million, and the concurrent bank loan was increased to €970 million from €820 million. In addition to the shift of proceeds to the loan from the bonds, the additional €55 million upsize of the bank loan will be used for cash on the balance sheet.

Joint bookrunner Goldman Sachs will bill and deliver. Credit Suisse, Barclays, Citigroup, BofA Merrill Lynch, RBC, HSBC, SunTrust and Jefferies are also joint bookrunners.

Proceeds will be used to fund the buyout of Diversey Care, the cleaning and hygiene solutions business of Sealed Air Corp., by Bain Capital.

The European market has slowed considerably from the torrid pace of early July.

With Diversey having cleared only one offer is parked on the active forward calendar as business to be completed by the end of the present week.

Spain-based Allfunds Bank is roadshowing a €575 million offering of seven-year PIK toggle notes (expected ratings Ba2/BB-) into Thursday.

Goldman Sachs is leading the buyout deal.

Light inflows on Monday

The daily cash flows of the dedicated high-yield bond funds were light but positive on Monday, according to a trader.

High-yield ETFs saw $70 million of inflows on the day.

Actively managed high yield funds saw $30 million of inflows on Monday.

Dedicated bank loan funds were flat to negative on the day, with $14 million of outflows on Monday, the trader said.

New NGPL notes not seen

In the secondary market, traders did not immediately report seeing any initial activity in the new two-part issue from NGPL PipeCo, owing to the relative lateness of the hour at which the Houston-based natural gas pipeline and storage facilities company’s quick-to-market offering had priced.

However, one market source saw the company’s existing 7.768% bonds due 2037 edge up to 120¼ bid, on volume of more than $10 million.

DAE notes firmer

Among recently priced new issues, a trader said that Friday’s new issue from DAE Funding LLC, “was still active, and trading slightly better.”

He saw its 4½% notes due 2022 at 101 3/8 bid, up about ¼ point on the day, while its 5% notes due 2024 were up around 1/8 point or so at 101½ bid.

On Monday, both of those issues had eased slightly from initial gains they had posted Friday after having been freed to trade following their pricing.

He did not see much in the way of dealings in the new 4% notes due 2020.

DAE Funding, a financing arm of the United Arab Emirates-based aircraft leasing company Dubai Aerospace Enterprise, priced all three tranches of that $2.3 billion bond behemoth at par on Friday, after the regularly scheduled forward calendar offering had been upsized from an originally announced $1.9 billion, and the thee-year note tranche added to what had originally been structured as a two-part offering.

Lessened volume in recent issues

Elsewhere among the recently priced deals, a market source saw AMC Networks’ 4¾% notes due 2025 edge up by 1/16 point to close at 101 1/8 bid, on volume of around $6 million, down from more than $10 million on Monday.

And he saw the Jefferies Finance/ JFIN CO-Issuer Corp. 7¼% notes due 2024 up nearly ¼ point on the day, at 100¼ bid, with about $7 million having changed hands, versus more than $20 million on Monday.

AMC Networks, a New York-based cable network operator and content provider, had priced its quick-to-market $800 million issue at par last Wednesday after the offering was upsized from an originally announced $500 million.

Jefferies, a New York-based commercial lender and investment banking company, priced its regularly scheduled $400 million forward calendar offering at par on Thursday.

Energy up on price surge

Away from the new issues, traders saw better levels in energy-related credits, helped by a surge in world crude oil prices, which were up for a second straight day.

September-delivery West Texas Intermediate crude, the key U.S. benchmark grade, zoomed by $1.55 per barrel on the New York Mercantile Exchange, settling at $47.89, while North Sea Brent crude jumped by a similar amount in London trading.

That gave a brighter tone to such issues as Whiting Petroleum’s 5% notes due 2019, which gained 5/8 point to end at 99 3/8 bid, on volume of over $9 million.

Continental Resources’ 4½% notes due 2023 were up by ½ point on the day at 97½ bid, with over $7 million traded.

California Resources Corp.’s bellwether 8% notes due 2022 jumped by 1½ points to 65 bid, with about $5 million of volume.

Healthcare not so healthy

On the downside, healthcare names were looking sickly on Tuesday, retreating against the backdrop of a narrow vote in the U.S. Senate allowing debate on the possible repeal of the existing “Obamacare” law and beyond that, its possible replacement by something else as yet unknown.

“That definitely had negative implications,” a trader said, seeing Community Health Systems’ 6 7/8% notes due 2022 off by 1 point, ending at 90 bid, with over $27 million having changed hands, the day’s Junkbondland volume leader.

Tenet Healthcare’s 8 1/8% notes due 2022 lost more than ½ point to close at 108 3/16 bid, on over $8 million traded, while HCA’s 5 3/8% notes due 2025 gave up 5/8 points to close at 106½ bid, on over $5 million of volume.

Indicators show improvement

Statistical market performance measures were better across the board on Tuesday, after having been mixed for two straight sessions before that, on Friday and again on Monday.

The KDP High Yield Daily Index rose by 6 basis points on Tuesday to end at 72.61, in contrast to Monday’s 4 bps loss, which had been its first setback after eight straight upside moves.

Its yield came in by 2 bps to 4.92% after having moved up by 1 bp on Monday – its first widening out after four straight sessions of tightening.

The Markit CDX Series 28 High Yield Index also rebounded, edging up by 1/16 point to 107 21/32 bid, 107 11/16 offered. On Monday, it had eased by around 1/16 point, its second consecutive setback after two straight gains before that.

The Merrill Lynch North American High Yield Index saw a second straight upside session, improving by 0.08%, on top of Monday’s 0.041% rise, which had followed Friday’s 0.023% retreat – its first downturn after nine straight advances before that.

Tuesday’s advance lifted the index’s year-to-date return to 6.009% from 5.923% on Monday.

That not only established a second consecutive new peak level for the year, but it also marked the first time this year the index has topped the psychologically significant 6% level.

It was the index’s highest finish since it closed out last year at 17.489% on Dec. 31.

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