XPO prices new offering, outstanding bonds decline; Mednax prices add-on; Windstream tanks

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 19 – The domestic and European high-yield primary market was active on Tuesday with the drive-thru window open for business.

XPO Logistics, Inc. priced a $1 billion issue of 5.5-year senior notes (Ba3/BB) at par to yield 6¾% in a quick-to-market trade.

In a cross-over deal, Mednax, Inc. priced an upsized $500 million add-on to its 6¼% senior notes due Jan.15, 2027 (Ba2/BBB-) at 99.75 to yield 6.289%.

In the European market, ThyssenKrupp AG launched a €1.25 billion amount of 2 7/8% unsecured notes due Feb. 22, 2024 (BB/Ba2/BB+) at mid-swaps plus 280 basis points.

Meanwhile, the secondary space was largely flat on Tuesday.

Avolon Holdings Ltd.’s recently priced 5¼% senior notes due 2024 (Ba2/BB+/BB+) continued to gain strength although volume was light.

While XPO’s new offering was in the works, its outstanding 6 1/8% senior notes due 2023 continued their downward momentum.

Windstream Corp.’s junk bonds tanked on Tuesday following Friday’s verdict in favor of a hedge fund that challenged the telecommunications company spin-off of Uniti Group Inc.

XPO Logistics drives through

XPO Logistics priced a $1 billion issue of 5.5-year senior notes (Ba3/BB) at par to yield 6¾% in a quick-to-market trade on Tuesday.

The yield printed 12.5 basis points beyond the wide end of the 6½% to 6 5/8% yield talk.

Citigroup was the left bookrunner.

The Greenwich, Conn.-based provider of supply chain solutions plans to use the proceeds to pay off its $500 million unsecured credit agreement and for general corporate purposes including the purchase of common stock as part of its new share repurchase program.

Mednax crossover upsizes

Mednax priced an upsized $500 million add-on to its 6¼% senior notes due Jan.15, 2027 (Ba2/BBB-) at 99.75 to yield 6.289% in a quick-to-market Tuesday crossover trade.

The issue size increased from $200 million.

The issue price came in the middle of price talk in the 99.75 area (99.75 plus or minus 0.25 bps).

The deal was expected to play to a mix of high-quality junk accounts, crossover investors and investment grade accounts, a trader said.

JP Morgan, BofA Merrill Lynch, Fifth Third, Mizuho, MUFG, SunTrust and Wells Fargo were the joint bookrunners.

The Fort Lauderdale, Fla.-based provider of physician services plans to use the proceeds to repay debt under its revolver.

ThyssenKrupp launches €1.25 billion

There was also action in the euro-denominated primary market on Tuesday.

Essen, Germany-based diversified industrial group ThyssenKrupp AG launched €1.25 billion of 2 7/8% unsecured notes due Feb. 22, 2024 (BB/Ba2/BB+) at mid-swaps plus 280 basis points.

The deal was set to clear at a reoffer price of 99.748% and to yield 2.93%.

Earlier indications contemplated a €1.5 billion issue size, as well as a 280 bps spread, a source said.

The deal was playing to $3 billion of orders, the source added.

Joint lead manager Deutsche Bank will bill and deliver. Banca IMI, BayernLB, BNP Paribas, Citigroup and UniCredit are also joint lead managers.

Proceeds will be used for general corporate purposes including refinancing debt maturities.

Avolon gains continue

While volume was light on Tuesday, Avolon Holdings recently priced 5¼% senior notes due 2024 continued to post gains in the secondary space.

The notes were quoted at 101 bid, 101½ offered, according to a market source. They traded up ¼ point to close Tuesday at 101 3/8.

The notes have traded up since hitting the secondary space and closed Friday at 101 1/8, sources said.

Avolon priced an $800 million issue of the 5¼% notes due 2024 at par on Feb. 14.

The deal also included a $300 million add-on to Park Aerospace Holdings’ 5¼% senior notes due 2022, which priced at 101.375 to yield 4.814%.

The add-on was also trading at a premium to its reoffer price although it was largely unchanged during Tuesday’s session at 102¼.

XPO decline continues

While XPO prepared its new offering, the transportation company’s outstanding 6 1/8% senior notes due 2023 continued their decline.

The 6 1/8% notes dropped another 3/8 point to close Tuesday at 99¾, according to a market source.

The notes dropped 1½ points on Friday following the company’s fourth-quarter earnings report.

XPO missed on both the top and bottom lines in the fourth quarter.

The decrease in revenue was attributed to a reduction in business from one of the company’s largest customers, which is believed to be Amazon.

Windstream tanks

Windstream’s junk bonds tanked on Tuesday as news spread about a court ruling on Friday in favor of hedge fund Aurelius Capital Management.

Windstream’s 10½% senior notes due 2024 shaved off more than 18 points to close Tuesday at 64½.

The telecommunications company 9% senior notes due 2025 dropped 10 points to close Tuesday at 59.

While volume was light, the 7¾% senior notes due 2021 dropped 20 points to close Tuesday at 42½.

The 6 3/8% senior notes due 2023 dropped more than 11 points to 37¼.

Windstream’s junk bonds tanked following a federal court ruling in favor of Aurelius Capital Management.

Aurelius claimed Windstream’s spin-off of Uniti violated the covenants of Windstream’s 6 3/8% senior notes due 2023, of which Aurelius was a majority owner.

Aurelius claimed Windstream’s spin-off of its wire and fiber optic cables into real estate investment trust Uniti and subsequent lease-back to Windstream of those assets violated the covenants of the 6 3/8% notes.

On Friday, a federal district court judge agreed and awarded Aurelius $310.5 million plus interest, Bloomberg reported.

While Windstream has appealed the decision, there is concern the judgement could push the telecom into bankruptcy, a market source said.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $196 million of outflows on the day.

However, actively managed high-yield funds saw $135 million of inflows on Friday.

In the year to Friday's close, the combined junk funds had seen $9.2 billion of net inflows, the source added.

Indexes mixed

Indexes started the week mixed after all saw a cumulative gain in the previous week.

The KDP High Yield Daily index rose 3 basis points to close Tuesday at 69.75 with the yield 6.14%.

The index saw a cumulative gain of 24 bps on the week last week.

The ICE BofAML US High Yield index gained 10.5 bps with the year-to-date return now 5.629%.

The index saw a cumulative gain of 64 bps on the week.

The index shot past 5% returns on Feb. 12 after sinking below the 5% threshold Feb. 7.

The index initially crossed the 5% threshold on Feb. 5 after surpassing 4% year-to-date returns on Jan.30.

The CDX High Yield 30 index dropped 7 bps to close Tuesday at 106.36.

The index saw a cumulative gain of 78 bps on the week last week.

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