Bausch prices, outstanding issues active; USA Compression soars; Windstream’s losses mount

By Abigail W. Adams

Portland, Me., Feb. 22 – While no new deals joined the forward calendar on Friday, the high-yield primary market’s drive-thru window opened once again with one deal pricing.

Bausch Health priced an upsized $1.5 billion deal that included a $500 million issue of new 8.5-year senior secured notes (Ba2/BB-) and an upsized $1 billion add-on to its 8½% senior notes due Jan. 31, 2027 (B3/B-).

Meanwhile, the secondary space remained strong on Friday with new paper in focus.

While Bausch Health prepared a new offering, its outstanding issues were active in the secondary space although with little movement in price.

USA Compression Partners, LP’s 6 7/8% senior notes due 2027 soared in the secondary space with the notes trading more than 2 points above their issue price.

While the overall market was strong, losses continued to mount for Windstream Corp.’s junk bonds with bankruptcy speculation surrounding the company growing.

Pyxus International Inc.’s 9 7/8% senior notes due 2021 continued their upward trajectory in active trading on Friday.

Oversubscribed Bausch upsizes

Bausch Health priced an upsized $1.5 billion amount of high-yield notes in a quick-to-market Friday trade.

Bausch Health Cos., Inc. priced a $500 million issue of new 8.5-year senior secured notes (Ba2/BB-) at par to yield 5¾%. The yield came at the tight end of yield talk in the 5 7/8% area.

Bausch Health Americas Inc., formerly known as Valeant Pharmaceuticals International, priced an upsized $1 billion add-on to its 8½% senior notes due Jan. 31, 2027 (B3/B-) at 103.25 to yield 7.748%.

The add-on was upsized from $750 million. The reoffer price came at the rich end of the 103 to 103.25 price talk.

The overall deal size increased to $1.5 billion from $1.25 billion.

The offer was well oversubscribed and both tranches were trading at modest premiums in the secondary market, despite pricing at tightened talk, an investor said.

J.P. Morgan Securities LLC, Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., DNB Markets, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and RBC Capital Markets LLC were the joint bookrunners for the big debt refinancing deal.

Bausch Health active

While Bausch Health prepared a new offering, its outstanding issues were active in the secondary space although with little movement in price.

Bausch Health’s 5 5/8% senior notes due 2021 were active but flat on Friday. They were seen changing hands around par 7/8 with about $20 million of the bonds on the tape.

Bausch’s 7% senior notes due 2024 were up slightly in active trading. The notes rose ¼ point to 105¾, according to a market source.

More than $15 million of the bonds were on the tape by the late afternoon.

Proceeds from Bausch’s $1.5 billion deal will be used to repurchase the 5 5/8% notes, in addition to its 5½% senior notes due 2023 and its 5 7/8% senior notes due 2023.

USA Compression soars

USA Compression’s newly priced 6 7/8% senior notes due 2027 soared in secondary trading with the notes trading more than 2 points above their issue price.

The 6 7/8% notes were quoted at 101¾ bid, 102¼ offered early in the session and were trading around 102 in the late afternoon., according to a market source.

More than $45 million of the bonds changed hands during Friday’s session.

USA Compression priced an upsized $750 million issue of the 6 7/8% notes at par in a Thursday drive-by.

The issue size was increased from $500 million.

The yield printed at the tight end of yield talk in the 7% area.

Windstream’s losses mount

Losses for Windstream’s junk bonds continued to mount on Friday with speculation growing the telecommunications company may file for bankruptcy.

Windstream’s 8 5/8% senior notes due 2025 dropped another point to 86¼ on Friday with more than $27 million of the bonds changing hands, according to a market source.

Prior to the past week, the notes were trading around 94½.

Windstream’s 9% senior notes due 2025 dropped ¼ point to 49¾ with about $20 million on the tape by the late afternoon.

The notes were trading in the 75 range prior to the past week.

Windstream’s 6 3/8% senior notes due 2023 dropped 5¾ points to 18¾ with about $7 million of the bonds changing hands.

While Windstream’s junk bonds continued to trade down, Uniti Group Inc.’s junk bonds leveled off, a market source said.

While the notes remained active, Uniti’s 8¼% senior notes due 2023 were largely flat at 76 1/8 on Friday.

With more than $39 million of the bonds on the tape by the late afternoon, the notes remained major volume movers in the secondary space.

The notes dropped 3¾ points during Thursday’s session.

Windstream and Uniti have been on a downward trajectory throughout the week with bankruptcy speculation surrounding the companies growing following a court ruling last Friday.

A federal court judge ruled in favor of Aurelius Capital Management, the challenger of Windstream’s spinoff of Uniti.

Aurelius claimed Windstream’s spinoff of its wire and fiber-optic cable business into real estate investment trust Uniti and the subsequent lease-back to Windstream of those assets violated the covenants of Windstream’s 6 3/8% senior notes due 2023 of which Aurelius was a majority owner.

Due to the court ruling, Moody’s Investors Service and S&P Global Ratings lowered their credit ratings of Windstream over the past week.

Moody’s, S&P and Fitch Ratings downgraded Uniti.

Moody’s and S&P highlighted Windstream’s heightened risk of bankruptcy due to the court ruling in their downgrade.

With Windstream the largest source of revenue for Uniti, the court ruling could have significant negative impact on Uniti, the ratings agencies said.

Pyxus trades up

Pyxus International’s 9 7/8% senior notes due 2021 were on the rise in active trading on Friday.

The 9 7/8% notes gained 1¼ points to 90 3/8, according to a market source.

More than $13 million of the bonds were on the tape by the late afternoon.

The notes have been on an upward trajectory since the tobacco company, formerly Alliance One International, reported third-quarter earnings in mid-February and updates on its cannabis ventures.

Thursday inflows

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

High-yield ETFs saw $251 million of inflows on the day.

Actively managed high-yield funds were essentially flat on the day with $5 million of inflows.

News of the Thursday daily flows follows word that the combined funds saw $284 million of inflows in the week to Wednesday's close, according to a closely watched weekly report from Lipper US Fund Flows.

Indexes gain

Indexes posted minor gains on Friday although they were mixed on the week.

The KDP High Yield Daily index rose 5 basis points on Friday with the yield now 6.08%.

The index dropped 3 bps on Thursday after rising 13 bps on Wednesday and 3 bps on Tuesday.

The index saw cumulative gains of 18 bps on the week.

The ICE BofAML US High Yield index gained 9.5 bps with the year-to-date return now 5.894%.

The index shaved off 1.7 bps on Thursday after gaining 15.3 bps on Wednesday and 10.5 bps on Tuesday.

The index saw a cumulative gain of 33.6 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 rose 6 bps to close Friday at 106.28.

The index dropped 13 bps on Thursday, 1 bp on Wednesday and 7 bps on Tuesday.

The index saw a cumulative drop of 15 bps on the week.

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