HCA, Aramark, Group 1 price; new bonds busy; Chesapeake off on swap; funds gain $398 million

By Paul Deckelman and Paul A. Harris

New York, Dec. 3 – The high-yield primary market revival that started on Wednesday continued on Thursday. Syndicate sources saw $1.2 billion of new dollar-denominated, junk-rated paper having priced in three tranches, although that was down a little from the previous session’s $1.55 billion, also in three tranches.

Unlike Wednesday, when most of the junk issuance was attributable to one deal – the dollar portion of Ball Corp.’s big three-part, dual currency offering – Thursday’s issuance was more broad-based.

Hospital operator HCA Holdings Inc. did a quickly shopped $500 million add-on to its existing 2026 notes.

Food, facilities and uniforms provider Aramark Services Inc. brought an upsized, unscheduled $400 million offering of eight-year notes to market.

Auto dealership and collision services chain operator Group 1 Automotive, Inc. drove by with an upsized $300 million of eight-year paper.

Physician services provider Mednax, Inc. meantime priced an upsized, regularly scheduled split-rated eight-year forward calendar offering.

All of those new issues, as well as Ball’s Wednesday deal, were actively traded.

Away from the new deals, Chesapeake Energy Corp.’s notes were down across the board as the oil and gas operator announced a notes exchange offer that values its current paper at a substantial discount to par.

Statistical measures of junk market performance turned lower on Thursday – their first across-the-board retreat in more than a week, since Nov. 24. They had been mixed on Wednesday and higher all around on Monday and Tuesday.

However, another numerical indicator – flows of funds into or out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – turned positive in the latest reporting week with a nearly $398 million net inflow. That gain broke a losing streak of three straight weeks of outflows before that.

HCA taps 5 7/8% notes

The dollar-denominated high-yield primary market hit cruising speed on Thursday. Three issuers came with junk-rated drive-by deals, raising a combined total of $1.2 billion.

Two of the three deals were upsized.

Executions were solid. Two deals came at the tight ends of yield talk. The other priced in line with price talk.

HCA Holdings subsidiary HCA Inc. priced a $500 million add-on to its 5 7/8% senior bullet notes due Feb. 15, 2026 (B1//BB) at 100.25 to yield 5.837%.

The reoffer price came in line with the 100 to 101 price talk.

The general corporate purposes deal was marketed via an internet roadshow. There was no investor call.

Barclays was the lead left bookrunner. BofA Merrill Lynch, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, RBC Capital Markets, SunTrust Robinson Humphrey Inc., UBS Investment Bank and Wells Fargo Securities LLC were the joint bookrunners.

Aramark, upsized and tight

Aramark priced an upsized $400 million issue of eight-year senior notes (B2/BB-) at par to yield 5 1/8%.

The deal size was increased from $300 million.

The yield printed at the tight end of yield talk in the 5¼% area and inside of the initial 5¼% to 5½% initial guidance, sources said.

JPMorgan and Goldman Sachs were the joint bookrunners.

The Philadelphia-based customer service business across the food, facilities and uniforms sectors plans to use the proceeds for general corporate purposes. Pending other uses of the proceeds, Aramark may use them to temporarily pay down its revolver.

Group 1, upsized and tight

Group 1 Automotive priced an upsized $300 million issue of eight-year senior notes (Ba2/BB) at par to yield 5¼%.

The issue size was increased from $250 million.

The yield printed at the tight end of the 5¼% to 5½% yield talk.

Wells Fargo was the left bookrunner. JPMorgan and BofA Merrill Lynch were the joint bookrunners.

The Houston-based auto dealership and collision services center chain plans to use the proceeds to repay amounts outstanding under the acquisition line of its revolver, to make a contribution to its floorplan offset account and for general corporate purposes.

Mednax split-rated deal upsized

First-time issuer Mednax priced an upsized $750 million issue of split-rated eight-year senior notes (Ba2/BBB-) at par to yield 5¼%.

The issue size was increased from $500 million.

The yield printed at the tight end of the 5¼% to 5½% yield talk.

The deal was “crazy oversubscribed,” a trader said, relating reports of an order book containing $4 billion to $5 billion of orders.

Mednax, as well as Thursday's other tight executions amid general market volatility in the global capital markets, shows that investors want new issues, the trader remarked.

“That's interesting because right now the secondary market is priced well below par, and there are a lot of things you can buy in the secondary with a much higher yield,” the trader said.

JPMorgan, BofA Merrill Lynch, U.S. Bancorp and Wells Fargo were the joint bookrunners for the Mednax deal.

The Fort Lauderdale, Fla.-based physician services provider plans to use the proceeds to pay down its revolving credit facility and for general corporate purposes.

Swissport €690 million

In the European market, Swissport Investment SA priced €690 million of high-yield notes in two tranches on Thursday.

The buyout deal included €400 million of six-year senior secured notes (B1/B) that priced at par to yield 6¾%. The yield printed at the tight end of the 6¾% to 7% yield talk. The final size of the secured notes tranche came at the low end of the €400 million to €450 million targeted range.

In addition the company priced €290 million of seven-year senior unsecured notes (Caa1/CCC+) at par to yield 9¾%, on top of price talk.

Joint lead bookrunner Barclays will bill and deliver. JPMorgan was also a joint lead bookrunner.

Entertainment One talks

Entertainment One Ltd. talked a £285 million offering of seven-year senior secured notes (B1/B+) to yield 7% to 7¼%.

Books close at 5 a.m. ET on Friday, and the offering is set to price thereafter.

Global coordinator JPMorgan will bill and deliver.

Barclays and BofA Merrill Lynch are the bookrunners.

In addition to Entertainment One, the market anticipates news Friday on ClubCorp Holdings, Inc.'s $400 million offering of eight-year notes via Citigroup, JPMorgan, Wells Fargo, Deutsche Bank and Goldman Sachs.

The roadshow is set to wrap up on Friday. No formal talk has circulated. Initial guidance had the deal coming in the high 7% range, sources say.

Also in the market is NGL Energy Partners LP with a $300 million offer of five-year senior notes.

Timing remains uncertain, sources said on Friday.

Formal talk on the deal from the battered energy sector has yet to be announced.

However, the whisper in the market has backed up to 11% to 11½% from initial guidance in the 9% area, a trader said on Thursday.

New bonds trade busily

In the secondary market, traders saw brisk activity in the day’s new issues.

A trader said that Aramark’s new 5 1/8% notes due January 2024 were trading around 100½ bid, versus their par issue price earlier in the session.

A second trader pegged the bonds in a 100½-to-100¾ bid context, while at yet another shop, a market source quoted the bonds going home at their peak level for the day of 100¾, with over $46 million of the new issue having traded.

HCA’s add-on to its 5 7/8% notes due February 2026 moved up to 100 7/8 bid, 101 3/8 offered, versus the 100¼ level at which the Nashville-based hospital operator’s deal had priced.

A second trader saw the notes get as good as 101¼ bid, well up from the issue price, with more than $34 million of the notes having changed hands.

However, he pointed out that while the levels were up from their issue price, “they were well off” from the levels above 102 at which the existing bonds had been trading before the company announced plans for the additional bond deal.

A trader said that Group 1 Automotive’s 5¼% notes due 2023 traded at bid levels between 98 7/8 and 100½, versus their par issue price.

The new split-rated 5¼% notes due 2023 from Mednax was the busiest credit of the day, with over $94 million seen having traded, although much of that activity was probably driven more by high-grade accounts looking for a little extra yield than by purely high-yield accounts, a market source suggested.

Two different traders saw the notes at 101 bid, versus the bonds’ par issue price.

Ball stays busy

Wednesday’s big deal from Ball continued to trade actively on the day Thursday, one of the market sources said, seeing its 4 3/8% notes due 2020 at about 101 1/16 bid, down 1/16 to 1/8 point from the levels to which the issue had jumped in initial aftermarket dealings after the $1 billion issue had priced at par.

“Ball has been trading a fair amount,” a trader said, seeing the Broomfield, Colo.-based food and beverage packaging manufacturer’s deal around 101¼ bid, about where the notes had traded after pricing as a drive-by transaction on Wednesday.

Another trader quoted the bonds as unchanged at 101 bid, 101¼ offered.

More than $48 million of the notes changed hands, although that was down from the over $72 million that had changed hands in initial dealings after the issue priced.

Synovus shows strength

A market source quoted Synovus Financial Corp.’s 5¾% fixed-to-floating-rate subordinated notes due 2025 as having moved up to 101½ bid from their par issue price.

The Columbus, Ga.-based financial services company priced $250 million of the notes at par on Wednesday after the regularly scheduled issue was upsized from $150 million originally.

Chesapeake chopped up

Away from the new deals, Chesapeake Energy’s notes fell across the board after the company announced a private debt exchange offer for 10 series of notes that one of the traders called “kind of a cram-down” for the holders of the existing paper.

The Oklahoma City-based oil and gas company said late Wednesday that it would issue up to $1.5 billion of new 8% senior secured second-lien notes due 2022 for notes due 2017 through 2023.

The exchange will be done on a priority basis, with the nearer-term maturities receiving highest priority and therefore the highest compensation per each $1,000 of notes.

On the news, Chesapeake’s debt dropped.

One trader said the name was “pretty active” during the session. The 6½% notes due 2017 – for which holders will receive $970 of the new notes if tendered by the early deadline – “initially traded up,” the trader said, hitting a high of 80. But then the paper “came in hard,” ending at 73.

The 7¼% notes due 2018 were also higher at first, the trader noted, moving up to 65 before settling in around 63.

Holders of the 2018 bonds will receive $825 of new debt for each $1,000 of notes tendered.

At another desk, the 6 5/8% notes due 2020 were seen falling nearly 6 points to 44½ bid. A second source placed that issue in a 42 7/8 to 43 1/8 context, down from levels around 48½ previously.

Holders of the 6 5/8% notes will get $610 of new notes for each $1,000 of notes tendered.

The early deadline is 5 p.m. ET on Dec. 15. The overall offer expires at 11:59 p.m. ET on Dec. 30, with settlement expected Dec. 31.

Indicators turn lower

A trader said that “we didn’t start to see any real weakness, generically speaking, until the afternoon.”

He said that equities “were kind of leaking lower,” but high yield had hung in there for most of the session, only weakening in the later afternoon towards the end of the day.

Statistical measures of junk market performance turned lower on Thursday – their first across-the-board retreat in more than a week, since Nov. 24. They had been mixed on Wednesday and higher all around on Monday and Tuesday.

The KDP High Yield Daily index plunged by 26 basis points on Thursday to end at 65.67, its first loss after three straight gains and second loss in the last five sessions. On Wednesday, the index had risen by 8 bps.

Its yield rose by 7 bps to finish at 6.92%, its first widening out after two straight narrowings and two straight unchanged sessions. The yield had come in by 3 bps on Wednesday.

The Markit Series 25 CDX North American High Yield index suffered its second consecutive loss on Thursday, falling by 3/8 point, on top of Wednesday’s downturn of 5/32 point, which had snapped a four-session winning streak. It ended at 102¼ bid, 102 5/16 offered, its third loss in the last seven sessions.

The Merrill Lynch North American Master II High Yield index swooned by 0.363%, its first retreat after three successive sessions on the upside, including Wednesday’s 0.312% gain. It was the second loss in the last five sessions.

The index’s year-to-date loss widened to 2.117% on Thursday from 1.76% on Wednesday.

However, those year-to-date losses were still well above the index’s worst 2015 cumulative setback of 3.069%, recorded on Oct. 2.

Funds gain $398 million

While those indicators were universally lower on Thursday, high-yield mutual funds and ETFs, moved over to the positive side with a net inflow of $397.6 million for the week ended Wednesday, according to market sources.

That snapped a three-week skid during which outflows from the funds had been seen, including the $501.15 million net cash loss that had been reported for the week ended Nov. 25. (See related article elsewhere in this issue.)

Stephanie N. Rotondo contributed to this review

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