Valeant, Hearthside, SRS, others price; GFL, WeWork struggle again; funds lose $542 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 17 –The domestic primary market leapt into action on Thursday with five issuers raising a total of $1.78 billion in single-tranche dollar-denominated deals – and another four deals totaling $2.04 billion are on deck for Friday.

Three of the five deals on Thursday came as drive-bys, two were downsized while one was upsized. Three of the offerings priced at the wide end of talk while only one priced tight.

Executions were tepid with lower quality issuers pricing well wide of price whispers that circulated when they launched their respective deals.

Valeant Pharmaceuticals International, Inc. priced a $750 million issue of 8.6-year senior notes (Caa1/B-/B-) at par to yield 8½% in a drive-by.

Hearthside Food Solutions LLC priced a downsized $350 million issue of 8½% eight-year senior notes (Caa2/CCC+) at par to yield 8.499%.

SRS Distribution, Inc. priced a downsized $350 million issue of 8¼% eight-year senior notes (Caa2/CCC+) at par to yield 8.246%.

Largo Resources Ltd. priced a $150 million issue of 9¼% three-year senior secured notes at 98 to yield 10.031%.

CrownRock, LP and CrownRock Finance, Inc. priced an upsized $185 million tack-on to their 5 5/8% senior notes due Oct. 15, 2025 (B3/BB-).

In the largest deal of the week, EP Energy Corp. plans to price $1 billion of eight-year 1.125 lien senior secured notes (expected ratings B1/B) on Friday afternoon, joining three other issuers that also expect to price on Friday.

With new deals in the works, Valeant’s and EP Energy’s outstanding junk bonds were actively traded in the secondary space. While the junk bonds of both names saw heavy trading volume during Thursday’s session, there was little movement in price.

Among older issuers, California Resources Corp.’s 8% senior notes due 2022 climbed 1 point on Thursday. While oil prices remained steady on Thursday, they held above $71 a barrel, which has been a boost for the energy sector, a market source said.

GFL Environmental Inc.’s recently priced 7% senior notes due 2026 (Caa1/B-) continued to lose ground on Thursday with the notes quoted down another point after losing 1 point on Wednesday.

While WeWork Cos. Inc.’s newly priced 7 7/8% senior notes due 2025 (Caa1/B+/BB-) saw a slight rebound on Thursday, it was only after sinking to a new low on Wednesday. The notes continue to trade about 6 points below their issue price.

GFL’s and WeWork’s junk bonds have struggled since hitting the secondary market with both trading below their issue price.

Elsewhere high-yield mutual funds and exchange-traded funds saw outflows for a second consecutive week, seeing $0.542 million exit in the week to May 9, according to fund-flow statistics generated by AMG Data Services Inc.

Valeant prices tight

Valeant Pharmaceuticals priced a $750 million issue of 8.6-year senior notes (Caa1/B-/B-) at par to yield 8½% in a drive-by.

The yield printed at the tight end of yield talk in the 8 5/8% area, and inside initial price talk in the ¾% area.

Goldman Sachs was the left bookrunner for the debt refinancing deal.

Hearthside Food downsizes

Hearthside Food Solutions priced a downsized $350 million issue of 8½% eight-year senior notes (Caa2/CCC+) at par to yield 8.499%.

The issue was decreased from $375 million with proceeds shifted to a term loan, which increased to $1,295,000,000 from $1.27 billion.

The yield came at the wide end of the 8¼% to 8½% talk. There were also covenant changes.

Joint bookrunner Barclays will bill and deliver for the acquisition financing.

SRS Distribution downsized

SRS Distribution priced a downsized $350 million issue of 8¼% eight-year senior notes (Caa2/CCC+) at par to yield 8.246%.

The deal was cut from $380 million, with $30 million shifted to a term loan, increasing the loan size to $1.33 billion from $1.3 billion.

The yield printed near the wide end of the 8% to 8¼% yield talk and well wide of the 7¾% to 8% initial guidance, according to a trader.

There were covenant changes.

Barclays was the lead left bookrunner for the buyout deal.

CrownRock upsizes tack-on

CrownRock was the sole Thursday issuer to upsize its offering.

The company priced a $185 million tack-on to its 5 5/8% senior notes due Oct. 15, 2025 (B3/BB-) at 98.26 to yield 5.918%. The sale was increased from $150 million.

The reoffer price came at the cheap end of the 98.26 to 98.5 price talk.

Credit Suisse was the lead left bookrunner for the general corporate purposes deal.

While trading activity surrounding the add-on was muted, the notes were seen up ¼ point to trade at 98.5 in the secondary market, a source said.

Largo drives by

Largo Resources priced a $150 million issue of 9¼% three-year senior secured notes at 98 to yield 10.031%.

Jefferies was the bookrunner for the quick-to-market refinancing deal, which came without any formal price talk.

Kraton prices €290 million

In the euro-denominated primary market, Kraton Corp. priced a €290 million issue of eight-year senior notes (B3/B) at par to yield 5¼%.

Guidance on the deal had been in the mid-5% area.

J.P. Morgan was the lead.

The Houston-based producer of engineered polymers and styrenic block copolymers plans to use the proceeds, plus an additional $90 million in incremental dollar-denominated term loans under its existing senior secured term loan, to tender for and/or redeem its dollar-denominated 10½% senior notes due 2023.

EP Energy for Friday

The stage is set for what should be a big Friday in the new issue market.

On Thursday, EP Energy disclosed plans to price $1 billion of eight-year 1.125 lien senior secured notes (expected ratings B1/B) on Friday afternoon.

Credit Suisse is the lead left bookrunner for the debt refinancing deal.

In addition to EP Energy, the following are expected to price before Friday’s close:

• Ithaca Energy (North Sea) plc’s $350 million of senior notes due May 2023 (Caa1/CCC+) via Barclays as billing and delivering agent, with , initial talk in the mid 9% area;

• BWX Technologies, Inc.’s $400 million of eight notes (Ba3/BB+) via Morgan Stanley, Wells Fargo, JP Morgan, TD, US Bancorp and PNC. Initial talk is 5½% to 5¾%;

• JW Aluminum Co.’s $285 million of seven-year senior secured notes (B3/B-) with Goldman Sachs as sole books. Initial talk is the mid-to-high 9% area;

• NBG Pangea’s €400 million of unrated senior notes due 2023 via Citigroup, Credit Suisse and National Bank of Greece. Initial guidance is in the high 3% area to 4%; and

• Premier Foods Finance plc’s £300 million sale of senior secured fixed-rate notes due October 2023 (B2/B/B). HSBC is physical books and will bill and deliver. Initial price talk is set in the mid 6% area.

Valeant active

While Valeant’s new 8½% senior notes broke late in the session and were not seen trading, the specialty pharmaceutical company’s outstanding issues were active in the secondary space.

While the notes saw high-volume trading, there was little movement in trading prices, a market source said.

Valeant’s 7½% senior notes due 2026 were seen trading at 97 7/8 with about $29 million on the tape by late afternoon.

The 5 7/8% senior notes due 2023 were seen trading at 95½ with about $23 million on the tape by late afternoon.

Valeant’s 9¼% senior notes due 2026 were seen trading at 104 5/8 with about $20 million on the tape by late afternoon.

It is not unusual for a new deal to jumpstart activity in outstanding issuances, which may show some weakness based on the price talk, a market source said.

While there was definitely activity in Valeant’s junk bonds, they were largely unchanged, the source said.

EP Energy in focus

EP Energy’s junk bonds were also in focus and a major volume mover on Thursday after the Houston-based oil and natural gas exploration and production company announced its $1 billion offering of new senior notes.

The outstanding junk bonds were also largely unchanged, a market source said. EP Energy’s 8% senior notes due 2025 were seen trading at 76¾ with more than $41 million of the bonds traded during Thursday’s session.

EP Energy’s 9 3/8% senior notes due 2024 were seen trading at 82 5/8 with more than $34 million on the tape.

While the new deal in the works did not cause much movement in EP Energy’s outstanding junk bonds, the new deal was seen as good for the company by market sources.

“It’s a positive,” a market source said. “It’s going to give them some liquidity.”

Energy gains

California Resources’ 8% senior notes were also in focus on Thursday. The notes were up more than 1 point in good volume, a market source said.

They were seen quoted at 91 bid, 91½ offered early in the session and traded up to 91½ later in the afternoon.

More than $32 million of the bonds had traded by late afternoon.

The 8% notes were quoted at 90 bid, 90½ offered on Wednesday.

While the barrel price of West Texas intermediate crude oil for June delivery was largely flat on Thursday, it was holding steady above $71 a barrel, which has a been a boon for the energy sector as a whole, a market source said.

California Resources stock was also up more than 5% on Thursday with trading in the options market predicting a high level of volatility in the name, Zacks Equity Research reported.

GFL Environmental loses

While GFL Environmental’s recently priced 7% senior notes due 2026 have not seen much trading activity since hitting the market in early May, the notes continue to be quoted down.

The 7% notes were quoted down about 1 point on Thursday at 97¾ bid, 98¾ offered, according to a market source.

The notes have been on a downward slide since the start of the week. They were seen at 98 bid, 99 offered on Wednesday and 98½ bid, 99½ offered on Tuesday.

The notes have struggled since hitting the secondary market with most trades below par.

GFL Environmental priced $400 million of the 7% notes at par in a quick-to-market trade on May 3. The deal reportedly also struggled during the bookbuilding process.

WeWork ‘still sucking wind’

WeWork’s recently priced 7 7/8% senior notes due 2025 saw a slight rebound on Thursday but only after dipping to a new low on Wednesday.

The 7 7/8% notes were seen up about 1.5 pointw to return to a 94 handle on Thursday. They were quoted at 94 bid, 94¾ offered.

They were quoted at 92½ bid, 93½ offered on Wednesday.

WeWork’s debut junk bond is “still sucking wind,” a market source said. “It’s just sloppy. It can’t get out of its own way.”

WeWork priced an upsized $702 million of the 7 7/8% senior notes at par on April 25.

The deal was said to be as much as five-times oversubscribed during bookbuilding but has been described as a disaster in secondary trading.

Indexes see slight losses

Three benchmarks for the high-yield secondary market all posted slight losses on Thursday.

The KDP High Yield index marked its first day of gains all week on Thursday. The index was up 3 basis points to 70.57 with the yield now 5.85%.

The index was down both Wednesday and Tuesday and was flat on Monday.

The Merrill Lynch High Yield index was up slightly on Thursday although it remained firmly in negative territory. The index was up 0.8 bps with the negative year-to-date return now 0.212%.

The index was down Wednesday and Tuesday, sinking back into negative territory after a brief foray into positive territory on Monday.

Monday marked the first time the year-to-date return was in positive territory since April 22.

The CDX High Yield 30 index was down 3 bps to close Thursday at 106.82 after rising 8 bps to close Wednesday at 106.85.

© 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.