Energizer prices; HCA upsizes; Acrisure on tap; MEG Energy tanks; HCA active; funds add $3.28 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 17 – The high-yield primary market ripped back to action on Thursday with two deals pricing and one more on deck for Friday.

Energizer Holdings, Inc. priced a $600 million issue of eight-year senior notes (B2/B+) at par to yield 7¾% in an oversubscribed offering.

The notes were active soon after breaking for trade and gained more than 2 points out of the gate.

HCA Inc. showed up with a $1 billion offering of 10-year senior bullet notes (Ba2/BB-/BB) in a Thursday drive-by with the deal upsized to include of a $500 million add-on to its 5 5/8% senior notes due September 2028.

While the deal was expected to price Thursday, no terms were available as of press time.

Acrisure LLC is on tap with a $500 million offering of senior secured notes due 2024 (B3/B), which is set to price on Friday.

Meanwhile, the secondary space remained firm on Thursday with the new paper in focus.

HCA’s capital structure was among the most actively traded in the secondary space as the primary prepared the company’s new offering.

The secured notes in the capital structure were trading up ½ point to 2 points following an upgrade from Moody’s Investors Service.

DCP Midstream Operating LP’s 5 3/8% senior notes due 2025 (Ba2/BB/BB+) were active after pricing an upsized tap during Wednesday’s session although the notes were largely trading flat.

While the overall market remained strong, MEG Energy Corp.’s junk bonds tanked in high-volume activity after Husky Energy Inc. abandoned its takeover of the company.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw inflows of $3.284 billion for the week ended Wednesday, Jan. 16, according to fund-flow statistics generated by AMG Data Services Inc.

The inflow marks the second consecutive week of inflows and was the largest since December 2016, according to a market source.

Energizer oversubscribed

For the second consecutive session there was action in the high-yield primary market, which hibernated through the entire month of December and the early part of January.

On the heels of a brief roadshow that kicked off Wednesday, Energizer Holdings priced a $600 million issue of eight-year senior notes (B2/B+) at par to yield 7¾%.

The yield printed at the tight end of yield talk in the 7 7/8% area and inside of initial talk of 8% to 8¼%.

The deal played to as much as $6 billion of orders at 7 7/8%, which was the middle of final talk, sources said.

Citigroup was the lead bookrunner.

The St. Louis-based manufacturer and distributor of consumer products plans to use the proceeds to help fund the acquisition of Spectrum Brands’ Global Auto Care business.

HCA upsizes

In drive-by action, HCA showed up with a $1 billion offering of 10-year senior bullet notes (Ba2/BB-/BB) on Thursday.

Talk was in the 6% area, at the tight end of initial talk in the low 6% area.

Later in the session the deal was upsized with the inclusion of a $500 million add-on to the 5 5/8% senior notes due September 2028, according to a trader who added that the tap portion of the deal was talked at 98.5 to 99.

The deal was expected to price Thursday; however, no terms were available at press time.

UBS is the left bookrunner.

Acrisure on tap

One deal is on deck for Friday.

Acrisure is in the market with a $500 million offering of senior secured notes due 2024 (B3/B).

Initial talk for Acrisure is in the mid 8% area, a trader said.

Energizer in demand

Energizer’s new 7¾% senior notes due 2027 were active soon after breaking for trade with the notes skyrocketing out of the gate.

The notes were quoted at 102¼ bid, 102¾ offered with most trades between 102¼ and 102½, sources said.

More than $56 million of the bonds had changed hands less than an hour after the notes freed for trade.

The notes were in high demand, especially given the shortage of new paper in the secondary space, a market source said.

HCA trades up

While the primary market prepared HCA’s new $1 billion offering, the capital structure of the operator of health care facilities was active in the secondary space.

The secured notes in the capital structure was trading up ½ point to 2 points following a Moody’s upgrade of the company’s senior secured notes.

HCA’s 5½% senior notes due 2047 rose almost 2 points to 101½ with more than $52 million of the bonds on the tape by the late afternoon.

HCA’s 5% senior notes due 2024 were up about 1/8 to 102 3/8. More than $40 million of the bonds had changed hands by the late afternoon, according to a market source.

The 5¼% senior notes due 2025 were up about 7/8 point to 103 7/8 with more than $30 million on the tape by the late afternoon.

The 5¼% senior notes due 2026 were up ½ point to 103½ with more than $30 million on the tape.

The notes in HCA’s capital structure that were trading up were its senior secured notes, which sources noted as interesting.

It is an area where weakness would be expected due to the new offering; however, there was none, a market source said.

Moody’s Investors Service upgraded its ratings on HCA’s senior secured credit facilities and senior secured notes to Baa3 from Ba1.

The upgrade was due to the unsecured debt in HCA’s capital structure providing significant first loss absorption and due to HCA’s scale and industry-leading profit margins, the ratings agency said. (See related article in this issue.)

DCP Midstream flat

DCP Midstream’s 5 3/8% senior notes due 2025 were active following a $350 million tap that priced during Wednesday’s session. However, the notes were largely trading flat.

The 5 3/8% notes were trading between 101 1/8 and 101¼ during Thursday’s session, which is largely where they had been trading, according to a market source.

More than $24 million of the bonds were on the tape by the late afternoon.

DCP priced an upsized $350 million tap of the 5 3/8% notes at par ¾ in a Wednesday drive-by. The original size of the deal was $150 million.

MEG Energy tanks

MEG Energy’s junk bonds tanked during Thursday’s session after Husky Energy abandoned its hostile takeover bid for the company.

The 6 3/8% senior notes due 2023 were the most actively traded issue in the secondary space with the notes dropping more than 13 points in the high-volume activity.

The 6 3/8% notes were trading between 86½ and 86¾. More than $100 million of the bonds changed hands during Thursday’s session. The notes closed Wednesday at par ¼.

The 6½% senior notes due 2025 dropped 8 points to trade down to a 97 handle, a market source said. More than $70 million of the bonds changed hands during Thursday’s session.

They closed Wednesday at 105.

MEG Energy’s 7% senior notes due 2025 dropped 12½ points to 87½ with more than $55 million of the bonds changing hands during Thursday’s session. The notes closed Wednesday at par ½.

MEG Energy’s junk bonds were cratering on Thursday after Husky Energy walked away from its $2 billion hostile takeover bid.

The takeover bid was contingent on at least two-thirds of MEG shares being tendered.

The minimum tender condition was not met and there have been several negative developments since the takeover offer was initiated, Husky said in a press release.

Among the negative developments was Alberta’s mandated production cuts and lack of development on an oil export pipeline, according to the press release.

Wednesday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Wednesday, a bond investor said.

High-yield ETFs saw $310 million of inflows on the day.

Actively managed high-yield funds saw $120 million of inflows on Wednesday, the investor said.

News of those daily flows was followed later Thursday by a report that the combined funds saw $3.284 billion of inflows in the week to Wednesday's close, according to Lipper US Fund Flows.

Indexes gains continue

Indexes continued to gain on Thursday.

The KDP High Yield Daily index was up 5 basis points to close Thursday at 68.79 with the yield 6.52%.

The index rose 14 bps on Wednesday after dropping 1 bp on Tuesday. The index rose 1 bp on Monday.

The ICE BofAML US High Yield index rose 6.2 bps on Thursday with the year-to-date return now 3.585%. The index was up 31.7 bps and 17.5 bps on Tuesday after a 17.1 bps drop on Monday.

After closing 2018 with a year-to-date return of negative 2.265%, the index catapulted past 3% returns in the first two weeks of 2019.

The CDX High Yield 30 index rose 55 bps to close Thursday at 104.48. The index was up 7 bps on Wednesday and 38 bps on Tuesday after a 42 bps drop on Monday.

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