Bombardier, CHS, Carter’s, Summit Materials, Qorvo price; funds add $698 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 28 – After silence for the majority of the week, the domestic high-yield primary market opened the flood gates and priced $4.66 billion over five drive-by deals on Thursday.

Bombardier Inc. priced an upsized $2 billion issue of 7 7/8% eight-year senior notes (Caa1/B-) at 99.246 to yield 8%.

Community Health Systems, Inc. priced $1.58 billion of 8% seven-year senior secured notes (Caa1/B-/B) at 98.683 to yield 8¼%.

Carter's, Inc. priced a $500 million issue of eight-year senior notes (Ba2/BB+) at par to yield 5 5/8%.

Summit Materials, Inc. priced a $300 million issue of eight-year senior notes (B3/BB) at par to yield 6½%.

Qorvo, Inc. priced an upsized $270 million add-on to its 5½% senior notes due July 15, 2026 (Ba1/BB+) at 101.5 to yield 5.175%.

CNX Resources Corp. planned to price a $500 million offering of eight-year senior notes (B3/BB-) but final terms were pending as of press time.

In the European primary market, Playtech plc priced a €350 million issue of seven-year senior secured notes (Ba2/BB) at par to yield 4¼% on Thursday.

As the secondary space awaited new paper, earnings reports and company specific news continued to dominate trading activity.

While new paper from Bombardier was in the works, the company’s 8¾% senior notes due 2021 were active and making gains.

Pacific Gas & Electric Co.’s 6.05% senior notes due 2034 was among the most actively traded issues in the secondary space.

However, the notes were largely trading flat despite more bad news for the struggling utility company.

Digicel Group Ltd.’s junk bonds were under pressure on Wednesday after the company reported earnings and announced lenders had allowed an easing of the leverage covenants on its bonds.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw inflows of $698 million for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

The inflow marks the fifth consecutive week of inflows.

Bombardier doubles deal size

During the brief time it was in the market, Bombardier doubled the size of its deal.

The Montreal-based aerospace and transportation services company priced an upsized $2 billion issue of 7 7/8% eight-year senior notes (Caa1/B-) at 99.246 to yield 8%.

The issue size increased from $1.75 billion after earlier increasing from $1 billion.

The yield printed at the tight end of yield talk in the 8% area. Initial talk was 8% to 8¼%.

The deal played to an order book in the high $3 billion range, a trader said.

Citigroup Global Markets Inc. was the left bookrunner for the debt refinancing and general corporate purposes deal.

CHS at the wide end

Community Health Systems raised $1.58 billion of proceeds via the placement of an issue of 8% seven-year senior secured notes (Caa1/B-/B) which priced at 98.683 to yield 8¼%.

The yield printed at the wide end of the 8% to 8¼% revised yield talk. Earlier talk was 7 7/8% to 8%. Initial guidance was in the 8% area.

Credit Suisse Securities (USA) LLC was the left bookrunner for the debt refinancing deal.

Carter's oversubscribed

Carter's priced a $500 million issue of eight-year senior notes (Ba2/BB+) at par to yield 5 5/8%.

The yield printed tight to price talk in the 5¾% area.

Initial guidance was in the high 5% to 6% area, a trader said, adding that the debt refinancing deal was playing to $1.2 billion of demand.

BofA Merrill Lynch was the lead.

Summit prices $300 million

Summit Materials priced a $300 million issue of eight-year senior notes (B3/BB) at par to yield 6½%.

The yield printed in the middle of yield talk in the 6½% area and tighter than initial guidance in the 6¾% area.

The debt refinancing deal was playing to an $800 million order book around midday Thursday, a trader said.

BofA Merrill Lynch was the lead.

Qorvo upsizes tap

Qorvo priced an upsized $270 million add-on to its 5½% senior notes due July 15, 2026 (Ba1/BB+) at 101.5 to yield 5.175%.

The issue size increased from $170 million.

No formal price talk circulated the market, sources said, adding that initial talk had the deal coming at 101.

The Qorvo tap was heard to be playing to $300 million of orders, a trader said.

BofA was the left bookrunner for the general corporate purposes deal.

CNX Resources’ offering

The sixth of Thursday's half dozen drive-by deals, CNX Resources’ $500 million offering of eight-year senior notes (B3/BB-) was whispered in the mid-to-high 6% area in the morning.

Final terms on the deal were pending at press time.

MUFG is the lead.

However, Credit Suisse Securities (USA) LLC initially shopped the deal with investors, and was subsequently outbid by MUFG, sources said.

Jockeying among bookrunners, with one attempting to outbid the other, isn't all that rare, according to an investment banker who took a late Thursday call from Prospect News.

Big, but not the biggest

February concluded with a bang in the new issue market.

Six deals, all of them drive-bys, blew into the market on Thursday.

Five of those cleared by the session's close.

Five junk-rated, dollar-denominated issuers raised a combined total of $4.66 billion, rendering Thursday's session only the fifth to top the $4 billon mark in the past six months.

Thursday's burst of issuance made for the second biggest day of 2019 to date.

It came well under the $6.24 billion that priced on Feb. 7, which was the biggest day for issuance in nearly two years.

Pressed for reasons as to why six issuers clustered into a single session, sources pointed to the JP Morgan Global High Yield & Leveraged Finance Conference in Miami, which concluded on Wednesday.

That conference always garners much of the market's attention.

Hence, issuers and dealers awaited its conclusion, and were then keen to complete the slate of deals – most of them refinancings – while the market technicals are solid and the capital markets backdrop is generally supportive, a debt capital markets banker said.

Playtech prices tight

In the euro-denominated primary market, Playtech priced a €350 million issue of seven-year senior secured notes (Ba2/BB) at par to yield 4¼% on Thursday.

The yield printed at the tight end of the 4¼% to 4 3/8% yield talk. Earlier guidance was 4½% to 4¾%.

NatWest Investments, Santander, UBS and UniCredit were the active bookrunners. Citigroup was the passive bookrunner.

UBS will bill and deliver.

The Isle of Man-based gambling software developer plans to use the proceeds to refinance its existing €297 million convertible bond and for general corporate purposes.

Bombardier improves

While Bombardier’s new offering was in the works, the company’s 8¾% senior notes due 2021 were active and making gains in the secondary space.

The 8¾% senior notes were up about ¾ point to 110 1/8, according to a market source.

More than $19 million of the bonds were on the tape by the late afternoon.

Pacific Gas & Electric active

Pacific Gas & Electric’s 6.05% senior notes due 2034 saw renewed attention in the secondary space on Thursday with the notes among the most actively traded of the session.

However, the notes were largely trading flat, a market source said.

The 6.05% notes were changing hands around 91 7/8.

More than $74 million of the bonds were on the tape by the late afternoon.

With the utility rocked by more bad news on Thursday, the trading activity was most likely the result of a large seller in the market, a market source said.

Pacific Gas & Electric stated on Thursday that it believes its equipment may be found to blame for the 2018 California Camp Fire, according to a company press release.

Due to this, the struggling utility company included a $10.5 billion charge for third-party claims in its fourth-quarter and full-year financial report.

Pacific Gas & Electric also included a $1 billion charge related to the 2017 Northern California wildfires.

Pacific Gas & Electric’s senior notes have been active and under pressure since the company was downgraded to junk and subsequently filed for Chapter 11 bankruptcy protection in January due to liabilities from the California wildfires.

Digicel drops

Digicel’s junk bonds were under pressure on Thursday with the capital structure falling after a disappointing earnings report and news the leverage covenants on its bonds had been eased.

Digicel’s 6% senior notes due 2021 were the most active of the capital structure with more than $25 million of the bonds on the tape by the late afternoon.

The notes traded down 5½ points to 82 1/8, a market source said.

Digicel’s 6¾% senior notes due 2023 also dropped 5½ points to trade down to 69 with more than $10 million of the bonds on the tape.

The mobile phone network provider’s 6¾% senior notes due 2023 dropped 5 points to 69 3/8.

The bonds were trading down after Digicel reported a decrease in revenue and EBITDA in its third-quarter report, a market source said.

Revenue dropped 4% year over year to $554 million, EBITDA was down 2% year over year to $241 million, and cash was reduced to $96 million from $268 million from the previous quarter.

Digicel also announced that lenders had agreed to ease the leverage covenant on its bonds to avoid a breach, a market source said.

Leverage was 6.8x EBITDA.

Indexes flat to down

Indexes were flat to down on Thursday.

The KDP High Yield Daily index was flat to close Thursday at 69.94. However, the yield dipped 1 basis point to 5.97%.

The index rose 4 bps on Wednesday and 3 bps on Tuesday after dropping 3 bps on Monday.

The index saw a cumulative gain of 18 bps on the week last week.

The CDX High Yield 30 index dropped 17 bps to close Thursday at 106.23. The index rose 2 bps on Wednesday, dipped 1 bp on Tuesday, and rose 11 bps on Monday.

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