Altice, Lions Gate price; D&B on tap; Transocean up; PG&E jumps; funds lose $264 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 24 – For the third consecutive session, the high yield drive-through window served multiple issuers on Thursday.

Two tranches from two issuers came in quick-to-market trades, both of which were upsized but still priced at the tight end of talk.

Altice USA Inc. priced an upsized $1.5 billion issue of 10-year senior guaranteed notes (Ba2/BB-) at par to yield 6½%.

Lions Gate Capital Holdings LLC priced an upsized $550 million issue of five-year senior notes (B2/B) at par to yield 6 3/8%.

The forward calendar also grew with Dun & Bradstreet Corp. planning to start a roadshow on Friday for a $1.35 billion two-part offering of high yield notes.

Meanwhile, the recently priced new paper from the past week remained active in the secondary space.

Transocean Poseidon Ltd.’s 6 7/8% senior notes due 2027 (B1/B+) were trading sharply above their issue price, in stark contrast to the deals that priced during Tuesday’s session.

Tenet Healthcare Corp.’s 6¼% senior notes due 2027 were slightly improved in high-volume activity on Thursday with the notes trading back at par after dipping below during Wednesday’s session.

MGM Growth Properties LLC’s 5¾% senior notes due 2027 were slightly weaker in high-volume activity on Thursday with the notes dropping back to par after trading at a slight premium.

Albertsons Cos., Inc.’s 7½% senior notes due 2026 (B3/B+) and Vistra Energy Corp.’s 5 5/8% senior notes due 2027 (Ba3/BB) were active although unchanged with both notes also continuing to trade at par.

Outside of the new paper, Pacific Gas & Electric Co.’s senior notes were back in focus in the secondary space with the capital structure seeing dramatic improvement after it was determined the utility company’s equipment was not at fault for the 2017 Tubbs Fire.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw outflows of $264 million for the week ended Jan. 23, according to fund-flow statistics generated by AMG Data Services Inc.

While there was a small outflow in the past week, the fund flows in 2019 have been net positive with a cumulative inflow of $3.44 billion in the four weeks thus far.

Altice upsized and tight

For the third consecutive session, the high-yield drive-through window opened for multiple issuers on Thursday.

For the most part, the early 2019 deals have about them a hot market cachet, a reflection of pent-up demand for bonds on the part of investors, enabling issuers and dealers to drive prices tighter, sources say.

Thursday's transactions were no exception.

Two tranches from two issuers came in quick-to-market trades, both of which were upsized but still priced at the tight end of talk.

Altice USA priced an upsized $1.5 billion issue of 10-year senior guaranteed notes (Ba2/BB-) at par to yield 6½% in a quick-to-market Thursday trade, according to market sources.

The issue size increased from $1 billion.

The yield printed at the tight end of the 6½% to 6¾% yield talk, which came toward the wide end of initial guidance in the mid-6% area.

Credit Suisse was the left bookrunner for the debt refinancing deal.

The issuing entity is CSC Holdings, LLC, an indirect, wholly owned subsidiary of Altice USA.

Lions Gate upsized

Lions Gate Capital Holdings priced an upsized $550 million issue of five-year senior notes (B2/B) at par to yield 6 3/8%.

The deal size increased from $400 million.

The yield printed at the tight end of yield talk in the 6½% area and tighter than initial talk in the 6½% to 6¾% area, a trader said.

J.P. Morgan Securities LLC, BofA Merrill Lynch, MUFG, RBC Capital Markets LLC, SunTrust Robinson Humphrey Inc., Wells Fargo Securities LLC, BNP Paribas Securities Corp. and SG CIB are the joint bookrunners.

The Santa Monica, Calif.-based entertainment company plans to use the proceeds, including the additional proceeds resulting from the $150 million upsizing of the deal, to pay down its revolving credit facility with any remaining proceeds to be used for working capital and other general corporate purposes.

Dun & Bradstreet roadshow

The active forward calendar also grew on Thursday.

Dun & Bradstreet plans to start a roadshow on Friday for a $1.35 billion two-part offering of high-yield notes.

The deal includes $500 million of 7.5-year senior secured notes (expected ratings B2/B/BB) with initial guidance in the mid-7% area. BofA Merrill Lynch is the lead bookrunner for the secured notes tranche.

The unsecured tranche features $850 million of eight-year senior notes (expected ratings Caa2/CCC/B-) with initial guidance in the 10¼% to 10½% area. Citigroup Global Markets Inc. is the lead bookrunner for the unsecured notes tranche.

Proceeds will be used to finance the acquisition of Dun & Bradstreet by an investor group led by CC Capital, Bilcar LLC, Cannae Holdings and Thomas H. Lee Partners.

The issuing entity will be Star Merger Sub, Inc., which is to be merged with and into Dun & Bradstreet, a Short Hills, N.J.-based provider of commercial data and analytics.

Transocean trades up

Transocean’s 6 7/8% senior notes due 2027 were trading sharply above their issue price in high-volume activity in the secondary space.

The notes traded up to 101 with more than $47 million of the bonds changing hands, sources said.

The deal was in demand during bookbuilding with talk for the coupon and yield tightening several times prior to pricing.

Thursday was also a strong day for oil and gas names, which helped buoy the notes in the secondary space. Crude oil futures rose to settle at $53.13 on Thursday, an increase of 51 cents, or 1%.

Transocean priced a $550 million issue of the 6 7/8% notes at 99.25 to yield 7.026%.

The coupon, price and yield came on top of final talk which had been revised from earlier talk specifying a coupon in the 7% area at 99.

Initial talk had the deal coming in the 99 area to yield 7% to 7¼%.

MGM weakens

MGM Growth Properties’ 5¾% notes due 2027 were weaker on Thursday with the notes losing their slight premium to drop back to par on Thursday.

The notes were down 3/8 point to close Thursday at par, according to a market source. More than $24 million of the bonds were on the tape by the late afternoon.

The notes were trading in a range of par to par ½ throughout Wednesday’s session.

MGM Growth priced an upsized $750 million of the 5¾% notes at par in a Tuesday drive-by. The issue size was increased from $500 million.

At par

The four deals to price in a flurry of drive-by activity on Tuesday, including the MGM notes, were all wrapped around par in the secondary space, which sources attributed to their tight pricing and the fact they were upsized during bookbuilding.

Tenet Healthcare’s 6¼% notes due 2027 returned to par on Thursday after dipping below during Wednesday’s session.

The notes remained active with more than $32 million on the tape by the late afternoon, according to a market source.

Tenet Healthcare priced an upsized $1.5 billion issue of the 6¼% notes at par in a Tuesday drive-by. The deal doubled from its initial $750 million size.

Albertsons’ 7½% senior notes due 2026 and Vistra’s 5 5/8% senior notes due 2027 remained active although the notes were little changed with both issues wrapped around par, according to a market source.

More than $17 million of Albertsons’ 7½% notes changed hands during Thursday’s session.

Vistra’s 5 5/8% senior notes saw more than $22 million in trade.

PG&E jumps

Pacific Gas & Electric’s senior notes were back in focus on Thursday.

The capital structure was dramatically improved after the California Department of Forestry and Fire Protection found the utility company’s equipment was not responsible for the 2017 Tubbs Fire.

Pacific Gas & Electric’s 6.05% senior notes due 2034 were the most actively traded issue in the secondary space with more than $194 million of the bonds on the tape by the late afternoon.

The notes jumped 5¾ points to 87¾, according to a market source.

The 3.5% senior notes due 2020 rose 10¾ points to 90¾ with more than $24 million of the bonds on the tape.

The 5.8% senior notes due 2037 rose 6 5/8 points to 87 1/8 with more than $18 million of the bonds on the tape.

Pacific Gas & Electric’s senior notes dominated the secondary space for much of January after the notes were downgraded to junk from investment grade by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings.

The downgrades were due to PG&E’s announcements it was contemplating and then that it would enter Chapter 11 bankruptcy protection due to potential liabilities from the 2017 and 2018 California wildfires.

Pacific Gas & Electric missed a $21.6 million interest payment on its 5.4% notes due 2040 on Jan. 15.

Wednesday outflows

The dedicated high-yield bond funds sustained modest outflows on Wednesday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $46 million of outflows on the day.

Actively managed high-yield funds sustained $50 million of outflows on Wednesday.

News of Wednesday's daily flows arrived hours before a report that the combined funds sustained $264 million of outflows in the four-session, holiday-shortened week to Wednesday's close, according to Lipper US Fund Flows.

Indexes mixed

Indexes were again mixed on Thursday.

The KDP High Yield Daily index gained 2 basis points to close Thursday at 68.78 with the yield now 6.55%.

The index dropped 6 bps on Wednesday and 10 bps on Tuesday after a cumulative gain of 32 bps on the week last week.

The ICE BofAML US High Yield index was down 5.3 bps with the year-to-date return now 3.648%.

The index was down 2.6 bps on Wednesday and 19.3 bps on Tuesday after a 71.8 bps gain on the week last week.

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 42 bps to close Thursday at 104.73. The index was up 12 bps on Wednesday after a 59 bps drop on Tuesday.

The index saw a cumulative gain of 88 bps on the week last week.

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