Upsized returning First Data, Charter megadeals lead $7 billion primary; Men’s Wearhouse mauled

By Paul Deckelman and Paul A. Harris

New York, Nov. 5 – The high-yield primary sphere’s junk bond juggernaut rolled on during Thursday’s session – which was one of the heaviest days for new-issue volume seen so far this year.

The day’s big deal came from First Data Corp., with the transaction processor returning to the market with an upsized two-part $3.2 billion offering of eight-year secured bonds exactly one week after it had successfully priced $3.4 billion of eight-year unsecured notes

Cable and broadband operator Charter Communications Inc. priced $2.5 billion of 10.25-year notes.

Cruise-ship operator NCL Corp. Ltd. did an upsized $600 million of five-year notes, while HMO Molina Healthcare, Inc. brought an upsized $700 million of seven-year notes to market, the day’s only scheduled offering off the forward calendar.

All told, that added up to $7 billion in five tranches – the third biggest volume day of the year so far, lagging only the $7.25 billion that got done on Sept. 11 and the $8.78 billion of new paper which priced on March 13.

In the aftermarket, traders saw brisk upside activity only in the new Molina Healthcare notes.

They also noted active dealings in some of the issues which prices earlier in the week such as Sabre Corp., Central Garden & Pet Co. and Platform Specialty Products Corp.

Away from the new deals, Men’s Wearhouse Inc.’s bonds dropped in active dealings after the clothing retailer slashed its earnings outlook for the third quarter and the full year.

Statistical measures of junk market performance were lower across the board for a second straight session on Thursday. They had declined on Wednesday for the first time in more than a week, after having been higher on Monday and Tuesday, mixed last Thursday and Friday and higher last Wednesday.

First Data returns, big-time

Four issuers brought a combined five tranches to market on Thursday for an overall take of $7 billion.

The deal dynamics were those of a market hitting on all cylinders.

Four of the five tranches were upsized and four of the five came as drive-bys.

Executions were tight, with four of the five tranches pricing at the tight end of talk, while the other one came on top of talk.

A mere five market sessions after it priced a massively upsized junk bond deal First Data returned to repeat the feat on Thursday, as the Atlanta-based electronic payment processing company priced an upsized $3.2 billion two-part eight-year senior secured notes transaction.

An upsized $1 billion tranche of first-lien notes (expected ratings B1/BB) priced at par to yield 5%. The tranche size was increased from $750 million. The yield printed at the tight end of yield talk that had been set in the 5 1/8% area.

Also, an upsized $2.2 billion tranche of second-lien notes (expected ratings Caa1/B) priced at par to yield 5¾%. The tranche size was increased from $750 million. The yield printed at the tight end of yield talk that was fixed in the 5 7/8% area.

The overall size of Thursday’s transaction was increased to $3.2 billion from $1.5 billion.

Deutsche Bank, BofA Merrill Lynch, Citigroup, Morgan Stanley, Credit Suisse, HSBC, Mizuho, PNC, SunTrust and KKR were the joint bookrunners.

The company plans to use the proceeds, including the additional $1.7 billion resulting in the upsizing, to redeem and/or repurchase all of its remaining 8¾% notes and 8¼% notes.

On Oct. 29 First Data Corp. priced a massively upsized $3.4 billion issue of eight-year senior notes (Caa1/B/CCC+) at par to yield 7%. The size of that deal was increased from $750 million.

As a result, the market has taken $6.6 billion of new First Data paper in the space of a week.

Charter ‘a food-fight’

Charter Communications priced a $2.5 billion issue of 10.25-year senior notes (B1/BB/BB) at par to yield 5¾%.

The yield printed on top of yield talk and tight to initial guidance in the 5 7/8% area.

Demand for the deal was intense, sources said. One investor referred to the deal as a “food fight.”

Credit Suisse, BofA Merrill Lynch, Goldman Sachs, UBS and Deutsche Bank were the joint bookrunners for the acquisition financing.

Molina, upsized and tight

Molina Healthcare priced an upsized $700 million issue of seven-year senior bullet notes (Ba3/BB) at par to yield 5 3/8%.

The deal size was increased from $500 million.

The yield printed at the tight end of talk for a yield in the 5½% area.

SunTrust was the left bookrunner. BofA Merrill Lynch and UBS were the joint bookrunners.

The Long Beach, Calif.-based health management organization plans to use the proceeds for general corporate purposes, which may include debt repayment, funding future acquisitions and capital expenditures.

The additional proceeds resulting from the $200 million upsizing of the deal will be used for general corporate purposes, which may include the debt repayment, funding for future acquisitions, capital expenditures, additions to working capital and capital contributions to the company’s health plan subsidiaries.

NCL upsizes, prices tight

Norwegian Cruise Line Holdings Ltd. priced an upsized $600 million issue of five-year senior notes (B2/BB-) at par to yield 4 5/8%.

The deal size was increase from $500 million.

The yield printed at the tight end of yield talk set in the 4¾% area.

Barclays was the lead left bookrunner. Citigroup, Deutsche Bank, Goldman Sachs, J.P. Morgan and UBS were the joint bookrunners.

The Miami-based cruise line operator plans to use the proceeds to refinance its $300 million of 5% senior notes due 2018, as well as to pay the related call premium and for general corporate purposes.

The additional $100 million of proceeds resulting from the upsizing of the deal will be used for general corporate purposes.

WorldPay, upsized and tight

In the European market, WorldPay Group plc priced an upsized €500 million issue of seven-year senior bullet notes (Ba2/BB) at par to yield 3¾%.

The deal-size was increased from €400 million.

The yield printed at the tight end of the 3¾% to 4% yield talk.

Global coordinator Barclays will bill and deliver. BofA Merrill Lynch, Credit Agricole and Credit Suisse were also global coordinators. BOC, Goldman Sachs, Lloyds, Medio, Mizuho, RBC, RBS, UBS and UniCredit were joint bookrunners.

The London-based international payments processing company, plans to use the proceeds of the note offering, together with cash on hand, to fund the partial prepayment of the £600 million bullet term facility provided under a senior facilities agreement that the company entered into on Sept. 4.

First Data back for seconds

While the big story of the day in Junkbondland was the return of First Data to the new deal arena just a week after the company had priced a $3.4 billion offering of eight-year notes, that was not so much the case in the secondary, since the new deal came to market fairly late in the day and not that much aftermarket activity was initially seen.

A market source heard both tranches of the bonds quoted in a 99½ bid, 100½ offered context, in line with both of the tranches having priced at par.

Another source said the new issue “did not even register among the top 20 or 25 names on Trace.”

However, First Data’s issue of 7% notes due 2023 from last Thursday was actively traded during the session, seen up 1/8 point on the day at 102 3/8 bid, with over $27 million traded.

First Data had priced those bonds at par in a quick-to-market transaction, after massively upsizing the deal from an initially announced $750 million.

Molina notes move up

Traders said the new Molina Healthcare 5 3/8% notes due 2022 firmed smartly on what one called “pretty decent volume” – more than $69 million by the time trading closed.

He saw the notes moving up to 101¾ bid, well above the par level at which the regularly scheduled forward calendar offering had priced after the issue was upsized from $500 million originally.

Another trader marveled that “there was so much paper traded.”

He pegged the bonds around a 101 5/8 to 101 7/8 bid context towards the end of the day.

Norwegian near issue price

A trader said that Norwegian Cruise Line’s 4 5/8% notes due 2020 “is trying to trade;” he saw more than $11 million of those bonds changing hands around 100 1/8 to 100 3/8.

A second saw the notes at 100¼ bid, 100¾ offered.

The quickly shopped issue had priced at par earlier in the day via NCL Corp. Ltd.

Traders meantime saw no immediate aftermarket activity in the fourth deal of the day, Stamford, Conn.-based cable and broadband provider Charter Communications’ $2.5 billion of 5¾% notes due February 2026.

Sabre bonds busy

Away from Thursday’s own new deals, a trader opined that “everything [among the recently issued bonds] was off a little from where they had been.”

For instance, the Sabre GLBL Inc. 5¼% senior secured notes due 2023 were quoted by a trader Thursday at 100 1/16 bid, which he called down nearly 1 point on the day. More than $69 million of the Southlake, Texas-based travel services provider’s had traded during the session.

“They hovered around the par level,” another trader noted.

Central Garden, Platform active

The new Central Garden & Pet 6 1/8% notes due 2023 were among the most actively traded credits on the day, with over $38 million having changed hands a trader said. He quoted the notes at 101 7/8 bid, about unchanged on the day.

Another trader said “they softened a little bit” to a 101½ to 102 bid context before tightening up a little later in the day to 101¾ bid, 102 offered.

The Walnut Creek, Calif.-based pet-care and lawn-and-garden supplies maker priced its quickly shopped $400 million issue on Wednesday at par and it was seen pushing up in aftermarket action to 101¾ bid, 102¼ offered after that.

The new Platform Specialty Products 10 3/8% notes due in May 2021 were holding steady Thursday around the 103 bid area, a market source said, with volume of around $16 million.

That was well up from the par level at which the West Palm Beach, Fla.-based specialty chemical manufacturer’s upsized deal had come to market on Tuesday via special-purpose funding vehicle PSPC Escrow II Corp. after upsizing to $500 million from $400 million originally.

Men’s Wearhouse whacked

Away from the new issues, a trader saw Men’s Wearhouse’s 7% notes due 2022 fall to 98 bid level.

That was down from the levels above 104 where the Houston-based apparel retailer’s notes had finished on Wednesday ahead of its release of quarterly results.

“The earnings came out after the close and they looked pretty bad,” the trader said.

More than $28 million of the notes were traded on Thursday

Indicators remain weaker

Statistical measures of junk market performance were lower across the board for a second straight session on Thursday. They had declined on Wednesday for the first time in more than a week, after having been higher on Monday and Tuesday, mixed last Thursday and Friday and higher last Wednesday.

The KDP High Yield Daily index fell by 13 basis points on Thursday to end at 67.27, after having been unchanged on Wednesday, which followed two straight gains before that. Thursday’s loss was its third in the last six sessions.

Its yield rose by 7 bps on Thursday, to 6.53%, after having also been unchanged on Wednesday. It was the yield’s second rise in the last three sessions, having also risen by 3 bps on Tuesday.

The Markit Series 25 CDX North American High Yield index was down by 5/32 point on Thursday, finishing at 103 1/8 bid, 103 3/16 offer, its second consecutive loss after three straight gains and its third setback in the last six sessions.

And the Merrill Lynch North American Master II High Yield index fell for a second straight session on Thursday after two higher sessions before that, making the day’s loss its third in the last five trading days.

The index dropped by 0.274%, after having eased by 0.002% on Wednesday after having finished up by 0.15% on Tuesday, its second straight gain; Thursday was the index’s third loss in the last five sessions.

That dropped the index’s year-to-date return to 0.166% from 0.442% on Wednesday, although it remained well above the index’s worst 2015 year-to-date deficit, the 3.069% of red ink recorded on Oct. 2.

Funds see fifth straight inflow

However, another statistical measure – the flow of investor cash into and out of high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – showed strengthen for a fifth consecutive reporting week.

Sources familiar with the fund-flow statistics said Thursday that $2.048 billion more came into those weekly-reporting-only funds than left them during the week ended Wednesday, on top of the previous week’s similarly-sized $2.035 billion cash injection for the seven-day period ended Oct. 28 (see related story elsewhere in this issue).

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