Week opens with quiet primary; new Team Health stays strong; Qorvo, Sensata Technologies firm

By Paul Deckelman and Paul A. Harris

New York, Nov. 16 – The high-yield market opened the new week on a relatively quiet note on Monday, participants said.

No activity was seen in the primary market, where nothing priced for the first time in 10 days, not counting last week’s Veterans Day holiday break.

Syndicate sources suggested that would-be issuers may have been cautious in the wake of last week’s terrorist attacks in France, waiting to see whether that would have any financial market impact before deciding to go ahead with prospective deals.

Meanwhile, deals already on the forward calendar for Veritas Technologies LLC, Rackspace Hosting, Inc. and American Energy – Permian Basin, LLC remained there, with primaryside players awaiting news on any one or more of them.

In the secondary market, Friday’s new issue from Team Health, Inc. remained at or even slightly above the levels reached in initial aftermarket trading. The physician staffing company’s eight-year notes had firmed smartly when they were freed to trade. As had been the case on Friday, volume was robust.

Traders also saw some dealings in Friday’s $1 billion two-part megadeal from high-tech firm Qorvo, Inc., with both halves of that offering seen higher, though on not much volume.

There was also continued active trading at firmer levels in Thursday’s new deal from industrial controls manufacturer Sensata Technologies Holding NV.

Statistical market-performance indicators closed mixed for the first time since Oct. 30 after two straight sessions in which those market measures had been lower all around. Lower levels have been seen in seven out of the previous eight trading days.

Primary quiet

The high-yield primary market did not generate any news on Monday.

Several deals were expected to launch, according to a sellside source who characterized the expected business as being market-dependent and possibly delayed by anticipated volatility related to the terrorist attacks in France over the weekend.

Some of those deals – the biggest of which is expected to be sized at $1.5 billion – should materialize later in the week, the source said.

The anticipated volatility did not really materialize, according to a trader based in New York, who added that the high-yield exchange-traded fund, the iShares iBoxx $ High Yield Corporate Bd (HYG), was up 39 cents on the day at $83.39 per share.

ETFs were better buyers on Monday, according to the trader, who closely tracks their activity.

However, there was some selling from the ETF space on Monday as well, the source added.

Thin calendar

The active forward calendar remained thin at Monday's close.

Veritas Technologies' $2,525,000,000 equivalent four-part offering of high-yield notes is the most conspicuous among the announced deals.

It was upsized from $2,275,000,000 equivalent and is likely being repriced following last week's changes to the downsized $1.5 billion equivalent term loan B, which saw price talk widen to Libor/Euribor plus 500 basis points at OID 95 from earlier talk of 450 bps to 475 bps at 98 to 99, sources said.

The bank loan was downsized from $2.45 billion. A $700 million term loan B will be held by the underwriters.

The bond upsizing came in the two tranches of seven-year senior secured notes (B1/B+) – one each in dollars and euros – which were increased to $750 million equivalent from $500 million equivalent.

The overall size of the eight-year senior unsecured notes (Caa1/CCC+) – also coming in dollar- and euro-denominated tranches – remains unchanged at $1,775,000,000 equivalent.

The market awaits updated timing and pricing information, sources said on Monday.

Meanwhile Rackspace Hosting has been holding a roadshow for a $350 million offering of senior notes due January 2024 (Ba1/BB+).

The deal, via Morgan Stanley & Co. LLC, Goldman Sachs & Co. and J.P. Morgan Securities LLC, has been in the market with initial guidance of 5¾% to 6% and is expected to price in the middle part of the week.

Also, American Energy – Permian Basin remains in the market with a $530 million offering of five-year senior secured first-lien notes (B2/B).

The deal, which was downsized from $560 million, ran a roadshow in mid-October before undergoing covenant changes.

Both American Energy and Veritas had been expected to price before Friday's close, sources say.

Team Health trading continues

In the secondary market, participants noted the continued investor interest in the new 7¼% notes due 2023 that Team Health priced Friday.

One trader pegged the notes around 102 bid, calling them “kind of unchanged from Friday,” while a second saw them in a 101½-to-102 bid context.

The Knoxville, Tenn.-based provider of outsourced physician staffing solutions for hospitals priced $545 million of the notes at par in a regularly scheduled deal off the forward calendar, and the new paper shot right up, gaining almost 2 points in heavy trading of over $53 million, making it the busiest issue that session.

On Monday, another market source said, the bonds crept up a little from those lofty levels to around 101 15/16 bid, with over $27 million trading hands, once again putting them at the top of the Most Actives list.

New Qorvo bonds firmer

Traders saw some upside activity in Friday’s other new deal, the $1 billion two-part offering of eight- and 10-year notes from Qorvo, a Greensboro, N.C.-based technology company.

One of the traders quoted the company’s 6¾% notes due 2023 around 100 3/8 bid, while its 7% notes due 2025 finished at 100¾ bid, both up from the par level at which the $450 million of eight-year notes and $550 million of 10-year notes had come to market following an investor roadshow.

But he opined that “it didn’t seem like those bonds traded much.”

Another trader saw two-sided markets in both tranches, with the eight-year paper at 100 3/8 bid, 100 7/8 offered, while the 10-year notes were at 100¼ bid, 100¾ offered.

And a third said that about $6 million of the 6¾% notes had traded, edging up by around 1/8 to ¼ point on the session.

He saw about $8 million of the 7% notes having traded, ending around 100¾ bid.

Sensata strength continues

A market source said that Thursday’s new deal from Sensata Technologies gained around 3/32 point on the day to finish at 100 7/8 bid. More than $12 million of the notes traded.

The Almelo, Netherlands-based industrial technology company had priced its quickly shopped $750 million offering at par on Thursday, and they had moved up to around a 100½ bid level, with over $23 million having moved around in initial aftermarket activity once they had been freed to trade.

On Friday, the bonds firmed by another ¼ point to the 100¾ bid level, on volume of about $19 million.

CNH bonds better

Going back a little further, one of the traders said that CNH Industrial Capital LLC’s 4 3/8% notes due 2020 firmed by about ¼ point on the day, seeing the bonds going home at 97¼ bid.

The U.S. financing arm of London-based heavy equipment and farm implement manufacturer CNH Industrial NV had priced $600 million of the notes at 99.446 in a quickly shopped transaction on Nov. 3, yielding 4½%. While the new bonds had initially traded right around their discounted issue price, they began to lose ground during the subsequent several sessions before finally turning back upward again on Monday.

Mostly featureless market

Beyond trading in the new or recent deals, a trader said he did not see anything in particular going on during Monday’s session.

“It was a pretty quiet day as far as account activity went. I think there was some short-covering going on,” pushing some bonds up.

He noted that oil prices, which had recently been under pressure, “did trade up, closing up over 1 point, probably due to geopolitical concerns” in the wake of Friday’s terrorist incidents in France and the expected retaliation in the Middle East.

December-contract West Texas Intermediate crude rose by an even $1.00 per barrel, or about 2.4%, to $41.74, wiping out a similarly sized loss seen on Friday.

“But other than that, it was a quiet day.”

Indicators turn mixed

Statistical measures of junk market performance turned mixed on Monday after having been lower across the board on Thursday and again on Friday. The indicators had been lower in seven out of the last eight trading days.

Monday’s result was the first such mixed session seen since Oct. 30.

The KDP High Yield Daily index dropped by 12 basis points on Monday to end at 65.93. It was the index’s seventh consecutive loss and followed one session during which it had been unchanged and two stronger sessions before that. On Friday, it had slid by 27 bps, on top of Thursday’s 33-bps plunge.

Its yield edged up by 2 bps on Monday to 6.89%, its seventh straight widening after an unchanged session and eighth such retreat in the last nine sessions. It had risen by 6 bps on Friday and by 10 bps on Thursday.

But the Markit Series 25 CDX North American High Yield index turned northward after two straight losing sessions, firming by 15/32 point on Monday to go home at 101¾ bid, 101 25/32 offered. It was the index’s first gain since Nov. 3, with all of the days in between resulting in losses, plus one unchanged finish last week.

However, the Merrill Lynch North American Master II High Yield index lost 0.198% on Monday, its third straight setback and its eighth such downturn in the last nine trading days.

That loss followed Friday’s 0.338% decline.

The index’s year-to-date loss widened to 1.815% from Friday’s red-ink reading of 1.621%, although those new year-to-date losses still remain well above the index’s worst 2015 year-to-date deficit, the 3.069% cumulative setback recorded on Oct. 2.

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