Aramark prices $1 billion two-parter; iHeart jumps, Memorial Resource Development up on sale

By Paul Deckelman and Paul A. Harris

New York, May 16 – The high-yield primary market opened the new week on Monday with a $1 billion two-part drive-by offering from Aramark Services, Inc., a provider of foodservice and facilities management and uniform supply services to various industries.

The mega-deal consisted of equally sized $500 million tranches of new 10-year notes and an add-on to the company’s existing 2024 paper. Traders quoted both halves of the deal at modestly higher levels when they moved into the aftermarket.

Among recently priced offerings, there was some trading activity, at moderate volume levels, in last week’s Cheniere Corpus Christi Holdings, LLC, LifePoint Health, Inc. and Goodyear Tire & Rubber Co. issues.

Syndicate sources meanwhile heard of new junk deals being shopped around by Vereit, Inc., a Phoenix-based real estate asset management firm and PennyMac Financial Services, Inc., a Moorpark, Calif.-based mortgage services company.

Away from the new-deal realm, iHeartMedia Inc.’s bonds jumped as the debt-laden broadcasting and outdoor advertising company was reported to have hired additional advisers to help it evaluate options for its debt, including possibly buying some of it back.

Another big winner was Memorial Resource Development Corp., whose bonds firmed smartly in active trading on the news that the energy exploration and development company has agreed to be acquired by sector peer Range Resources Corp. in an all-stock transaction valued at $4.4 billion, including the acquisition of more than $1 billion of Memorial Resource Development’s net debt.

Range Resources’ bonds also improved, though on considerably less volume.

Statistical market performance measures turned higher across the board on Monday, after having been lower all around on Friday. Monday was the second stronger session in the last three trading days.

Aramark $1 billion drive-by

Aramark priced Monday’s sole new issue in the high-yield primary market, a $1 billion two-part offering of senior notes (B2/BB-).

The Philadelphia-based company priced a $500 million add-on to its 5 1/8% senior notes due Jan. 15, 2024 at 103.75 to yield 4.364%. The reoffer price came rich to price talk in the 103.5 area; early guidance was also in the 103.5 area.

In addition, Aramark priced $500 million of new 10-year senior notes at par to yield 4¾%. The yield came at the tight end of the 4¾% to 5% yield talk. Early guidance had the new notes pricing to yield in the high 4% to 5% yield context.

Wells Fargo was the left bookrunner for the debt refinancing deal. BofA Merrill Lynch, Barclays, Credit Suisse, JP Morgan, Goldman Sachs and Morgan Stanley were the joint bookrunners.

Vereit whisper 5 1/8% area

The Monday session also saw a modest buildup of the forward calendar.

Vereit is expected to price a $500 million offering of 10-year senior bullet notes on Thursday at the conclusion of an investor roadshow.

The debt refinancing deal is in the market with early guidance in the 5 1/8% area, the source added.

J.P. Morgan, Barclays, Citigroup, Capital One, Goldman Sachs and Morgan Stanley are joint bookrunners.

PennyMac starts roadshow

PennyMac Financial Services began a roadshow on Monday for a $300 million offering of non-callable five-year senior notes (expected ratings B2/B+).

Early guidance has the notes pricing with a yield in the low to mid 9% range, a trader said.

The offer is expected to price Thursday.

JP Morgan, Barclays, BofA Merrill Lynch, Credit Suisse and Goldman Sachs are the joint bookrunners.

Proceeds will be used to repay revolver debt and for general corporate purposes.

Dell secureds possible Tuesday

The Monday session produced news on Dell Inc.’s $16 billion minimum six-part offering of senior secured notes (BBB-) backing the acquisition of EMC Corp.

Early guidance was updated.

Final talk had been expected to surface as early as late Monday, however it was not available at press time.

The overall secured bond portion of the financing – the final size of which remains to be determined – was said to be playing to $30 billion of demand at midday Monday. Demand was most concentrated on the 10-year notes, with the second-most amount of demand being for the five-year tranche, with the three-year tranche seeing the third-most demand, and the 30-year tranche seeing the fourth-most.

As reported, dealers are keen to move as much secured paper as possible in order to hold the line on the aggregate interest rate of the acquisition financing.

An offering of speculative-grade senior unsecured notes could surface as early as this week, sources said on Monday. However the overall size of the unsecured portion of the bonds is now expected to be around $3.25 billion, they say, drastically reduced from the $9 billion which had been expected in recent weeks.

In part because the junk-rated unsecured bond offering is expected to shrink, high-yield investors are highly likely to put in for the investment-grade-rated secured bonds, sources say.

Inflows on Friday

Cash flows for dedicated high-yield bond funds were positive on Friday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $65 million of inflows on the day.

Asset managers saw $55 million of inflows on Friday.

Dedicated bank loan funds, meanwhile, saw $15 million of inflows on Friday, the trader said.

Aramark issue quoted higher

In the secondary market, a trader said that Aramark’s new 10-year notes were in a 100 3/8 to 100 5/8 bid context when they opened, after having priced at par, “then the bid got hit, and they pulled back to 100¼.”

He was also seeing some bids around 104 on the 5 1/8% 2024 add-on notes, which had priced at 103.75.

At another desk, a trader saw the 10-years circulating between 100¼ and 100½ bid.

Some recent deals trading

Traders reported activity in some of the issues which priced last week but only on relatively modest volume – something of a change of pace, given the very busy secondary dealings which some of that paper saw last week.

For instance, a trader saw the new Cheniere Corpus Christi 7% senior secured notes due 2024 holding steady at about 101 3/8 bid, on volume of about $11 million – well down from the intense activity in those bonds seen after they priced on Thursday, when over $24 million changed hands, and especially on Friday, when volume swelled to more than $116 million.

Another trader saw those bonds at 101¼ bid, 101½ offered.

The company, a unit of Houston-based liquefied natural gas transportation, storage and marketing services company Cheniere Energy, Inc., priced $1.25 billion of those notes at par after the regularly scheduled forward calendar offering was upsized from an originally announced $1 billion.

LifePoint Health’s new 5 3/8% notes due 2024 were seen up 3/8 point on Monday at 100 3/8 bid, a market source said, with about $10 million of volume.

Another trader saw them ¼ point better, at 100 1/8 bid, 100½ offered.

LifePoint, a Brentwood, Tenn.-based operator of hospitals and other healthcare facilities, priced $500 million of those notes at par in a quick-to-market offering on Thursday after the deal was upsized from $400 million originally.

More than $40 million of the bonds were traded in initial aftermarket dealings later that session, gaining ¼ point from their par issue price, and more than $76 million moved around on Friday, as the notes dropped back to around the par bid level.

Goodyear’s 5% notes due 2026 were seen by a trader to have eased by 1/8 point on Monday to 101 3/8 bid, with about $8 million having traded.

The Akron-based tire-making giant had priced $900 million of those notes at par in a drive-by offering last Tuesday.

Secondary demand for that paper was heavy, with over $120 million seen having traded later Tuesday, raising the bonds about ½ point, and another $64 million on Wednesday, bringing them above the 101 bid mark. The bonds continued to firm beyond that on Thursday and Friday, though on somewhat reduced volume.

Among other names that made their debut last week, a trader said he had not seen any kind of activity in Griffon Corp.’s 5¼% add-on notes due in March 2022, characterizing it as “a real small deal” that likely would not be seen trading around much.

A second trader did quote the bonds at 100¼ bid, 101¼ offered.

That would be a solid rise from the 98.76 level at which Griffon, a New York-based maker of building products, tools, communications equipment and plastics, priced its $125 million quick-to-market add-on to its existing $600 million of the 2022 bonds. That deal priced on Friday afternoon to yield 5½% after having been upsized from an originally announced $100 million.

iHeart improves on advisers

Away from the new issues, a trader saw iHeartMedia’s 14% notes due 2021 shoot up to around the 37½ bid level, a gain of more than 7 points on the session.

“It seems like they had some good news” pushing the bonds up, he said, with active dealings of almost $30 million.

iHeart’s 10% notes due 2018 climbed more than 5½ points on the session to end at 48½ bid, another trader said, estimating volume in that paper at around $9 million.

The company’s over-the-counter-traded shares gained 4 cents, or 4.65%, ending at 90 cents per share, though only a few thousand shares actually traded.

The bonds and shares rose on news reports that iHeart – groaning under the weight of some $21 billion of debt incurred when the San Antonio, Texas-based broadcasting and outdoor advertising company then known as Clear Channel Communications, Inc., was taken private in a giant-sized leveraged buyout – had hired Millstein & Co., a restructuring advisory firm, to help it evaluate options for its debt, possibly including buying some of it back.

Earlier this year, iHeart had also hired investment bank Moelis & Co. as a financial adviser.

In recent months, iHeart has been locked in a dispute with some of its senior secured creditors, largely hedge funds, over the company’s decision to move shares from one subsidiary to another, which the creditors have claimed constitutes a default.

A trial on iHeart’s motion to stop the creditors from legally declaring that an event of default had happened was scheduled to begin on Monday in a state courtroom in San Antonio.

The company meantime disclosed in an 8-K filing Monday with the Securities and Exchange Commission the various proposals iHeart and its creditors were putting forward in their debt negotiations (see related story elsewhere in this issue).

Sale boosts Memorial Resource

Elsewhere, Memorial Resource Development LLC’s 5 7/8% notes due 2022 zoomed by more than 9 points on the session Monday, given a big boost by the news that Range Resources Corp. will acquire the bond issuer’s corporate parent, Memorial Resource Development Corp.

The notes closed at 99 3/8 bid, well up from their most recent trading levels around 90 in the middle of last week, a market source said.

He said that more than $35 million of those notes changed hands, making them the day’s busiest credit in Junkbondland.

The all-stock deal is valued at some $4.4 billion, including Fort Worth, Texas-based Range’s assumption of some $1.1 billion of Memorial Resource debt.

According to the Houston-based exploration and production company’s most recent 10-Q filing with the SEC, it has $600 million of the notes outstanding, as well as $524 million in borrowings against its $2 billion revolving credit facility.

After the transaction, Memorial Resource shareholders will own about 31% of the combined company.

Range Resources own bonds were up across its capital structure, moving into the mid-90s. Its most active issue – the 5% notes due 2023 – gained 1¼ points to end at 94½ bid, with over $10 million having changed hands.

But the company’s shareholders failed to share the bondholders’ enthusiasm – its New York Stock Exchange-traded shares plunged by $4.32, or 10.28%, ending at $37.69, on volume of over 19 million shares, more than three times the norm.

Memorial Resource’s Nasdaq-traded shares, on the other hand, moved in tandem with that company’s bonds, rising by 41 cents, or 3.05%, to $13.86 per share. Volume was 29.9 million shares, more than seven times the usual daily turnover.

Indicators get better

Statistical market performance measures turned higher across the board on Monday, after having been lower all around on Friday. Monday was the second stronger session in the last three trading days.

The KDP High Yield Daily Index rose by 11 basis points on Monday, ending at 67.39, versus Friday’s loss of 15 bps, its first such downturn after three straight gains.

Its yield correspondingly came in by 4 bpd, to 6.25%, its fourth such narrowing in the last five sessions. On Friday, the yield had risen by 6 bps.

The Markit Series 26 CDX North American High Yield Index was up by nearly 5/16 point on Monday, closing at 102 9/32 bid, 102 11/32 offered, after having moved down by 13/32 point on Friday. Monday’s gain was the index’s second in the last three sessions.

The Merrill Lynch North American High Yield Master II Index firmed by 0.23% on Monday, its fourth gain in the last five sessions. That winning streak was interrupted only by Friday’s 0.077% retreat.

Monday’s improvement raised the index’s year-to-date return to 7.153% – its first time back over 7% in nearly two weeks, since May 3, when it had closed at 7.019%. The cumulative return had dropped to 6.908% on Friday, well down from the peak level for the year so far of 7.398%, reached on May 2.

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