Quorum Health deal caps $10.9 billion week, year’s biggest; Quorum firms; recent issues move up

By Paul Deckelman and Paul A. Harris

New York, April 8 – The high-yield primary market closed out its heaviest-volume week since last November on Friday with one modestly sized calendar offering, as hospital operator Quorum Health Corp. priced $400 million of seven-year notes at a sizable discount. Traders saw the new bonds firm when they hit the aftermarket, on busy volume.

That deal brought the week’s new-issuance total to $10.92 billion in nine tranches, well up from the $6.36 billion of new U.S. dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers which got done in six tranches the previous week, ended Friday, April 1, according to data compiled by Prospect News.

Not only did this week produce the most new junk paper of any week so far this year, it was also the heaviest issuance since the week ended Nov. 6, 2015, when $13.94 billion was priced in 15 tranches, the data indicated.

The week’s issuance, in turn, lifted year-to-date new issuance to $43.31 billion in 59 tranches – although that was still 54.1% behind the pace seen a year ago, when $94.40 billion of bonds had priced in 144 tranches by this time on the calendar, according to the data.

Secondary market traders meantime saw brisk activity at mostly firmer levels among some of the new deals that priced earlier in the week, including those from Numericable SFR SA – which remained the most actively traded name in Junkbondland for a third consecutive session – as well as Charter Communications, Inc. and MGM Growth Properties, LLC.

The overall junk market, even away from the new deals, was seen doing better on Friday.

Statistical market performance measures turned higher across the board, after having been lower all around on Thursday. It was indicators’ second upside session in the last three trading days.

For the week, though, the indicators were mixed from where they had finished the previous Friday.

Quorum yields 12%

Quorum Health priced Friday’s sole dollar-denominated deal, a $400 million issue of 11 5/8% seven-year senior notes (Caa1/CCC+) that came at 98.266 to yield 12%.

The yield printed on top of yield talk. The reoffer price came cheap to discount talk of approximately 1 point.

Pricing on the deal hiked north during the time it was in the market, sources said. Initially guided in the 11% area, talk moved to 11½% not long before the above-mentioned official price talk circulated, a trader recounted.

Credit Suisse, UBS, Bank of America, Citigroup, J.P. Morgan, Wells Fargo, RBC and SunTrust were the joint bookrunners.

Talk on the Brentwood, Tenn.-based acute care hospitals company’s $880 million six-year first-lien term loan (B1/B) also moved higher, to Libor plus 575 basis points from earlier 500 to 525 bps talk, while the original issue discount on the loan widened to 98 from 98.5

Proceeds from the debt financing will be used to help fund the spinoff of the company from Community Health Systems Inc.

Peugeot yields 2 3/8%

There was also activity in the euro-denominated primary market on Friday.

Peugeot SA launched and priced a €500 million issue of seven-year senior notes (Ba2//BB) at par to yield 2 3/8%.

The deal, which priced at the tight end of yield talk that had been set in the 2½% area, was eight times oversubscribed, according to an informed source.

BNP Paribas and HSBC were the global coordinators.

Credit Agricole, Natixis, Santander and SG were the active bookrunners.

The week ahead

Friday’s action cleared the active forward calendar.

However the week ahead promises to be at least as active as the past week, with drive-by deals and roadshow announcements, sources said on Friday.

Micron Technology, Inc. is expected to come to market with a $1 billion offering of seven-year senior secured notes during the week ahead.

Morgan Stanley, the lead in the Boise, Idaho-based semiconductor manufacturer’s concurrent $500 million term loan, is also expected to lead the bond offer.

The notes will come with three years of call protection and will feature investment grade-style covenants, a trader said.

Elsewhere Pinnacle Entertainment Inc. is expected to come with a $300 million offering of senior notes (B2/BB-) during the April 11 week.

J.P. Morgan is expected to lead the deal.

Proceeds will be used to refinance existing debt and for general corporate purposes.

The financing, which also includes a $935 million credit facility, is being done in connection with the spin off of the operating business and the real property of Belterra Park Gaming & Entertainment into a separately traded public company (Pinnacle) and the sale of the remaining real estate assets (PropCo.) of Pinnacle to Gaming and Leisure Properties Inc.

Should the deal materialize, Pinnacle Entertainment would come on the heels of a blowout spinoff deal from Las Vegas-based MGM Growth Properties Operating Partnership LP, which priced $1.05 billion of 5 5/8% senior notes due May 1, 2024 (B2/B+) on Wednesday.

That deal played to orders totaling between $9 billion and $10 billion, a sellside source said on Friday.

The new MGM Growth Properties 5 5/8% notes due 2024 were trading at 102 7/8 bid, 103 1/8 offered heading into the Friday close, the sellsider said.

Earlier in the session a trader spotted them at 103¼ bid, 103½ offered.

It also bears reiterating that among the past week’s deals came the biggest tranche of junk ever to clear the market.

Numericable priced a whopping $5.19 billion issue of 7 3/8% senior secured notes due May 1, 2026 (B1/B+) at par on Wednesday. The deal was massively upsized from $2.25 billion.

Mixed flows on Thursday

Cash flows for dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time, according to a buyside source.

High-yield ETFs sustained $23 million of outflows on the day.

Actively managed funds saw $45 million of inflows.

Thursday’s daily flows came on the heels of news that the dedicated high yield funds saw $1.181 billion of inflows for the week to Wednesday’s close, according to Lipper-AMG.

Meanwhile, dedicated bank loan funds sustained $10 million of daily outflows on Thursday.

Quorum Health moves up

In the secondary arena, traders saw the new Quorum Health 11 5/8% notes due 2023 firm smartly when they hit the aftermarket shortly after pricing at a sizable discount.

One trader said that more than $18 million of the notes changed hands during that short burst of late-afternoon aftermarket activity.

He saw the notes closing the day at 101½ bid – well up from the 98.266 level at which the deal got done.

Numericable again tops actives

In what has come to be a familiar story in the junk market this week, the most actively traded issue of the day once again was Numericable’s 7 3/8% senior secured notes due 2026. A market source said that more than $113 million of the notes traded on Friday, easily the most active credit of the day.

That was on top of the more than $63 million of the notes that traded on Wednesday, after the issue priced, as well as more than $450 million that changed hands in Thursday’s dealings.

The market source said that the new bonds were up by 3/8 point on Friday, finishing the session at 100¾ bid.

A trader at another desk saw the bonds trading in a 100 5/8 to 101 1/16 bid range.

Yet another trader said that most of the day’s activity in Numericable happened in a narrow, 100¾ to 101 bid context.

Numericable, a St. Denis, France-based broadband and wireless service provider, priced $5.19 billion of the 7 3/8% notes at par in a forward calendar offering on Wednesday after the transaction had first been upsized from its original $2.25 billion size and was then upsized again from $3 billion to its eventual total.

It was the largest single junk market offering since Sept. 11, 2015, when Stamford, Conn.-based wireline telecommunications operator Frontier Communications Corp. priced $6.6 billion of new junk paper in three tranches.

The new notes initially went home on Wednesday around 100¾ bid, then firmed around the 101 bid level in Thursday’s intensively active trading.

-Sara Rosenberg contributed to this market commentary

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