HD Supply, Hilcorp, Matador add-on price; Envision Healthcare drops; MEG Energy up on buyout offer

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 1 – October got underway with a bang in the primary market, which saw three dollar-denominated drive-by deals – two upsized and at least two conspicuously oversubscribed – clear the market on Monday.

HD Supply Holdings, Inc. priced a $750 million issue of eight-year senior notes (Ba3/BB-) at par to yield 5 3/8% in a quick-to-market Monday trade.

Hilcorp Energy Co. priced an upsized $600 million issue of 10-year senior notes (Ba2/BB+) on Monday at par to yield 6¼%.

Matador Resources Co. priced an upsized $300 million add-on to its 5 7/8% senior notes due Sept. 15, 2026 (B2/BB-) at 100.5 to yield 5.772%.

The forward calendar also continued to grow with EnPro Industries, Inc. planning a two-day roadshow to begin Tuesday for a $350 million offering of eight-year senior notes (existing ratings B1/BB).

In the European market, Playtech plc plans to start a roadshow on Tuesday for a €530 million offering of five-year senior secured notes (expected ratings Ba2/BB).

Germany's Bilfinger SE (S&P: BB) is in the market with a €300 million offering of five-year senior notes with pricing expected as early as Thursday.

And Warner Music Group Corp. is in the market with €200 million of eight-year senior secured notes (expected ratings Ba3/B+).

Meanwhile, new paper was in focus in the secondary space with both HD Supply and Hilcorp active and above their issue price after breaking for trade.

However, Envision Healthcare Corp.’s 8¾% senior notes due 2026 (Caa1/B-) continued to struggle in high-volume activity in the secondary space with the notes dropping more than 1 point.

While volume was light, Vine Oil & Gas LP and Vine Oil & Gas Finance Corp.’s 9¾% senior notes due April 15, 2023 (Caa1/B-) were strong in secondary trading with the notes well above issue.

Outside of new deal activity, MEG Energy’s junk bonds soared on Monday climbing 6 to 9 points after Husky Energy Inc.’s takeover bid.

Tesla Inc.’s 5.3% senior notes due 2025 not only rebounded but shot past their previous levels in high-volume trading on Monday after CEO Elon Musk’s settlement with the Securities and Exchange Commission.

HD Supply oversubscribed

HD Supply priced a $750 million issue of eight-year senior notes (Ba3/BB-) at par to yield 5 3/8% in a quick-to-market Monday trade.

The yield printed at the tight end of the 5 3/8% to 5½% yield talk. Initial price talk was in the mid-to-high 5% area.

The deal was playing to $1.25 billion of orders around noon ET on Monday, a trader said.

BofA Merrill Lynch was the left bookrunner for the debt refinancing deal.

The notes were active and trading at a premium to their issue price after breaking for trade, a market source said.

The 5 3/8% notes traded as high as par 5/8 but came in as the session progressed.

They were seen at par 1/8 bid, par ½ offered in the late afternoon with more than $25 million of the bonds on the tape.

Hilcorp upsized

Hilcorp Energy priced an upsized $600 million issue of 10-year senior notes (Ba2/BB+) in a quick-to-market trade.

The issue size was increased from $500 million.

The yield printed at the tight end of the 6¼% to 6½% yield talk.

The deal was playing to $1.4 billion of orders around 2 p.m. ET Monday, a trader said.

JP Morgan was the lead.

The Houston-based oil and gas exploration and production company plans to use the proceeds to repay bank debt and for general corporate purposes.

The notes traded in a wide range after breaking for trade, a market source said.

They lagged their issue price at times and changed hands for as low as 99 7/8. They also traded as high as 101.

They were seen at par 1/8 bid, par 3/8 offered in the late afternoon.

More than $79 million of the bonds traded during Monday’s session.

Matador upsizes tap

Matador Resources priced an upsized $300 million add-on to its 5 7/8% senior notes due Sept. 15, 2026 (B2/BB-) at 100.50 to yield 5.772% in a Monday drive-by.

The issue size was increased from $250 million.

The reoffer price came on top of price talk.

BofA Merrill Lynch was the left bookrunner.

The Dallas-based energy exploration and production company plans to use the proceeds to repay debt under its revolving credit facility and for general corporate purposes.

Brief roadshow for EnPro

EnPro Industries plans to start a two-day roadshow for a $350 million offering of eight-year senior notes (existing ratings B1/BB) on Tuesday, which will wrap up on Wednesday.

BofA Merrill Lynch, Wells Fargo Securities LLC, Fifth Third Bank and KeyBanc Capital Markets are the joint bookrunners.

The Charlotte, N.C.-based producer of highly engineered components plans to use the proceeds, together with a draw on its senior secured revolving credit facility, to redeem all of its outstanding 5 7/8% senior notes due 2022.

Playtech roadshow

The European new issue market also generated news on Monday.

Playtech plc plans to start a roadshow on Tuesday for a €530 million offering of five-year senior secured notes (expected ratings Ba2/BB)

Active bookrunner UBS will bill and deliver. NatWest Investments and Santander are also active bookrunners.

The Isle of Man-based gaming technology company plans to use the proceeds to repay bank debt and redeem outstanding Snaitech high yield bonds.

Bilfinger five-year deal

Germany's Bilfinger (S&P: BB) is seeking to price a €300 million offering of five-year senior notes, possibly as early as Thursday.

Initial talk is 3¼% to 3½%.

The Mannheim, Germany-based civil and industrial construction engineering services provider has completed an investor roadshow, engaging with over 60 accounts, the source added.

The deal size will not grow.

The maturity comes at the short end of the five- to seven-year range the company announced in mid-September.

At that time BNP Paribas, Deutsche Bank and HSBC were announced as joint bookrunners.

Elsewhere, Warner Music Group plans to price €200 million of eight-year senior secured notes (expected ratings Ba3/B+).

Credit Suisse has the books.

The New York-based music company plans to use the proceeds to fund the partial redemption of its 4 1/8% senior secured notes due 2024.

Envision drops

Envision Healthcare’s 8¾% senior notes due 2026 continued to struggle in the secondary space with the notes down more than 1 point from issue.

The 8¾% notes were seen at 99 bid, 99¼ offered early in the session but traded down to 98 7/8 in the afternoon, sources said.

More than $105 million of the bonds changed hands during Monday’s session.

The notes were trading down after breaking for trade on Friday.

They were seen as low as 99¼ bid soon after pricing.

There was some speculation the deal had trouble getting out the door, a market source said.

Envision Healthcare priced a downsized $1,225,000,000 issue of the 8¾% notes at par on Friday.

The deal was reduced from $1,625,000,000 with $400 million of proceeds shifted to a concurrent term loan, increasing its size to $5.45 billion from $5.05 billion.

The bond yield printed in the middle of yield talk set in the 8¾% area.

That talk came tight to the earlier whisper of 8¾% to 9%, as well as tight to initial price talk announced in the high 8% area, sources said.

Envision’s deal was the latest high-profile LBO deal to price.

Proceeds will be used to help fund the buyout of the company by KKR for $46.00 per share in cash, or about $9.9 billion including the assumption or repayment of debt.

Vine & Oil trades up

While the same credit rating as Envision, Vine & Oil’s 9¾% senior notes due 2023 put in a strong secondary market performance.

The 9¾% notes were seen at par ¾ bid, 101¼ offered, a market source said. However, trading of the new notes was light.

Vine & Oil priced an upsized $380 million issue of senior notes due April 15, 2023 (Caa1/B-) at par to yield 9¾%.

The deal was increased from $350 million.

The yield printed at the wide end of the 9½% to 9¾% yield talk. Initial price talk was set in the mid 9% area.

MEG Energy soars

MEG Energy’s junk bonds jumped 6 to 9 points on Monday after a hostile takeover bid for the Canadian oil sands company.

MEG Energy’s 7% senior notes due 2024 were up more than 9½ points to change hands at par 7/8, according to a market source.

More than $75 million of the bonds had traded by late afternoon.

The 6 3/8% senior notes due 2023 were also up about 9 points to trade at 99. More than $53 million of the bonds were on the tape.

The company’s 6½% senior notes due 2025 were up more than 6 points to 105¼. More than $63 million of the bonds traded during Monday’s session.

Husky’s unsolicited bid to buy MEG Energy in a deal valued at $5 billion, including debt, sent MEG Energy’s junk bonds soaring on Monday.

The deal would involve Husky refinancing the bonds, a market source said.

Tesla rebounds

Tesla’s 5.3% senior notes due 2025 were on the rebound on Monday with the notes shooting past their previous levels prior to Friday’s dip.

The notes were up 3 points to trade at 87½ on Monday. More than $28 million of the bonds were on the tape.

The notes were as low as 94¼ on Friday before closing the day at 85 bid, 85 1/8 offered.

Prior to Friday’s dip, the bonds were trading in the 86½ to 87 range.

Tesla’s stock and bonds rebounded after Musk and the SEC settled the SEC’s lawsuit over the weekend.

Musk will continue to serve as CEO; however, the settlement removes him from the position of chairman of the board, to which Tesla agreed to appoint two independent directors.

The surprise settlement came after Tesla’s stock and bonds took a beating on Friday after the SEC filed a lawsuit against Musk over his early August tweet about taking the company private.

The suit sought to bar Musk from serving as an executive or director of a publicly traded company, which rattled investors, sources said.

Friday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Friday, the most recent session for which data was available at press time, according to a trader.

High-yield ETFs saw $148 million of inflows on the day.

Actively managed funds saw $30 million of inflows on Friday, the trader said.

Indexes gains

Three benchmarks for the high-yield secondary market opened the week with large gains.

The KDP High Yield Daily index jumped 17 basis points to close Monday at 70.61 with the yield now 5.73%. The index was up 8 bps on the week last week.

The ICE BofAML US High Yield index jumped 22.5 bps on Monday with the year-to-date return now 2.708%. The gained 14.2 bps on the week last week.

The CDX High Yield 30 index also saw large gains on Monday. The index was up 20 bps to close the day at 107.6.

While seesawing between gains and losses throughout last week, the index closed the week flat.

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