Cumberland prices; Petsmart surges on Chewy acquisition; Post up a bit after buying Weetabix; pharma down

By Colin Hanner and Paul A. Harris

Chicago, April 18 – Cumberland Farms, Inc. priced $300 million of eight-year senior notes on Tuesday, while in the high-yield secondary market mergers and acquisitions were felt, traders said, with the most-active traded issues coming out of Petsmart, Inc.

The pet-product retailer acquired online pet food and product retailer Chewy, Inc. for $3.35 billion, according to Recode, which cited several sources close to the deal. The price tag made it the largest e-commerce acquisition ever.

Petsmart bonds shot up in early morning trading, a trader said, before paring some gains in the afternoon to remain in the net positive for the session.

On Tuesday, St. Louis-based consumer packaged goods company, Post Holdings, Inc., announced it acquired Weetabix Food Co. for £1.4 billion in a news release.

Though Post’s stock and ratings were downgraded on the day, its bond were up marginally, a trader said.

In what would affect other pharmaceutical companies on the day, Cardinal Health, Inc. announced it was lowering expectations for its guidance range because of anticipated fourth-quarter results due to falling drug prices, a news release said.

Valeant Pharmaceuticals International, Inc. and Concordia International Corp. posted losses on the day.

Cumberland Farms eight-year deal

In Tuesday's primary market session Cumberland Farms, Inc. priced a $300 million issue of eight-year senior notes (B3/B) at par to yield 6¾% on Tuesday, according to a market source.

BofA Merrill Lynch, Wells Fargo Securities LLC, BMO Securities, SunTrust Robinson Humphrey, Citizens and Huntington were the joint bookrunners.

The Westborough, Mass.-based regional chain of convenience stores plans to use the proceeds to repay $191 million of existing debt and to put cash on the company's balance sheet.

Drax roadshow

Drax Group Co. plans to start a two-day roadshow on Wednesday for its £500 million two-part offering of five-year senior secured notes (expected ratings BB+/BB+), according to a market source.

The deal features £275 million minimum fixed-rate notes with two years of call protection, and a to-be-determined amount of floating-rate notes with one year of call protection.

The roadshow wraps up on Thursday.

Joint bookrunner Barclays will bill and deliver for the Rule 144A and Regulation S for life offer. JP Morgan is also a joint bookrunner. BofA Merrill Lynch and Lloyds are co-managers.

The Selby, United Kingdom-based coal and biomass generator plans to use the proceeds to repay its bridge facility and refinance existing term debt.

Garda next week

Garda World Security Corp. plans to launch $630 million of senior notes (Caa2/CCC+) on Monday, according to a market source.

Timing on the bonds was announced on Tuesday in conjunction with the announcement of deadline extensions of other components of the cash logistics and security solutions provider's refinancing and recapitalization effort.

The expiration date for the company's tender offer for its $440 million of 7¼% senior notes due 2021 was extended to May 12 from April 18.

Also the commitment deadline for the $980 million-equivalent covenant-light term loan, in the market via Barclays, Citigroup Global Markets Inc., Macquarie Capital (USA) Inc., TD Securities (USA) LLC and Societe Generale, was extended to April 25 from April 19.

Voyage Care two-part offer

In the sterling-denominated market, Voyage Care BondCo plc announced in a Tuesday press release that it is offering £250 million of secured notes.

The Rule 144A and Regulation S offer includes £210 million of senior secured notes due 2023 and £40 million of second-lien notes due 2023.

Proceeds, together with equity to be injected in Voyage BidCo Ltd. by certain of its shareholders, an expected draw on a new revolving credit facility and cash on hand, will be used to fully redeem the £222 million of 6½% senior secured notes due 2018 and £50 million of 11% second-lien notes due 2019 on May 13 and fund working capital requirements.

The prospective issuer is a Cannock, England-based services provider for individuals with disabilities.

Travelodge floating-rate deal

Thame and London Ltd. (Travelodge) and its subsidiaries announced in a Monday press release that TVL Finance plc, an indirect subsidiary of Travelodge, will make an offering of £165 million of senior secured floating-rate notes due 2023.

Proceeds from the Rule 144A and Regulation S offer, together with cash on hand, will be used to take out the group’s existing senior secured floating rate notes, redeem 10% of the outstanding senior secured fixed rate notes and to make certain payments to Travelodge’s shareholders in an amount not to exceed £35 million.

Petsmart jumps

Petsmart’s 7 1/8% notes due 2023 finished the day in a 94 to 94¼ zip code, traders said, a 1½-point gain on the session. A trader said it had traded as high as 97 before coming back down.

“It traded up immediately in the day” when the deal to acquire Chewy Inc. was announced, a trader said, though details, including the price of the deal, were not disclosed until the afternoon.

“There was not a lot of details on that acquisition,” a trader said. “It was kind of hard to figure out what exactly the deal is going to look like, but certainly created a lot of activity in that one today.”

The acquisition is expected to close by the end of PetSmart’s second fiscal quarter of 2017, a news release said.

Posting higher

Cereal maker Post Holdings 5¾% notes due 2027 were up ½ point to 101, a trader said.

The billion-dollar euro acquisition caused Post’s stock to plummet $3.35, or 3.81%, to $84.51.

Post said in a press release that it expects to fund the acquisition of Weetabix with a combination of cash on hand, borrowings under its existing revolving credit facility and possibly a new senior secured term loan facility.

Pharma, hospitals lower

Largely seen as bringing down the pharmaceutical sector was Cardinal Health’s lowered expectations for the quarter, and Valeant Pharmaceuticals seemed to take the brunt.

Its 6 1/8% notes due 2025 were down ¾ point to 73, while the 7% notes due 2021 were down ½ point to 83 3/8, a trader said.

The 5 3/8% notes due 2020 were down 1 point to 85 1/8.

Concordia International’s 9% notes due 2022 were down ¾ point to 69½.

Similar to the Cardinal Health-contagion for pharmaceuticals, HCA Holdings Inc.’s forecast of its first quarter earnings on Monday may have weighed down on its 5¼% notes due 2025 on Tuesday, which were down 3/8 point to 106 5/8, a trader said.

Tenet Healthcare Corp.’s 6¾% notes due 2023 were down 1 point to 95¼.

Hertz heads down

“Hertz bonds were active,” a trader said on Tuesday. “[There was] not a lot of price movement, and it looked like it was a smidge weaker.”

The 5 7/8% notes due 2020 were down ¾ point to 92 7/8.

And its 6¾% notes due 2019 were down ¼ point to 98¼, “rebounding off lower trades” earlier in the session, a trader said.

High-yield wrap

Ultra Petroleum Corp.’s recent 6 7/8% notes due 2022 were down ½ point to par.

Dish Network Corp.’s 6¾% notes due 2021 were unchanged at 106¼.

Telecommunications company Charter Communications Inc.’s 5 1/8% notes due 2027 were up ½ point to par-and-and-half, a trader said.

L Brands Inc.’s 5 5/8% notes due 2023 were down 1/8 point to 103 1/8.

And GameStop Corp.’s 6¾% notes due 2021 were unchanged at 103.

Market indexes fall

The KDP High Yield Daily index was down by 5 basis points to finish at 71.90, its fifth-straight loss following four straight gains.

Its yield was up 1 bp to 5.25%, breaking a three-session streak of flat movement.

The Markit CDX Series 28 index was down less than ¼ point on Tuesday, following a 1/8-plus point setback on Monday, its second-consecutive narrowing.

It finished with a 106.605 bid, 106.695 offer.

On Thursday, it firmed by 3/32 point to finish at 106 27/32 bid, 107 29/32 offered after having dropped by nearly ¼ point on Wednesday.

Devika Patel contributed to this review

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