ADT, Freedom Mortgage, Kosmos price; Churchill Downs, Viasat rise; funds up $1.79 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 21 – The domestic high-yield primary market saw three deals clear during Thursday’s session – one upsized, one downsized, and another revised its structure.

ADT Corp. truncated its notes offering and priced two of a planned three tranches on Thursday.

Freedom Mortgage Corp. priced a downsized $250 million issue of 10¾% five-year senior notes (B2/B-) at 98.119 to yield 11¼%.

Kosmos Energy Ltd. priced an upsized $650 million issue of seven-year senior notes (expected ratings BB-/BB) at par to yield 7 1/8%.

With three deals clearing, one more remains on the active forward calendar.

Nexeo Plastics plans to price its $410 million offering of seven-year senior secured notes (B3/B) on Friday.

Meanwhile, the secondary space was firm on Thursday with the paper priced during the previous session performing well in the secondary space.

Churchill Downs Inc.’s 5½% senior notes due 2027 (expected ratings Ba3/B+) were active and trading at a slight premium to their issue price during Thursday’s session.

Viasat, Inc.’s 5 5/8% senior notes due 2027 (B1/BB+) shot up in secondary trading with the notes more than 1 point above their issue price.

Power Solutions’ 8½% senior notes due 2027 (B3/B/B-) continued to see high-volume activity on Thursday.

While the notes rebounded slightly, they were still well below their highs after hitting the market.

Intelsat SA’s junk bonds again saw large declines on Thursday after another roadblock to the company’s C-band proposal surfaced.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw inflows of $1.796 billion for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

ADT prices secureds, pulls unsecureds

ADT truncated its notes offer and priced two of a planned three tranches on Thursday.

The revised debt refinancing deal featured $1.5 billion of first priority senior secured bullet notes (Ba3/BB-) in two evenly split tranches.

Included was a $750 million tranche of five-year notes that priced at par to yield 5¼%.

The yield printed in the middle of yield talk in the 5¼% area and tighter than initial talk in the 5½% area.

ADT also priced a $750 million tranche of seven-year notes at par to yield 5¾%.

The yield printed in the middle of yield talk in the 5¾% area and tighter than initial talk in the 6% area.

The Boca Raton, Fla.-based security services company withdrew a $1.25 billion tranche of unsecured notes that had been talked at 7½% to 7¾%, downsizing the overall transaction to $1.5 billion from $2.75 billion.

The two tranches of secured notes were heard to be playing to around $2 billion of orders across both tranches, a trader said.

Deutsche Bank Securities Inc., Barclays, Citigroup Global Markets Inc. and RBC Capital Markets LLC were the joint bookrunners.

Proceeds will be used to repay debt.

Kosmos Energy upsizes

Kosmos Energy priced an upsized $650 million issue of seven-year senior notes (expected ratings BB-/BB) at par to yield 7 1/8%.

The issue size was increased from $600 million.

The yield printed at the tight end of yield talk in the 7¼% area but wide of initial talk in the 7% area.

The debt refinancing deal was heard to be playing to a mix of high-yield and emerging markets accounts, sources said.

Citigroup Global Markets Inc., SG CIB and Standard Chartered Bank were joint bookrunners.

Freedom Mortgage downsizes

Freedom Mortgage priced a downsized $250 million issue of 10¾% five-year senior notes (B2/B-) at 98.119 to yield 11¼%.

The issue size decreased from $350 million.

The coupon and yield came on top of final talk. Initial talk had the yield printing in the high 10% area.

JP Morgan managed the debt refinancing deal.

Nexeo talk 9¾% to 10%

Looking to the Friday session, there is a sole dollar-denominated deal parked on the active calendar, set to price before the weekend.

Nexeo Plastics talked its $410 million offering of seven-year senior secured notes (B3/B) to yield 9¾% to 10%, on Thursday.

Official talk comes at the wide end of the 9½% to 10% initial talk.

Goldman Sachs is the left bookrunner.

Activity in the high-yield market is expected to be muted on Friday, as the National Collegiate Athletic Association's March Madness Men's Division 1 National Basketball Tournament continues to unfold in the United States, and people tend to office pool tournament brackets marked with their forecasted winners.

Churchill Downs active

Churchill Downs’ 5½% senior notes due 2027 were active and trading at a slight premium to their issue price on Thursday.

The notes were quoted at par 3/8 bid, par 5/8 offered with most trades on Thursday between par ½ and par 5/8.

They were slightly improved from Wednesday when they closed the day at par 3/8 bid, par ½ offered, a market source said.

More than $28.5 million of the bonds were on the tape by the late afternoon.

Churchill Downs priced an upsized $600 million issue of the 5½% notes at par in a Wednesday drive-by.

The issue size increased from $400 million.

The yield printed in the middle of the 5 3/8% to 5 5/8% yield talk and came at the tight end of initial guidance of 5½% to 5 5/8%.

Viasat trades up

Viasat’s 5 5/8% notes due 2027 were trading at a large premium to their issue price in the secondary space.

The notes were seen changing hands between 101 and 101¼ on Thursday, a market source said.

Volume was light in comparison to Wednesday.

About $15 million of the bonds changed hands by the late afternoon.

The notes saw high-volume activity on Wednesday with more than $128 million of the bonds changing hands after breaking for trade.

They were trading up out of the gate and were seen at par ¾ bid, 101 offered late Wednesday afternoon.

Viasat priced an upsized $600 million issue of the 5 5/8% notes at par on Wednesday.

The issue size was increased from $500 million.

The yield printed at the tight end of yield talk in the 5¾% area and tighter than initial guidance in the 6% area.

Power Solutions in focus

Power Solutions’ 8½% senior notes due 2027 remained in focus on Thursday with the notes rebounding slightly after dropping the previous session.

The 8½% notes were seen at par ½ bid, par ¾ offered and were changing hands at par 5/8, sources said.

More than $65 million of the notes were on the tape by the late afternoon.

The notes were up slightly after dropping about 1 point to par ½ on Wednesday.

The 8½% notes traded as high as 101½ after breaking for trade on Monday, a market source said.

While Power Solutions’ 8½% notes remained active, Power Solutions’ 6¼% notes due 2026 were quiet on Thursday with the notes still maintaining their large premium.

The 6¼% notes were seen changing hands between 101 7/8 and 102 on Thursday.

The 6¼% notes were secured notes and probably had less flippers involved, a market source said.

Intelsat drops

Intelsat’s junk bonds were again on the decline on Thursday as the satellite communications service provider’s C-band proposal met more bad news.

Intelsat’s 8 1/8% senior notes due 2023 dropped 3 points to 70 5/8 with more than $64 million of the bonds on the tape, a market source said.

The 5½% senior notes due 2023 were down 1 point to 88¾ with more than $46 million of the bonds on the tape.

The 8½% senior notes due 2024 dropped ¾ point to 97¾ with more than $45 million on the tape.

The 9½% senior notes due 2023 fell 2 points to 90 with $25 million on the tape.

Intelsat’s junk bonds fell after the Federal Communications Commission signaled it would take its time in reviewing the C-band proposal brought forward by Intelsat and a consortium of other satellite service providers.

Intelsat has joined with other satellite communications providers to form the C-band Alliance, which is proposing selling a portion of the C-band to aid in the adoption of 5G in the United States.

Intelsat’s junk bonds have been under pressure for much of March with the proposal meeting with political opposition.

Several congressional leaders have called for its rejection.

Big Wednesday inflows

The dedicated high-yield bond funds saw $1.796 billion of net inflows in the week to Wednesday's close, according to Lipper US Fund Flows.

An outsize portion of that amount came late in the reporting period, according to a trader.

The daily cash flows of the funds were strongly positive on Wednesday, the source said.

High-yield ETFs saw $506 million of inflows on the day.

Actively managed high-yield funds saw $488 million of inflows on Wednesday, the trader said.

Indexes gain

Indexes were on the rise on a strong day for the market on Thursday.

The KDP High Yield Daily index rose 12 basis points to close Thursday at 70.14 with the yield now 5.91%. The index was up 2 bps on Wednesday, 5 bps on Tuesday and 6 bps on Monday.

The ICE BofAML US High Yield index shot past 7% returns on Thursday. The index gained 21.4 bps with the year-to-date return now 7.112%.

The index gained 4.5 bps on Wednesday, 11.3 bps on Tuesday and 6 bps on Monday after a cumulative gain of 84.8 bps on the week last week.

After sinking below 6% year-to-date returns on March 9, the index popped back above it on March 11.

The index initially shot past 6% returns on Feb. 25 after passing 5% returns on Feb. 12.

The CDX High Yield 30 index rose 15 bps to close Thursday at 106.71. The index was up 9 bps on Wednesday, dropped 6 bps on Tuesday and gained 6 bps on Monday.

The index saw a cumulative gain of 97 bps on the week last week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.