Lithia prices, rises; new Hovnanians continue climb; Valeant firms on asset-sale news

By Paul Deckelman and Paul A. Harris

New York, July 17 – The new week opened quietly on Monday in the high -yield primary market, as a single deal was heard by syndicate sources to have priced.

They said that automotive retailer Lithia Motors, Inc. brought a $300 million issue of eight-year notes to market as a regularly scheduled forward calendar offering.

When those new bonds hit the aftermarket, traders said they were well-received, firming by more than 1 point in very active dealings.

The traders also saw continued strong gains, on brisk volume, in both halves of Friday’s offering of five- and seven-year secured paper from homebuilder K. Hovnanian Enterprises, Inc.

Another gainer was last week’s dollar-denominated issue from British performance carmaker McLaren Automotive.

Away from the issues that have already priced, syndicate sources said that junk investors – with ample cash on hand and a dearth of recent new-deal activity – were anticipating likely pricings this week from DAE Funding LLC, HD Supply Waterworks and Jefferies Finance LLC.

Outside of the new-deal realm, traders said that Valeant Pharmaceuticals International Inc.’s bonds firmed on news of an asset sale and anticipated debt paydown.

Statistical market performance measures were higher across the board for a fourth straight session on Monday; they had turned upwards on Wednesday and had continued improving on Thursday and again on Friday, after being mixed for three consecutive trading days before that.

Litihia inside of talk

In the Monday primary market session Lithia Motors, Inc. priced a $300 million issue of eight-year senior notes (Ba2/BB) at par to yield 5¼.

The yield printed 12.5 bps inside of the 5 3/8% to 5 5/8% price talk.

J.P. Morgan, U.S. Bancorp and BofA Merrill Lynch were the joint bookrunners.

The Medford, Ore.-based automotive retailer plans to use the proceeds for general corporate purposes, which may include acquisitions, capital expenditures and debt repayment.

DAE details deal

DAE Funding LLC detailed a $1.9 billion two-part offering of senior notes that was announced last week.

The deal, via sole bookrunner Morgan Stanley, includes a benchmark tranche of five-year notes, non-callable for two years, with initial guidance of 4¾% to 5%, and a benchmark tranche of seven-year notes, non-callable for three years, with initial guidance of 5 1/8% to 5 3/8%.

The notes are expected to price late in the week.

CD&R Waterworks whisper

Plumb Buyer, LLC, which currently does business as HD Supply Waterworks, is out with early guidance on its $475 million offering of eight-year senior notes (Caa1/B-) of 6¾% to 7%.

The deal is expected to price on Thursday.

BofA Merrill Lynch is leading the offer.

Proceeds will be used to fund the acquisition of Waterworks, which Clayton, Dubilier & Rice is buying for $2.5 billion from HD Supply.

Jefferies details deal

Jefferies Finance LLC detailed its $400 million offering of seven-year senior notes (B1/B).

The notes and are set to price at the end of the present week.

Jefferies is the left bookrunner. Citigroup and HSBC are joint bookrunners.

Proceeds, along with proceeds from a concurrent $250 million term loan, will be used to repay an existing term loan and for general corporate purposes.

Eurofins launches €500 million

In the European new issue market Eurofins Scientific launched a €500 million offering of seven-year senior notes on a Monday conference call.

BNP Paribas and BofA Merrill Lynch are the global coordinators.

Credit Agricole, Natixis and UniCredit are the joint bookrunners.

The deal is being marketed by means of an Internet roadshow. Subsequent timing remains to be announced.

The Luxembourg-based laboratory services provider plans to use the proceeds to repay bonds maturing in 2018, and for enhanced liquidity.

InfoPro roadshow

France-based InfoPro Digital began a roadshow on Monday for a €500 million two-part offering of senior secured notes (B2).

The roadshow is set to wrap up on Thursday.

The debt refinancing deal includes five-year fixed-rate notes with initial guidance of 4¾% to 5%, and five-year floating-rate notes with initial guidance of Euribor plus 475 basis points to 500 bps. Tranche sizes remain to be determined.

JPMorgan will bill and deliver. The syndicate of banks managing the deal also includes BNP Paribas and SG CIB.

The Paris-based multi-media products and services provider plans to use the proceeds to repay bank debt.

Mixed Friday flows

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

The hig- yield ETFs saw $493 million of inflows on the day.

Asset managers sustained $85 million of outflows on Thursday.

Dedicated bank loan funds were flat to positive, with $10 million of inflows on Friday, the trader said.

Everyone likes Lithia

In the secondary market, the new Lithia Motors, Inc. 5¼% notes due 2025 were seen posting strong gains when they moved into the aftermarket.

A trader enthused that the new issue was “doing fantastic” after pricing earlier in the session at par.

He saw the bonds firm to a 101-to-101¼ bid context, with volume of over $40 million putting the credit high atop the day’s Most Actives list.

A second trader pegged the new notes going home at 101¼ bid.

And at another desk, a market source saw the paper moving around between 100 5/8 and 101¼ bid.

Hovnanian moves higher

Friday’s new issue from Hovnanian Enterprises was meantime seen adding to the already strong gains that two-part issue had notched in initial aftermarket action.

“Hovnanian is going very well,” one of the traders said, seeing the company’s new 10% senior secured notes due 2022 1 point better on the day at 103½ bid.

He said that its 10½% senior secured notes due 2024 were doing even better, gaining 1½ points on the session to end around 105 bid.

“The volume was pretty good too,” he noted.

A second trader said that more than $29 million of the 10% notes changed hands, pushing the bonds up to a 103½-to-103 7/8 bid context, while the 10½% notes were last seen in a 104¾-to-105 bid range, on volume of more than $24 million.

A third trader said both halves of the deal were by 1¼ point on Monday, with the 10% notes at 103¾ bid, 104¼ offered, while the 10½ notes were ending at 10½ bid, 105 offered.

Hovnanian, a Red Bank, N.J-based homebuilder, priced both halves of its $840 million regularly scheduled forward calendar offering at par on Friday – $440 million of the 10% five-year notes and $400 million of the 10½% seven-year notes.

Those notes had stormed higher right from the get-go, with the 10% piece of paper seen having traded up to a 102-to-102½ bid context, with over $35 million having traded on Friday.

The 10½% notes had done even better in their initial aftermarket activity, moving up to a 103-to-103½ bid range, on turnover of more than $35 million.

McLaren motors upward

A trader said that McLaren Automotive’s 5¾% senior secured notes due 2022 gained ¾ point on Monday, finishing at 102¾ bid, 103½ offered.

The Woking, England-based performance car manufacturer had priced $250 million of those notes at par on Thursday, part of a £564 million equivalent two-part dual-currency offering, which was upsized from £525 million equivalent.

The other half of that offering was a £370 million five-year senior secured note, which priced at par.

The new dollar-denominated bonds had been seen by market sources having moved up to a 101½-to-102 bid context initially, and then having improved even further on Friday, rising to around 102 bid, with over $10 million having traded.

New deals show strength

A trader noted that recently, “there had not been much of a new-issue calendar, so you’ve got money just kind of circulating into the secondary market.”

With a relative dearth of new-deal activity in the first half of July, he indicated that paper-starved investors were just taking up the new issues as they appeared.

Valeant improves on asset sale

Outside of the new-deal realm, Valeant Pharmaceuticals International’s paper pushed up on news of an asset sale by the underperforming Laval, Que.-based drugmaker, with a trader seeing the company’s numerous issues of notes “up generically” by ½ to ¾ point “across the structure.”

He said the company’s most widely traded issue, the 6 1/8% notes due 2025 rose by just under 1 point, at 86 3/8 bid.

Another trader saw those notes up 7/8 point at 86 3/8, with over $10 million having traded.

About $5 million of its 6½% notes due 2022 traded, improving by 3/8 point, to 105 3/8 bid.

Valeant agreed to sell its Obagi Medical Products business for $190 million in cash to Haitong International Zhonghua Finance Acquisition Fund I, LP. The transaction is expected to close in the second half of the year.

Valeant will use the proceeds to pay down term loan debt.

Indicators continue firming

Statistical market performance measures were higher across the board for a fourth straight session on Monday; they had turned upwards on Wednesday and had continued improving on Thursday and again on Friday, after being mixed for three consecutive trading days before that.

The KDP High Yield Daily Index moved up by 8 basis points on Monday to end the day at 72.25, its fourth gain in a row. It had also jumped by 9 bps on Friday, 10 bps on Thursday and 9 bps on Wednesday, which was its first advance after five straight losses.

However, its yield – unusually -- rose by 6 bps on Monday to 5.08% after having tightened over the previous three sessions, including Friday’s 3 bps narrowing. The yield generally, although not exclusively, moves inversely to the index reading, usually falling when the index reading rises and rising when the index reading falls.

The Markit CDX Series 28 High Yield Index firmed for a fourth straight session on Monday, gaining 1/8 point to close at 107½ bid, 107 5/8 offered. On Friday, it had risen by more than 3/32 point, after having improved by 7/32 point on Thursday and by 13/32 point on Wednesday.

And the Merrill Lynch North American High Yield Index saw its sixth upturn improvement in a row on Monday, fattening by 0.218, on top of Friday’s 0.179% advance. Those six straight better sessions follow three sessions before that on the downside.

© 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.