Bausch Health trades up, Century Communities, Charter lag; Tronox drops post-earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 10 – After the largest week of the year for new deal activity, the domestic high-yield primary market took a breather on Friday.

While there is uncertainty regarding activity in the week ahead, some deals remain on the forward calendar.

VistaJet Malta Finance plc is in the market with a $525 million offering of five-year senior notes (B3).

And Australia-based Ausdrill Finance Pty Ltd. is marketing a $500 million offering of seven-year senior notes (Ba2/BB).

While no dollar-denominated deals priced on Friday, EM-focused United Group BV priced €856 million of notes in two tranches.

Meanwhile, the secondary space closed out a soft week with a weak tape.

New paper continued to dominate trading activity although several of the deals to free for trade on Thursday had lackluster performances in the secondary space.

Charter Communications, Inc.’s 5 3/8% senior notes due 2029 (BB/BB+) were seen hovering at par while Century Communities, Inc.’s 6¾% senior notes due 2027 (B2/B+) were lagging their issue price in the secondary space.

However, Bausch Health Cos Inc.’s recently priced tranches (B3/B-/B) were continuing to trade at a premium, although the notes were slightly weaker from the levels reached after freeing for trade.

Outside of the new paper, weak earnings continued to drag down the secondary space.

Tronox Ltd.’s 6½% senior notes due 2026 dropped in active trading after a large earnings miss.

After a rebound during the previous session, Weatherford International plc’s junk bonds were again trading down during Friday’s session.

The company announced its intention to file for bankruptcy in its quarterly earnings report released after the market close.

United Group prices

EM-focused United Group priced €856 million of notes in two tranches.

The secured tranche featured €550 million of six-year senior secured floating-rate notes (B2/B), which priced at par and will bear interest at a 412.5 basis points spread to Euribor, with no Euribor floor.

The spread came at the tight end of spread talk in the Euribor plus 425 bps area. The issue price came on top of price talk.

In the unsecured tranche, issuing entity Summer Bidco BV priced €306 million of senior holdco pay-if-you-can PIK notes (B-) at par with a cash yield of 9%, at the wide end of the 8¾% to 9% yield talk.

The PIK notes have a 9% cash coupon and a 9¾% PIK coupon.

Physical bookrunner and global coordinator JPMorgan will bill and deliver.

Credit Suisse, KKR and Morgan Stanley were global coordinators and joint bookrunners. Credit Agricole CIB was a joint bookrunner.

Proceeds will be used to refinance the bridge facility put in place to fund the acquisition of United Group by BC Partners.

The week ahead

A quiet Friday notwithstanding, over the past week the new issue market put up the biggest weekly issuance total in over nine months.

Issuers raised $11.25 billion during the May 6 week, the biggest weekly total since the week of Aug. 6, 2018 which saw $12.33 billion of issuance, according to Prospect News data.

In the wake of the past week's big run, there was some uncertainty as to how busy the primary market will be during the week ahead.

There could be some opportunistic issuers, a syndicate banker said, but added that a number of issuers that priced deals in the past week likely moved up timing.

It became clear that in spite of the trade war headlines that roiled stock markets around the world, high-yield investors remained intent upon putting cash to work in the new issue calendar.

It's anyone's guess as to whether the issuance window that remained wide open during the May 6 week will stay open, the banker said.

In any case the week will get underway with a thin calendar.

VistaJet Malta Finance is in the market with a $525 million offering of five-year senior notes (B3).

The deal conducted a roadshow during the previous week.

As the market awaits official talk, the whisper on VistaJet's debt refinancing deal is in the 9% area.

And Australia-based Ausdrill Finance marketed a $500 million offering of seven-year senior notes (Ba2/BB) during the past week.

Initial talk on that debt refinancing deal is in the high 6% area.

Charter at par

Charter Communications’ 5 3/8% senior notes due 2029 were hovering around par in secondary trading.

The notes were seen at 99 7/8 bid, par 1/8 offered on Friday, according to a market source.

Sources attributed the lackluster performance of the notes to their tight pricing.

Charter priced a downsized $750 million issue of 10-year senior notes (BB/BB+) at par to yield 5 3/8%.

The issue size was decreased from $1 billion.

The yield printed in the middle of guidance in the 5 3/8% area.

The deal was downsized to maintain the company’s desired pricing, a source said.

Century Communities lags

Century Communities’ 6¾% senior notes due 2027 were lagging their issue price in the secondary space.

The notes were seen at par ¼ bid, par 3/8 offered early in Friday’s session.

However, they had dropped to 99¼ bid, par offered by the late afternoon.

Century Communities priced an upsized $500 million issue of the 6¾% notes at par on Thursday.

The issue size increased from $400 million.

The yield printed at the wide end of the 6½% to 6¾% yield talk, which was also the initial price talk.

Bausch weakens

While Bausch’s new tranches continued to trade at a premium to their issue price, they were coming in slightly from the levels seen after freeing for trade on Thursday.

Bausch’s 7% senior notes due 2028 were trading just shy of par ½ in high-volume activity on Friday after closing Thursday at par ½.

The notes were among the most actively traded in the secondary space with more than $96.5 million in reported volume by the late afternoon.

The 7¼% senior notes due 2029 were down ¼ to par ½ after closing Thursday at par ¾, a market source said.

The notes were second only to the 7% notes in trading volume. More than $88.5 million of the bonds were on the tape by the late afternoon.

Bausch Health priced $1.5 billion of senior notes in two evenly split tranches in a Thursday drive-by with both tranches pricing at par.

Tronox drops

Tronox’s 6½% senior notes due 2026 were trading down in high-volume activity following a large earnings miss.

The 6½% notes dropped 1¼ points to trade at 97¼ in the late afternoon. More than $23.5 million of the bonds were on the tape during Friday’s session.

Tronox reported revenue of $390 million for the first quarter, which missed analyst expectations for revenue of $412 million by almost 12%, a market source said.

Weatherford down again

After a rebound during Thursday’s session, Weatherford’s junk bonds were again down after another delay in its earnings report.

The 5 1/8% senior notes due 2020 were down more than 4 points to 69¾, according to a market source.

They gained 2 3/8 points to change hands just shy of 74 during Thursday’s session.

Weatherford’s 8¼% senior notes due 2023 dropped 1¾ points to 63¼, according to a market source.

Weatherford’s junk bonds were under pressure after the company delayed its earnings report, which was initially expected on Wednesday.

The company was expected to release earnings prior to the market open on Friday. However, the earnings report did not materialize until after the market close.

The company announced in its quarterly report its intention to file for Chapter 11 bankruptcy.

Mixed Thursday flows

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

High-yield ETFs sustained $337 million of outflows on the day.

However, actively managed high-yield funds saw $60 million of inflows on Thursday, the source said.

News of Thursday's daily flows follows a late Thursday afternoon report that the combined funds sustained $212 million of outflows in the week to Wednesday's close, according to Lipper US Fund Flows.

It was only the fourth negative weekly cash flow of 2019, the trader said.

Indexes mixed

Indexes were mixed on Friday. However, all posted cumulative losses on the week.

The KDP High Yield Daily index dropped 6 basis points to close Friday at 70.08 with the yield 5.91%.

The index was down 12 bps on Thursday, 5 bps on Wednesday, 2 bps on Tuesday and 6 bps on Monday.

The index saw a cumulative loss of 31 bps on the week last week.

The ICE BofAML US High Yield index dropped 2.9 bps on Friday with the year-to-date return now 8.308%.

The index was down 29.6 bps on Thursday, 2 bps on Wednesday, 11 bps on Tuesday and 13 bps on Monday.

The index saw a cumulative decline of 58.5 bps on the week.

The CDX High Yield 30 index rose 42 bps to close Friday at 107.

The index dropped 30 bps on Thursday, 14 bps on Wednesday, plummeted 42 bps on Tuesday and dropped 24 bps on Monday.

The index was down 68 bps on the week.

© 2015 Prospect News.
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