Upsized SBA, Jonah deals price, gain; Rite Aid retreats; funds add $433 million

By Paul Deckelman and Paul A. Harris

New York, Sept. 28 – The high-yield primary arena saw a pair of upsized new issues on Thursday totaling $1.35 billion – off a little from the nearly $1.53 billion of new dollar-denominated and fully junk-rated paper which had gotten done in four tranches during Wednesday’s session.

Wireless communications infrastructure facilities provider SBA Communications Corp. did a quickly shopped $750 million of five-year notes while oil and natural gas producer Jonah Energy LLC priced a $600 million eight-year forward calendar offering.

Secondary market participants saw the new Jonah issue gain nearly 1 point in active aftermarket trading and they also quoted the new SBA issue higher.

They also saw brisk activity in such recently priced credits as United Continental Holdings, Inc., Chesapeake Energy Corp., Beazer Homes USA, Inc. and Pilgrim’s Pride Corp.

Away from the new issues, Rite Aid Corp.’s bonds and shares fell after the drugstore operator reported disappointing fiscal second-quarter results.

Bombardier, Inc.’s bonds – which had slid badly in active dealings on Wednesday after Washington imposed a hefty tariff on the Canadian aircraft manufacturer’s planes – rebounded a little.

Statistical market performance measures improved on Thursday after turning mixed on Wednesday.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – was in positive territory for a second straight week. Some $433 million more came into those weekly-reporting-only domestic funds than left them during the week ended Wednesday on top of last week’s $866 million net inflow (see related story elsewhere in this issue).

SBA Communications upsizes

In Thursday’s primary market, SBA Communications priced an upsized $750 million issue of five-year senior notes (expected B2/confirmed B+) at par to yield 4% in a quick-to-market trade.

The amount was increased from $500 million.

The yield printed at the tight end of the 4% to 4¼% yield talk.

Citigroup, JP Morgan, Barclays, Deutsche Bank, Mizuho, TD and Wells Fargo were the underwriters.

The Boca Raton, Fla.-based owner and operator of wireless communications infrastructure plans to use the proceeds, including those additional proceeds resulting from the $250 million upsizing, to repay amounts outstanding under its revolving credit facility, with any remaining proceeds to be used for general corporate purposes.

Jonah upsizes

Jonah Energy priced an upsized $600 million issue of eight-year notes (B3/BB-) at par to yield 7¼% on Thursday at the conclusion of a roadshow.

The transaction was increased from $500 million.

The yield printed at the tight end of the 7¼% to 7½% yield talk.

However during the time that the deal was in the market that talk widened out from the initial 7% to 7¼% guidance, a trader said, and he added that the deal also underwent covenant changes.

J.P. Morgan was the lead for the debt refinancing deal.

Caesar’s talk 5% to 5¼%

Looking to the Friday session, Caesars Entertainment Corp. talked its $1.7 billion offering of eight-year senior notes (B3/B-) to yield 5% to 5¼%.

Talk comes in line with initial guidance in the low 5% area, sources say.

Books were scheduled to close at the Thursday close of business and the deal is set to price on Friday.

J.P. Morgan is the lead bookrunner.

One other $1 billion-plus deal is on the active forward calendar heading toward the weekend.

West Corp. is selling $1.35 billion of eight-year senior notes (B3/CCC+/B-).

The roadshow ran in Los Angeles on Thursday, and is scheduled to wrap up in San Francisco on Friday.

Price talk will circulate on Monday and the deal is set to price Tuesday.

Almaviva prices tight

In the European market, Italian information technology services provider Almaviva SpA priced €250 million of five-year senior secured notes (B2/B+) at par to yield 7¼%.

The yield printed at the tight end of the 7¼% to 7½% yield talk.

Goldman Sachs managed the debt refinancing deal.

Elsewhere syndicate bankers in Europe are bracing for a significant ramp up in new deal volume heading into the middle of October, sources say.

The Oct. 9 week could see as much as €10 billion equivalent of new junk sold off the European high-yield desks, a London-based debt capital markets banker said.

A chunk of that amount could come from a single issuer.

Wind Tre SpA is expected to show up as early as mid-October with new dollar-denominated and euro-denominated bonds and loans as it undertakes to refinance €10 billion equivalent of debt.

Bookrunners have yet to step forward.

Mixed Wednesday flows

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

High-yield ETFs saw $370 million of inflows on the day.

However asset managers sustained $385 million of outflows on Wednesday.

New Jonah, SBA credits better

When the day’s new deals hit the aftermarket, traders saw good upside in the new Jonah Energy 7¼% notes due 2025.

Two of them quoted the San Antonio, Texas-based oil and natural gas exploration and production company’s new paper at 100¾ bid, up from its par issue price.

At another shop, the bonds were seen rising to a 100½ to 101 1/8 bid context while yet another market source pegged the issue between 100¾ and 101 1/8 bid.

More than $87 million of the notes changed hands, landing it high up on the day’s Most Actives list.

The traders saw considerably less activity in communications antenna tower operator SBA’s new 4% notes due 2022, which priced later in the session.

A trader located those notes moving between 100 1/8 and 100 3/8 bid.

Recent issues active

Looking at some of the issues which priced earlier in the week, both tranches of Chesapeake Energy’s big new add-on deal from Wednesday were seen fairly active, although a trader remarked that “they weren’t going anywhere” price-wise.

The Oklahoma City-based oil and gas company’s 8% notes due 2025 were seen around a 101½ to 101 5/8 bid range, up slightly from the 101.25 level at which that quickly shopped $300 million add-on tranche to its $1 billion of existing notes had priced to yield 7.768%. The offering was upsized from an originally announced $250 million.

More than $28 million traded on Thursday.

Chesapeake’s 8% notes due 2027 were meantime seen hovering right around the 99¾ level at which that $550 million unscheduled add-on to the company’s existing $750 million of those notes had priced. This tranche was upsized from $500 million originally. Thursday volume was more than $26 million.

There was also active trading in Wednesday’s quick-to-market $400 million issue of 4¼% notes due 2022 from United Continental Holdings, the Chicago-based airline.

A trader said the bonds had gained altitude, finishing at 101 bid, well up from their par issue price, while a second saw them between 100 5/8 and 100 7/8 bid on volume of over $27 million.

Tuesday’s offering of 5 7/8% notes from Greely, Colo.-based poultry producer Pilgrim’s Pride was seen about unchanged on Thursday at 102 3/8 bid, with around $15 million traded. The company had priced $600 million of those notes at par in a regularly scheduled offering and, while the new paper had firmed smartly in initial dealings later Tuesday and again on Wednesday, “it appeared to have stalled out” on Thursday, a market source said.

The source also did not see any trading Thursday in the other half of that deal – $250 million add-on to the company’s existing $500 million of 5¾% notes due March 2025. The add-on had priced at 102 to yield 5.42%, moved up to 102 7/8 bid on Wednesday and then dropped from sight.

Beazer Homes’ 5 7/8% notes due 2027 were seen trading Thursday at par, off slightly from Wednesday’s close, on volume of around $18 million.

The Atlanta-based homebuilder priced $400 million of the notes at par on Monday after the issue was upsized from an originally planned $300 million, The new notes remained anchored right around their issue price after that.

Rite Aid in retreat

Away from the new deals, traders said that Rite Aid’s notes were trading off following the Camp Hill, Pa.-based drugstore operator’s report of disappointing fiscal second-quarter earnings.

Its 6 1/8% notes due 2023 were the most actively traded bonds of the day, with over $135 million changing hands. They finished around 96 5/8 bid, down 1 point on the day.

Its 7.7% bonds due 2027 did even worse, plunging by almost 5 points to 89 3/8 bid on volume of over $13 million.

Rite Aid’s New York Stock Exchange-traded shares slid by nearly 11% on the session on twice the usual volume.

During the conference call that followed its earnings release, Rite Aid discussed its plans for using the proceeds from the sale of nearly half of its stores to large rival Walgreens to substantially cut its debt (see related story elsewhere in this issue).

Bombardier bounces

On the upside, traders said that Bombardier’s notes – which had nosedived in active trading on Wednesday in response to the news that the United States will impose a 220% tariff on the Montreal-based aircraft manufacturer’s planes sold south of the border – were bouncing back somewhat on Thursday.

Its 7½% notes due 2025, off more than 3 points on Wednesday, regained ¾ point of that Thursday, ending around 99 3/8 bid, on volume of more than $11 million.

Several of its other issues edged up by around ¼ point from their Wednesday close but on only small volume of a few million for each.

Indicators show improvement

Statistical market performance measures improved across the board on Thursday after turning mixed on Wednesday. It was the third session in the last four during which all of the indicators showed gains.

For a third straight session, the KDP Daily High Yield Index edged up by 1 basis point, matching the gains seen on Tuesday and Wednesday, as it ended at 72.35. It was the index’s fourth consecutive advance, including Monday’s 5 bps firming. Before that it had suffered straight losses of 3 bps each on Thursday and Friday.

Although the index rose, its yield – atypically – was also higher, widening out by 6 bps to finish at 5.17%, after being unchanged on both Monday and Wednesday and coming in by 1 bp on Tuesday. The yield usually moves inversely to the index reading, generally declining when the index rises and vice versa.

The Markit CDX Series 28 High Yield Index was up by almost 3/32 point on Thursday to close at 107 9/16 bid, 107 19/32 offered, its fifth successive gain after two losses. It had also gained more than 5/16 point on Wednesday.

And the Merrill Lynch North American High Yield Index firmed by 0.071% on Thursday, versus Wednesday’s 0.034% retreat, which was its first loss after three advances in a row.

Thursday’s upturn raised the index’s year-to-date return to 6.954% from Wednesday’s close at 6.878%, establishing a new 2017 year-to-date peak level. The old mark of 6.915% had been set on Tuesday.

© 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.