Zayo megadeal on deck; Hecla Mining prices; Bombardier gains; HCA continues to ‘flounder’

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 13 – After pricing almost $10 billion in the early part of the week, the domestic high-yield primary market stood poised to close the week with a quiet exit.

Hecla Mining Co. priced its $475 million offering of eight-year senior notes, clearing the forward calendar.

Adding a new name to the calendar, Zayo Group Holdings Inc. disclosed plans on Thursday to start a roadshow in the Feb. 17 week for its $3.08 billion two-tranche megadeal.

Meanwhile, it was a mixed day in the secondary space, which started the day weak but rallied into the afternoon.

New issues continued to dominated trading activity.

HCA Healthcare, Inc.’s newly priced 3½% senior notes due 2030 (Ba2/BB-/BB) remained one of the most actively traded issues in the space although the notes “continued to flounder,” a source said.

While volume was light, Laredo Petroleum Inc.’s recently priced 9½% senior notes due 2025 and 10 1/8% senior notes due 2028 (B3/B+) continued their downward spiral after reporting earnings.

While new issues remained in focus, topical news put the spotlight on some outstanding issues.

Bombardier Inc.’s junk bonds were in focus and making gains following news of an asset sale.

While the week was mixed, the overall technicals of the market remained strong with another multibillion inflow reported on the week.

High-yield mutual funds and exchange-traded funds saw inflows of $2.827 billion for the week through Wednesday’s close, according to Refinitiv Lipper US Fund Flows.

Zayo rolls out megadeal

News volume in the high-yield primary market remained light on Thursday, for a second consecutive session – a stark contrast to the early part of the Feb. 10 week which generated nearly $10 billion of issuance.

Zayo Group Holdings disclosed plans to start a roadshow on Tuesday for a $3.08 billion two-part offering of notes.

The secured portion of the deal comes as a $1 billion tranche of seven-year senior secured notes (B1/B), while the unsecured portion comes as a $2.08 billion tranche of eight-year senior notes (Caa1/CCC+).

Initial guidance has the secured notes coming to yield in the mid-4% area, and the unsecured paper coming to yield in the high 6% area, a trader said.

Elsewhere Thursday, Hecla Mining Co. priced a $475 million issue of eight-year senior notes (Caa1/B) at par to yield 7¼%.

Early guidance was 7½% to 7¾%.

HCA flounders

HCA’s newly priced 3½% senior notes due 2030 “continued to flounder” in high-volume activity in the secondary space, a market source said.

The notes were changing hands around 99¾ Thursday afternoon with more than $42 million in reported volume, sources said.

While the notes were still holding close to par, “I wouldn’t be surprised if there was a meaningful sell-off,” a market source said.

The notes were priced aggressively and carried the lowest coupon for a BB credit since 2009.

The deal was also upsized to $2.7 billion from $1 billion.

There were indications investors who had expected their allocations to be cut back ended up with larger allocations than expected in the upsizing.

HCA priced a $2.7 million issue of the 3½% notes at par on Tuesday.

Laredo Petroleum down again

While volume was light, Laredo Petroleum’s recently priced 9½% senior notes due 2025 and 10 1/8% senior notes due 2028 continued their downward spiral following its earnings report.

The 9½% notes dropped 3 points to 85, according to a market source.

The 10 1/8% notes were down 1 point to 85½.

The notes continued to sell off following a mixed fourth-quarter earnings report.

While the energy company beat analyst expectations on revenue, it missed on adjusted EBITDA, according to a market source.

Laredo reported revenue of $218.1 million versus the $200.6 million expected.

The company reported adjusted EBITDA of $137.9 million versus the $140.8 million expected.

Laredo priced a $600 million tranche of the 9½% notes and a $400 million tranche of the 10 1/8% notes at par on Jan. 10.

Bombardier in focus

Bombardier’s junk bonds were in focus and posting gains on Thursday following news of an asset sale.

The Montreal-based transportation manufacturer’s 7 7/8% senior notes due 2027 were among the most actively traded issues of the day.

The notes closed Thursday at 102.875 bid, 103.625 offered, an increase of about 2½ points, a market source said.

The bonds saw more than $77 million in reported volume.

Bombardier’s 6 1/8% notes due 2023 rose 1¼ points to close the day at 104 5/8 with more than $24 million in reported volume, a source said.

The 6% notes due 2022 jumped 3/8 point to close the day at par. The 7½% notes due 2025 were up 1¼ point to close the day at 101.

News broke on Thursday that Bombardier was in advanced talks with Alston SA to sell its rail business for €7 billion.

The news was a welcome respite for the struggling manufacturer, which saw its junk bonds sell off in mid-January after warning of a disappointing fourth-quarter earnings report and the possible end to its joint Airbus venture.

Bombardier announced fourth-quarter earnings on Thursday which were largely in line with its mid-January announcement, a source said.

While the company posted better than expected EBITDA, it saw a slight miss for its free cash flow.

EBITDA was $63 million versus the $0 the company pre-announced. However, free cash flow was $952 million versus the $1 billion the company projected.

Indexes mixed

Indexes were again mixed on Thursday as they have been for most of the week.

The KDP High Yield Daily index gained 4 points to 71.61 with the yield now 4.82%.

The index was flat on Wednesday, down 5 bps on Thursday, rose 3 bps on Tuesday and shaved off 1 bp on Monday.

The ICE BofAML US High Yield index was up 5.2 bps with the year-to-date return now 1.117.

The index was up 11.4 bps on Wednesday when it crossed the 1% threshold.

The index gained 29.5 bps on Tuesday and was up 2.3 bps on Monday.

The CDX High Yield 30 index dropped 6 bps to close Thursday at 109.42. The index gained 16 bps on Wednesday, 13 bps on Tuesday and 14 bps on Monday.

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