NuStar, Murphy, downsized Tempo pace $2.1 billion day; funds lose $362 million

By Paul Deckelman and Paul A. Harris

New York, April 20 – The high-yield primary sphere saw its busiest session in more than two weeks on Thursday as five issuers each brought a single tranche of junk bonds to market, generating $2.1 billion in new dollar-denominated paper.

That was well up from Wednesday’s $650 million and Tuesday’s $300 million, each in one tranche, and it was in fact the most such paper from domestic or industrialized issuers since April 5, when $2.67 billion got done via a half-dozen issuers, according to data compiled by Prospect News.

NuStar Logistics, LP, which provides petroleum terminaling and storage services, had the big deal of the day, a quick-to-market $550 million of 10-year notes.

Also driving by was filling station and convenience store chain operator Murphy Oil USA, Inc., with $300 million of 10-year paper.

Among the regularly scheduled forward calendar offerings, Tempo Acquisition LLC, a financing vehicle for private equity firm Blackstone Group LP’s pending acquisition of some technology assets of insurer Aon plc, did a downsized $500 million of eight-year notes.

Broadcaster E.W. Scripps Co. priced $400 million of eight-year notes, while engineering and consulting services provider Booz Allen Hamilton Inc. brought $350 million of eight-year notes.

Secondary traders saw the new Murphy Oil, Booz Allen and E.W. Scripps bonds all up at least 1 point or more in active initial aftermarket dealings.

There was also brisk volume in Wednesday’s new offering from homebuilder Lennar Corp. and in Tuesday’s new deal from convenience store chain operator Cumberland Farms, Inc.

Statistical market performance measures remained mixed for a second consecutive session on Thursday; they had turned mixed on Wednesday after being lower across the board on Tuesday. It was the fourth mixed session in the last five trading days.

Another numerical indicator – flows of investor money into or out of high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – remained modestly negative in the latest reporting week, according to numbers released on Thursday. Some $362 million more left those weekly reporting-only domestic funds than came into them during the week ended on Wednesday, on top of the last week’s $348 million cash loss (see related story elsewhere in this issue).

NuStar bullet prices tight

Five issuers brought single-tranche dollar-denominated deals on Thursday, raising a combined $2.1 billion of proceeds.

Two of the five issuers came with drive-by deals.

None of the transactions was upsized but one was downsized.

Executions appeared razor sharp, with all five deals pricing at the tight end of talk.

In drive-by action, NuStar Logistics priced a $550 million issue of 10-year senior bullet notes (Ba1/BB+/BB) at par to yield 5 5/8%.

The yield printed at the tight end of yield talk that had been set in the 5¾% area.

Mizuho was the left bookrunner for the acquisition financing and debt repayment deal.

Tempo downsized and tight

Despite being substantially oversubscribed, Tempo Acquisition downsized its issue of eight-year senior notes (Caa1/CCC+) to $500 million from $730 million.

It priced the offering at par to yield 6¾%, at the tight end of talk.

The $230 million of proceeds was shifted to the concurrent term loan.

The order book for the notes was said to be five-times oversubscribed, according to an investor, who added that proceeds were shifted to the loan simply because the loan represents a lower cost of capital for the borrower.

The new 6¾% notes printed at the tight end of the 6¾% to 7% yield talk.

Proceeds are being used to help finance Blackstone Group LP’s acquisition of Aon plc’s technology-enabled benefits and human resources platform, which is part of Aon Hewitt.

Barclays was the left bookrunner.

E.W. Scripps moves up timing

E.W. Scripps priced a $400 million issue of eight-year senior notes (Ba2/BB) at par to yield 5 1/8%.

The yield printed at the tight end of yield talk that was fixed in the 5¼% area.

Timing was moved ahead. The deal had been expected to remain in the market until Friday.

Wells Fargo was the left bookrunner for the debt refinancing and general corporate purposes deal.

Booz Allen prices tight

Booz Allen Hamilton priced a $350 million issue of eight-year senior notes (B1/B+) at par to yield 5 1/8%.

The yield printed tight to the 5¼% yield talk. Initial guidance was in the mid 5% area.

BofA Merrill Lynch was the lead.

The McLean, Va.-based company plans to use the proceeds to repay its revolving credit facility, with any remaining funds to be used for working capital and other general corporate purposes, including the repayment of all or a portion of the outstanding deferred payment obligation established in connection with the acquisition of Booz Allen by the Carlyle Group in 2008.

The issuer provides management and technology consulting services and engineering services to governments, corporations and not-for-profit organizations.

Murphy Oil’s drive-by

Murphy Oil USA, Inc., a wholly owned subsidiary of Murphy USA, priced a $300 million issue of 10-year senior notes (Ba2/BB+) at par to yield 5 5/8%.

The yield came tight to the 5¾% yield talk and well inside the 6% to 6¼% initial guidance.

JP Morgan and Stephens Inc. were the joint bookrunners.

Laureate talked at 8% to 8¼%

The Friday session should be a busy one, with half a dozen deals coming from both sides of the Atlantic possibly pricing before the weekend.

On Thursday Laureate Education, Inc. talked its $800 million offering of eight-year senior notes (Caa1/B-) to yield 8% to 8¼%.

The books is around deal size, a trader said.

Initial guidance had the deal coming at 8%, a trader said earlier in the week.

The offer is expected to price on Friday.

Clearwater talk at 6¾% to 7%

Clearwater Seafoods Inc. talked its $250 million offering of eight-year senior notes (B3/B+) to yield 6¾% to 7%.

The deal, via left bookrunner Wells Fargo, is also set to price on Friday.

Sugarhouse Casino roadshow

One deal began a roadshow on Thursday.

Sugarhouse Casino started marketing a $300 million offering of eight-year senior secured notes.

The debt refinancing deal, via left bookrunner Goldman Sachs, is expected to roadshow into the middle part of the week ahead.

Drax initial guidance

In the European market, Drax Group Co. set price talk for its £500 million two-part offering of five-year senior secured notes (BB+/BB+).

A £275 million minimum amount of fixed-rate notes is talked to yield 4¼% to 4½%. A to-be-determined amount of floating-rate notes is talked at a 400 to 425 basis points spread to Libor.

The deal is set to price Friday.

Barclays will bill and deliver.

Mixed Wednesday flows

The 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, according to a buyside source.

High-yield ETFs saw $168 million of inflows on the day.

However asset managers sustained $60 million of outflows on Wednesday.

Day’s new issues do well

When the new Murphy Oil 5 5/8% notes hit the aftermarket, they were seen by a trader to have pushed up to around 101 bid, improved from the par level at which that quick-to-market transaction had priced.

The trader saw more than $37 million of the El Dorado, Ark.-based filling station and convenience store chain operator’s new paper changing hands.

The Booz Allen Hamilton 5 1/8% notes were going home at 101½ bid, well up from their par pricing level.

Another market source also pegged the notes 1½ points higher in initial secondary dealings on volume of more than $28 million.

Cincinnati-based broadcaster E.W. Scripps’ 5 1/8% notes due 2025 ended the day at 101 1/8 bid versus their par issue price, a trader said, seeing turnover of more than $22 million.

A trader saw the new Tempo Acquisition 6¾% notes due 2025 in a 100½ to 101 bid context.

Recent deals busy

Among recently priced issues, a trader saw Lennar’s 4½% notes due 2024 trading at 100¼ bid on Thursday.

At another desk, the Miami-based homebuilder’s bonds were seen having moved up to 100½ bid, a gain of 3/8 point on the day. Volume was more than $37 million.

The company priced $650 million of the notes at par on Wednesday after upsizing the drive-by deal from an originally planned $500 million.

Cumberland Farms’ 6¾% notes due 2025 added to their already impressive aftermarket gains on Thursday, with a market source seeing that paper up another ½ point on the day to end at 103¼ bid, with over $10 million changing hands.

The Westborough, Mass.-based convenience store chain priced $300 million of the notes at par on Tuesday in a regularly scheduled forward calendar offerings. They zoomed to above the 102 bid mark in initial aftermarket dealings and continued to firm past that point in active dealings on Wednesday.

Going back a little further, a trader said that Tutor Perini Corp.’s 6 7/8% notes due 2025 “keep inching up,” seeing them on Thursday in a 102½ to 102¾ bid range.

The Sylmar, Calif.-based civil and building construction company priced $500 million of those notes at par off the forward calendar on April 12. They proceeded to move up to 101¾ bid in initial aftermarket dealings and continued to build on those gains subsequently.

Rite Aid busy, unchanged

Away from the new deals, Rite Aid Corp.’s 6 1/8% notes due 2023 were “active volume-wise,” a trader said, with over $28 million having changed hands.

But he saw the bonds little changed from the 98¾ bid level to which those notes had plunged – a more than 3 point loss – in active dealings on Wednesday.

The bonds fell on news reports that the Federal Trade Commission may sue to block the Camp Hill, Pa.-based drugstore chain operator’s planned merger with larger sector peer Walgreens, citing antitrust issues.

Indicators stay mixed

Statistical market performance measures remained mixed for a second consecutive session on Thursday; they had turned mixed on Wednesday after being lower across the board on Tuesday. It was the fourth mixed session in the last five trading days.

The KDP High Yield Daily Index fell by 2 basis points on Thursday to end at 71.84, its seventh consecutive loss after four straight gains. It had also been down by 4 bps on Wednesday.

Its yield was unchanged at 5.27%. On Wednesday, the yield had risen by 2 bps, the index’s second straight widening out after two sessions in which it was unchanged.

However, the Markit CDX Series 28 Index saw its first gain on Thursday after two straight losses and one unchanged session, firming by almost 9/32 point to close at 106 13/16 bid, 106 7/8 offered. On Wednesday, it had dropped by 3/32 point.

And the Merrill Lynch North American High Yield Index firmed by 0.022% on Thursday, its second successive gain. On Wednesday, it had risen by 0.12%, rebounding from Tuesday’s 0.04% setback.

That gain pushed the index’s year-to-date return up to 3.108% from Wednesday’s 3.085% close.

Those levels remain below the 2017 peak of 3.19%, set on March 1.

© 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.