Power Solutions carries over; SS&C Technologies, Par in focus; Community Health drops

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 15 – The domestic high-yield primary market saw no deals price on Friday.

However, the week ahead promises to be active with the forward calendar growing.

Power Solutions’ highly-anticipated dual-currency megadeal was carried over to the March 18 week.

ADT Corp. is expected to bring $2.65 billion of notes in the coming week.

Neon Holdings, Inc. plans to start a roadshow Monday for a $410 million offering of senior notes and Kosmos Energy Ltd. will be conducting a roadshow for a $600 million offering of senior notes.

Meanwhile, new paper was in focus in the secondary space, which rounded out a strong week with a firm finish, sources said.

SS&C Technologies, Inc.’s 5½% senior notes due 2027 and Endo International plc subsidiary Par Pharmaceutical Cos., Inc.’s 7½% senior notes due 2027 dominated trading activity in the secondary space with both issues trading at a premium to their issue price.

Outside of the new paper, Community Health Systems, Inc.’ capital structure was taking a hit on Friday with its recently priced 8% senior notes due 2026 continuing their downward spiral following the filing of a whistleblower lawsuit.

PHI Inc.’s 5¼% notes due March 15 also dropped as the company sought Chapter 11 bankruptcy protection after failing to meet the maturity of the notes.

Power Solutions delays

Swamping that trickle of Friday news was word of a big rainout.

Citing the cross-border nature of the transaction, dealers delayed the pricing and allocations of the Power Solutions dual-currency megadeal until the week ahead, according to an informed source.

The three-part, dual-currency deal, which had been scheduled to price Friday, is now expected to clear during European and U.S. business hours on Monday (see related story in this issue).

The week ahead

The Friday primary market generated a trickle of news.

Neon Holdings plans to start a roadshow on Monday in New York and New Jersey for a $410 million offering of seven-year senior secured notes (B3/B).

That roadshow wraps up late in the March 18 week, and the acquisition financing is set to price thereafter.

Goldman Sachs & Co. LLC is the left bookrunner. Jefferies LLC and Mizuho Securities USA Inc. are the joint bookrunners.

ADT is also expected to bring $2.65 billion of notes via Deutsche Bank.

Kosmos Energy is set to begin a roadshow for $600 million of seven-year senior notes due 2026 (expected ratings BB-/BB) on Monday, via Citigroup Global Markets Inc., SG CIB, Standard Chartered Bank.

Early talk has the deal coming to yield in the 7% area.

Kosmos Energy comes amid a small flurry of deals that have one foot planted in the emerging markets and the other planted in high yield.

Others include Millicom International Cellular SA and PPF Arena 1 BV.

Meanwhile, in the European market, Portugal's Banco Montepio mandated BNP Paribas and BofA Merrill Lynch as joint lead managers to arrange a series of fixed income investor meetings beginning Tuesday, ahead of a benchmark Regulation S-only offering of euro-denominated 10-year tier 2 subordinated notes (Caa2//B-/B high).

Par Pharmaceutical in focus

Par Pharmaceutical’s newly priced 7½% senior notes due 2027 dominated activity in the secondary space with the notes trading up in high-volume activity.

The 7½% notes were quoted at par 3/8 bid, par 5/8 offered early in the session. They were changing hands around par ¾ in the late afternoon, sources said.

More than $167 million of the bonds were in play on Friday.

The deal was oversubscribed and investors were looking to add to their positions, a market source said.

Par Pharmaceutical priced an upsized $1.5 billion issue of the 7½% notes at par in a Thursday drive-by.

The issue size increased from $1 billion.

The yield printed in the middle of initial talk in the 7½% area.

SS&C Technologies trades up

SS&C Technologies’ 5½% senior notes due 2027 were also in focus in the secondary space and trading at a premium to their issue price.

The notes were quoted at par 1/16 bid, par 3/16 offered early in the session but continued to trade up as the session progressed, sources said.

They were changing hands between par ¼ and par ½ in the late afternoon and stood poised to close at par ½.

More than $160 million of the bonds were on the tape by the late afternoon.

SS&C Technologies’ deal was massively oversubscribed and, much like Par Pharmaceuticals, investors were looking to add to their positions because they were unable to get the allocation they wanted, sources said.

SS&C Technologies priced an upsized $2 billion issue of the 5½% notes at par in a Thursday drive-by.

The issue size increased from $750 million.

The yield printed at the tight end of the 5½% to 5¾% yield talk. Initial guidance had the deal coming to yield in the high 5% area.

Community Health drops

Community Health’s capital structure was taking a hit on Friday following the latest whistleblower lawsuit against the operator of acute care hospitals.

The recently priced 8% senior notes due 2026 were the most active in the capital structure with the notes continuing their downward spiral.

The notes took off 2¼ points and stood poised to close the day at 94½, according to a market source.

More than $48 million of the bonds changed hands during Friday’s session.

Community Health priced a $1.58 billion issue of the 8% notes at 98.683 to yield 8¼% on Feb. 28. The notes have struggled since hitting the secondary space.

While less active, Community Health’s 6 7/8% notes due 2022 dropped 2½ points to 64.

The company’s 8 5/8% notes dropped 1¼ points to par ½.

The capital structure was trading down after a whistleblower lawsuit against Community Health was unsealed.

The lawsuit alleges Community Health submitted false claims for federal incentive payments regarding the use of certified electronic health records technology.

Community Health has denied the allegations.

PHI’s bankruptcy

PHI’s 5¼% notes matured on Friday. The helicopter service provider filed for Chapter 11 bankruptcy protection after failing to meet the maturity of the notes (see related article in this issue).

The 5¼% notes were trading down 2½ points to 57½, a market source said.

However, volume was light with about $6 million of the bonds on the tape.

PHI’s default on the notes was widely anticipated.

The company launched a tender offer for the 5¼% notes over the summer.

However, the tender offer was contingent on PHI closing a refinancing deal, which it was unable to complete and ultimately had to pull from the market.

Thursday inflows

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

High-yield ETFs saw $153 million of inflows on the day.

Actively managed high-yield funds saw $80 million of inflows on Thursday, the trader said.

News of Thursday's daily flows follows a Thursday afternoon report that the combined high-yield bond funds saw net inflows of $1.04 billion in the week to Wednesday's close, according to Lipper US Fund Flows.

During the latter part of that reporting period, Monday to Wednesday, high-yield ETFs saw $1.4 billion of inflows, the trader said.

The cash picture of the asset class is altogether rosy compared to a year ago, the trader said.

Year-to-date inflows for the combined junk bond funds totaled $9.8 billion to Thursday's close.

By comparison, in 2018 to the March 14 close the combined funds saw $17.5 billion of outflows.

And, although it may have been a time for Julius Caesar to be wary, investors willing to shoulder the risk attached to owning speculative grade bonds have realized a robust 6.56% of returns to the Ides of March, 2019, the trader said.

Those returns may have plateaued, somewhat.

The return for March, to date, is 0.21%, whereas junk returned 1.69% in February, and a whopping 4.57% in January, the source added.

Indexes gain

Indexes closed out a strong week with gains.

The KDP High Yield Daily index rose 7 basis points to close Friday at 69.89 with the yield now 6%. The index was up 5 bps on Thursday, 11 bps on Wednesday, 13 bps on Tuesday and 5 bps on Monday.

The index saw cumulative gains of 41 bps on the week.

The ICE BofAML US High Yield index gained 8.2 bps with the year-to-date return now 6.68%.

The index was up 8.6 bps on Thursday, 24.8 bps on Wednesday, 23.5 bps on Tuesday and 19.7 bps on Monday.

The index saw cumulative gains of 84.8 bps on the week.

After sinking below 6% year-to-date returns on Friday, the index popped back above it on Monday.

The index initially shot past 6% returns on Feb. 25 after passing 5% returns on Feb. 12.

The CDX High Yield 30 index gained 9 bps to close Friday at 106.47.

The index dropped 10 bps on Thursday but gained 26 bps on Wednesday, 15 bps on Tuesday and 57 bps on Monday.

The index saw a cumulative gain of 97 bps on the week.

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