KCI megadeal prices, trades actively, Navient also drives by; market easier, Freeport falters

By Paul Deckelman and Paul A. Harris

New York, Sept. 13 – Medical products company Acelity LP, Inc. – through its Kinetic Concepts Inc. subsidiary – was the big name in Junkbondland on Tuesday, pricing $1.75 billion of five-year secured notes in a regularly scheduled offering off the forward calendar.

The wound-care therapies company’s megadeal was the most heavily traded junk credit of the day, hovering around its issue price.

Financial services company Navient Inc. also got a deal done during the session – a quickly shopped $500 million of seven-year notes.

A U.S.-based company – paints and industrial coatings maker Axalta Coating Systems – tapped the European junk market with an 8.25-year offering.

The forward calendar grew, with new deals being shopped by IMS Health Inc., Cincinnati Bell Inc. and Brinker International Inc., among others.

The junk secondary market was mostly easier, against a backdrop of sharply lower stocks. Freeport-McMoRan Inc.’s bonds were particularly hard hit.

Statistical market performance measures turned lower across the board on Tuesday, after having been mixed on Monday. It was the second losing session in the last three.

Acelity prices $1.75 billion

In Tuesday's primary market Acelity LP Inc. priced $1.75 billion of five-year second-lien senior secured notes (Caa1/B-) at par to yield 9 5/8%.

The yield printed at the tight end of yield talk in the 9½% area. Early guidance was also in the mid-9% range.

Goldman Sachs was the left bookrunner for the debt refinancing. BofA Merrill Lynch, Credit Suisse, Nomura, SunTrust, RBC and UBS were the joint bookrunners.

Navient drive-by

Navient Corp. priced a $500 million issue of non-callable seven-year senior notes at par to yield 7¼%.

The yield printed at the tight end of the 7¼% to 7 3/8% yield talk.

BofA Merrill Lynch, JP Morgan and RBC were the joint bookrunners for the deal that came in an investment grade-style execution.

The Wilmington, Del.-based financial services company plans to use the proceeds for general corporate purposes, including debt repurchases.

Axalta prices €450 million

Axalta Coating Systems priced a €450 million issue of senior notes due Jan. 15, 2025 (B1/B+) at par to yield 3¾%.

The yield printed on top of yield talk.

Barclays was the lead left bookrunner for the debt refinancing deal. BofA Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and UBS were the joint bookrunners.

The issuing entity is Axalta Coatings Systems Dutch Holding B BV.

Quintiles-IMS for Wednesday

IMS Health Inc. set price talk in a $1.5 billion equivalent offering of senior notes (Ba3/BB+).

The deal includes €500 million notes of eight-year notes talked to yield in the 3½% area and $1 billion of 10-year notes talked to yield in the 5% area.

The deal, in the market in conjunction with the merger of IMS Health with Quintiles Transnational Holdings, is set to price on Wednesday.

Goldman Sachs is the left bookrunner. J.P. Morgan, Barclays, BofA Merrill Lynch, HSBC and Wells Fargo are the joint bookrunners.

BBVA, Citigroup Global Markets Inc., Fifth Third Bank, Huntington, Mizuho Securities,

Cincinnati Bell starts roadshow

Cincinnati Bell Inc. began a roadshow on Tuesday for a $425 million offering of eight-year senior notes.

Initial guidance has the notes coming with a yield in the 7½% context.

The debt refinancing deal is set to price late this week.

Morgan Stanley, Citigroup and Goldman Sachs are the joint bookrunners.

Brinker starts Wednesday

Brinker International, Inc. plans start a roadshow on Wednesday for a $350 million offering of non-callable eight-year senior notes.

JP Morgan is the lead.

The Dallas-based casual dining restaurant company plans to use the proceeds to repurchase up to $300 million of its common stock and repay up to $50 million of outstanding debt under its revolver, with any remaining proceeds to be used for general corporate purposes.

Allegient sets roadshow

Allegiant Travel Co. plans to start a roadshow on Wednesday for a $300 million offering of seven-year senior notes.

The offer, via sole bookrunner Morgan Stanley, is expected to price on Friday.

The Las Vegas-based low-cost airline plans to use the proceeds for general corporate purposes including capital expenditures such as aircraft acquisitions, pre-delivery deposits, purchases of 12 newly manufactured CFM powered A320 aircraft expected to be delivered in 2017 and 2018, share repurchases and debt repayment.

Canexus unrated C$75 million

Canexus Corp. plans to privately place C$75 million of unrated seven-year senior notes this week.

Co-lead agent CIBC is the sole bookrunner. Scotia is also a co-lead agent. BMO Securities, NBF, TD Securities and ATB are in the syndicate.

The Calgary-based producer of chemicals used primarily in the pulp and paper and water treatment industries plans to use the proceeds to refinance debt.

Acelity trades actively

In the secondary arena, traders said that the new Acelity 9 5/8% senior secured second-lien notes due 2021, issued by the San Antonio, Texas-based wound therapeutics company’s Kinetic Concepts Inc. and KCI USA Inc. subsidiaries were the most actively traded junk credits of the day.

One market source estimated that some $99 million of the megadeal’s notes changed hands.

He saw them finishing slightly below their par issue price, at 99 7/8 bid.

At another desk, a trader said that considering the overall mostly lower junk market, “they traded pretty well.”

He said that they had fallen back from their issue price on the break, dipping as low as 99 5/8 bid, “but then got back to par later in the day.”

A third trader pegged the bonds in a 99¾ to 100¼ bid context.

PDC Energy moves lower

Monday’s offering of 6 1/8% notes due 2024 from PDC Energy, Inc. was seen to have traded down from the levels that those bonds had reached in initial aftermarket dealings.

A trader located the notes “below 101,” at 100½ bid, 100¾ offered.

A second trader saw them between par and 100¾ – well down from the 101¼ to 101¾ range he had seen the notes at on Monday.

The Denver-based independent oil and natural gas exploration and production company had priced $400 million of the notes at par in a quick-to-market offering Monday, with aftermarket levels as high as 101½ to 102 bid.

Cablevision bucks the trend

Also among the recently priced deals, Cablevision Systems Corp.’s 5½% senior guaranteed notes due in April of 2027 managed to hold their ground despite the overall easier trend, and in fact, added to their initial gains.

A market source saw the bonds up 1/16 point on the day, ending just under the 101 bid mark.

Volume was a brisk $49 million.

The Bethpage, N.Y.-based media and telecommunications company – now a subsidiary of Europe’s Altice SA – priced $1.31 billion of those notes at par on Friday in a quick-to-market transaction, after the deal was downsized from an originally announced $1.91 billion with the shift of $600 million of that borrowing into a concurrently shopped bank loan deal.

Freeport-McMoRan moves down

Away from the new deals, a trader commented that Freeport McMoRan’s “whole capital structure was down 1 to 2 points,” seeing the Phoenix-based gold and copper mining and oil and gas company’s flagship 3.55% notes due 2022 down nearly a deuce on the day at 87¼ bid. More than $43 million of the notes traded.

Its 6 7/8% notes due 2023 lost ½ point, to 101½ bid, with over $31 million traded, while its 3 7/8% notes due 2023 were down more than 2 points, at 87 bid, with more than $24 million of turnover.

Freeport’s bonds and its shares slid even as the company announced that it will sell some of its oil and gas assets in the Deepwater Gulf of Mexico to Anadarko Petroleum for $2 billion in cash consideration – a price that some analysts derided as probably too cheap.

Indicators turn lower

Statistical market performance measures turned lower across the board on Tuesday, after having been mixed on Monday. It was the second losing session in the last three.

The KDP High Yield index saw its third straight loss on Tuesday, nosediving by 22 basis points to end the day at 70.23, on top of Monday’s 9-bps retreat and Friday’s 24-bps plunge; it had posted two straight gains before that.

The three-day slide left the index well down from last Thursday’s 70.78 close – its year-to-date and 52-week highs.

Its yield meantime rose by 6 bps to close at 5.36%, its third consecutive increase; it had also risen by 3 bps on Monday, after having gapped out by 7 bps on Friday.

The Markit Series 26 CDX index plunged by nearly 7/8 point on Tuesday, finishing at 103 3/8 bid, 103 13/32 offered, in contrast to its 9/16 point rebound from Friday’s nearly 1 full point swoon.

And the Merrill Lynch High Yield index recorded its third straight loss after five consecutive sessions on the upside, retreating by 0.31% on Tuesday. That followed Monday’s 0.211% downturn and Friday’s 0.386% loss.

Tuesday’s retreat dropped its year-to-date return to 13.952% on Tuesday from Monday’s 14.306% – its first time under 14% since Aug. 15, when it had closed with a 13.837% return.

Those levels were well down from Thursday’s 14.992%, which had been its fourth straight new 2016 peak cumulative level.

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