Giant Tenet deal leads $6 billion session to cap nearly $13 billion week, new deals trade up

By Paul Deckelman and Paul A. Harris

New York, Sept. 13 - It may have been Friday the 13th - but not a black cat was seen prowling around Junkbondland.

Instead, issuers, emboldened by the recent revival of the high-yield primary market, while at the same time anxious to get their deals done before interest rates rise any further, were feeling lucky enough to bring six new dollar-denominated, fully junk-rated deals to market, totaling some $6.14 billion in seven tranches.

Chief among these was the $4.6 billion two-part offering from hospital operator Tenet Healthcare Corp. Both tranches were seen to have firmed smartly when they hit the aftermarket.

Meat processor JBS USA Inc. served up an upsized $500 million add-on to its existing 2021 bonds.

There was a pair of $300 million issues, from Natural Resource Partners LP, which invests in energy and mining properties, and Pinnacle Agricultural Holdings, LLC, an agricultural input supply and distribution company.

Building Materials Holding Corp. did a $250 million five-year secured deal, while oil and gas operator Sanchez Energy Corp. brought an upsized $200 million add-on to its 2021 bonds.

The day's deals capped off a week which saw nearly $13 billion of new junk paper issued, the most since the week ended May 17, when over $15 billion of new high-yield notes priced, according to data compiled by Prospect News.

It brought year-to-date issuance to $223.5 billion in 499 tranches, running some 8% head of the pace seen last year, during what turned out to be a record year for high-yield issuance.

Deals priced earlier in the week were seen continuing to mostly hold their own, such as Tuesday's transaction from Oasis Petroleum Corp. Monday's megadeal from Whiting Petroleum Corp. was again actively traded.

Trading in new deals continued to dominate the secondary arena.

Statistical indicators of market performance were higher on the day, after having been mixed on Thursday, and were higher across the board from a week ago, after having been mixed for three consecutive weeks.

Tenet prices $4.6 billion

Of the $6.14 billion raised by six issuers in a combined seven tranches of junk, four of the seven tranches priced at the tight end of talk. Two came in the middle and one at the wide end.

Three of the six issuers made structural changes to their deals before pricing.

The lion's share of Friday's issuance came from Tenet Healthcare, which priced $4.6 billion of non-callable high-yield notes in two tranches.

A $1.8 billion tranche of seven-year senior secured notes (Ba3/B+/BB) priced at par to yield 6%, at the tight end of the 6% to 6¼% yield talk.

A $2.8 billion tranche of 8.5-year senior unsecured notes (B3/CCC+/B-) priced at par to yield 8 1/8%, in the middle of the 8% to 8¼% yield talk.

BofA Merrill Lynch was the left bookrunner for the acquisition financing. Barclays, Citigroup and Wells Fargo were the joint bookrunners.

JBS upsizes restructures

JBS USA priced an upsized, restructured $500 million add-on to its 7¼% senior notes due June 1, 2021 (Ba3/BB) at 99.5 to yield 7.33%.

The deal, initially marketed as a new issue of eight-year senior notes, was increased from $400 million.

The reoffer price came in the middle of the 99 to par price talk.

J.P. Morgan, BofA Merrill Lynch, Wells Fargo, RBC and Credit Suisse were the joint bookrunners for the debt refinancing.

Natural Resource restructures

Natural Resource Partners LP and NRP Finance Corp. priced a restructured $300 million issue of 9 1/8% five-year senior notes (B3/B) at 99.007 to yield 9 3/8%.

The yield printed at the tight end of yield talk that had been set in the 9½% area.

The maturity of the notes is decreased to five years from eight years. Call protection was decreased to 2.5 years from three years. There were also covenant changes.

Citigroup and Wells Fargo were the joint bookrunners.

Proceeds will be used to repay revolver debt and a portion of the $200 million term loan entered into in connection with the company's OCI Wyoming acquisition.

Pinnacle comes at rich end

Pinnacle Agricultural Holdings priced a $300 million issue of seven-year second-lien senior secured notes (Caa1/CCC+) at par to yield 9%.

The yield printed at the tight end of the 9% to 9¼% yield talk.

Credit Suisse, BMO, Citigroup and Apollo were the joint bookrunners.

The Mayfield, Ky.-based agricultural input supply and distribution company plans to use the proceeds to refinance its second-lien term loan, to repay ABL borrowings and for general corporate purposes.

Building Materials prices

Building Materials Holding Corp. priced a restructured $250 million issue of 9% five-year senior secured notes (Caa1/B-) at 99.511 to yield 9 1/8%.

The yield printed at the wide end of yield talk that had been set in the 9% area.

A proposed special call provision, which would have allowed the issuer to redeem 10% of the notes annually at 103 during the non-call period, was removed.

In addition there were covenant changes.

J.P. Morgan and Moelis were the joint bookrunners for the debt refinancing.

Sanchez Energy upsizes

Sanchez Energy priced an upsized $200 million add-on to its 7¾% senior notes due June 15, 2021 (Caa1/CCC+) at 96.5 to yield 8.37%.

The deal was increased from $150 million.

The reoffer price came at the rich end of the 96 to 96.5 price talk.

RBC was the left bookrunner. Credit Suisse was the joint bookrunner.

The Houston-based oil and gas exploration and development company plans to use the proceeds to fund a portion of its recent acquisitions and its accelerated development program through 2014.

The week ahead

The Friday session came without any formal deal announcements.

Nevertheless the Sept. 16 week gets underway with $2.73 billion of announced business from seven issuers that is expected to price before Friday's close.

Watch for the week to be front-loaded, one trader advised, adding that the mid-week Fed meeting, which may yield some outlook on the future of the Fed's bond-buying program, could be a game-changer.

And although the European high-yield market passed a quiet Friday, look for new deal activity there to ramp up during the week ahead, a senior London-based syndicate banker said.

One deal that has been parked on the horizon since 2013's summer winds blew is the £500 million multi-tranche offering of notes backing the leveraged buyout of England's Domestic & General Group Ltd.

That deal, which is expected to be led by Goldman Sachs, Barclays, Credit Suisse, BNP, Morgan Stanley, SG CIB and UBS, is likely to come before the end of the month, the London banker said on Friday.

Tenet's new titan trades up

In the secondary arena, Dallas-based hospital operator Tenet Healthcare's massive two-part issue was seen by a trader as having been just what the doctor ordered, as he pegged both tranches sharply higher when they were freed for aftermarket dealings.

"The Tenet bonds traded right up to 103," he declared, with both pieces of the big deal well up from their respective par issue prices. The 6% senior secured notes due 2020 moved up to a bid range around 102½ to 102¾%, while the 8% senior unsecured notes due 2022 rose to the 103 to 103¼ area.

He said that there was "a pretty decent amount of trading, I would imagine," adding that "we traded some here, though not a tremendous amount."

A second trader located the seven-year notes at 102¼ bid, 102½ offered, and saw the 8.5-year paper at 103 1/8 bid, 103 3/8 offered.

The company's existing 8% notes due 2020 were meantime seen by a market source having gained ½ point to 104½ bid, while a second source saw those bonds doing even better, getting as good as 1051/2, up 1½ points on the day.

Its 6¼% notes due 2018 firmed to 106½ bid, on trading volume of over $5 million.

Other deals seen firmer

Among the other issues that priced during the session, a trader said that Pinnacle Agricultural Holdings' new 9% senior secured notes jumped to 102 bid, 102½ offered when they were freed for trading, well up from their par issue price.

He saw the Sanchez Energy 7¾% notes due 2021 at 97½ bid, 98 offered, versus the 96.5 level where that add-on tranche priced.

A trader said that Natural Resource Partners' 9 1/8% notes due 2018 moved up to 101 bid, better by some 2 points from the 99.007 level at which the Houston-based master limited partnership priced its restructured $300 million deal.

Greeley, Colo.-based meat processing company JBS USA's upsized add-on to its 7¼% notes firmed a little to a par to 101 bid range, a trader said, after having priced at 99.5.

Traders did not immediately see any aftermarket dealings in Vancouver-based building products and services provider Building Materials Holding Corp.'s 9% senior secured notes.

Activision, Diamondback hold

Among the transactions that priced on Thursday, a trader said that Activision Blizzard, Inc.'s $2.25 billion two-part deal "is still up around 101" on the pair of tranches quoting them both trading at bid levels between 100½ and 101.

At another desk, a trader saw the Santa Monica, Calif.-based interactive entertainment publishing company's $1.5 billion of 5 5/8% notes due 2021 at 100½ bid, 101 offered, while its $750 million of 6 1/8% notes due 2023 were at 101 bid, 101¼ offered.

Both of those levels were off slightly from the peak gains at 100¾ and 101¼ bid, respectively, that the notes reached in initial aftermarket dealings, after having both priced at par.

Thursday's $450 million of 7 5/8% notes due 2021 from Midland, Texas-based oil and gas operator Diamondback Energy Inc. was seen by a trader at 101½ bid, 102 offered, while a second quoted the notes at 101¼ bid, 101¾ offered, about where they had traded after pricing at par.

DuPont Fabros Technology, Inc.'s 5 7/8% notes due 2021 were at par bid, 100½ offered, a trader said, while a second saw them off a little at 99¾ bid, 100¼ offered.

The Washington, D.C. -based technology-oriented real estate investment trust priced $600 million of the notes Thursday at par.

Oasis still strong

One of the traders said that Oasis Petroleum's 6 7/8% notes due 2022 "were still up there," quoting the Houston-based energy exploration and production company's bonds at 102¾ bid, 103¼ offered.

Oasis priced its $1 billion drive-by deal at par on Tuesday, after massively upsizing the transaction from an originally announced $600 million, and the new bonds quickly jumped more than a point in the aftermarket and had moved up to above the 102 mark by Thursday, staying there on Friday as well.

An even bigger deal in the energy space - Denver-based Whiting Petroleum's $1.9 billion two-part deal - continued to trade fairly busily on Friday, with a trader seeing over $13 million of its 5% notes due 2019 trading a little above par. Its 5¾% notes due 2021 were seen at 100¼ bid, with over $6 million having changed hands by mid-afternoon, still good enough to make the most actives list.

Another trader saw the 5s dip a little from Thursday levels to around 99¾ bid, par offered, while the 53/4s were at par bid, 100¼ offered.

Whiting priced $1.1 billion of the 5% notes and $800 million of the 5¾% paper at par in a quick-to-market transaction on Monday.

Market indicators turn higher

Overall, statistical junk market performance indicators turned higher on Friday after having been mixed on Thursday; it was the third session in the last four that those market gauges had been higher across the board.

They were also higher all around on Friday versus where they ended last Friday, Sept. 6 after three weeks of having been mixed.

The Markit Series 20 CDX North American High Yield Index rose by 3/32 point on Friday to end at 105 3/16 bid, 105 5/16 offered, after having lost 5/16 point on Thursday, the index's first loss after four consecutive gains.

It was also up from 104¼ bid 104¾ offered last Friday.

The KDP High Yield Daily index gained 12 basis points on the session to close at 73.48, its fourth straight gain. It had risen by 11 bps on Wednesday.

Its yield came in by 3 bps Friday to end at 6.25%, its second straight narrowing, after having declined by 4 bps on Thursday.

Those levels compared favorably to the previous Friday's 73.19 index reading and 6.34% yield.

And the widely followed Merrill Lynch High Yield Master II Index gained 0.053% on Friday, its sixth straight advance. It had risen by 0.148% on Thursday.

The latest gain lifted its year-to-date return to 3.193%, up from Thursday's 3.138%, which was its first time above the psychologically significant 3% mark since Aug. 14, when it stood at 3.132%.

On the week, the index gained 0.433%, after having lost 0.019% in the week ended Sept, 6, when its year-to-date return closed at 2.748%.

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