Molina prices; Specialty Building Products adds-on; EQT gains; FirstEnergy rises on downgrade

By Abigail W. Adams

Portland, Me., Nov. 2 – The domestic high-yield primary market saw some activity on Monday with one new deal and one add-on pricing in drive-by action.

Molina Healthcare Inc. priced $650 million of 10-year bullet notes (Ba3/BB-) and Specialty Building Products Holdings LLC, doing business as U.S. Lumber Group and SBP Finance Corp., priced a $50 million add-on to its 6 3/8% senior secured notes due 2026 (B3/B-) at 100.75 to yield 6.22%.

While Franchise Group Inc. was rumored to be pricing its $650 million offering of five-year senior secured notes on Monday, there were no updates on the deal as of press time.

Primary market activity is expected to be subdued as the market braces for another round of volatility around the presidential election.

However, there are some megadeals on the horizon.

While the timing of the deal is uncertain, Inspire Brands Inc. announced its intention over the weekend to fund its $8.8 billion acquisition of Dunkin Brands, in part, through the issuance of senior secured notes, a source said.

Meanwhile, the tone of the secondary space improved dramatically on Monday following last week’s sell-off.

The cash bond market was up ¼ point with buyers returning to the space, sources said.

ETFs were circulating some large offers-wanted-in-competition lists. “They are buyers for the first time in a long time,” a source said.

FirstEnergy Corp.’s senior notes were in focus on Monday with the capital structure making gains after S&P downgraded the company to junk.

EQT Corp.’s newly priced 5% senior notes due 2029 (Ba3//BB) were making gains in active trading.

Molina on a 3-handle

The primary market was relatively active on Monday with two drive-by deals clearing the market.

Molina Healthcare priced $650 million of 10-year bullet notes (Ba3/BB-) in a Monday drive-by at par to yield 3 7/8%, according to a market source.

Initial guidance had the notes coming with a yield in the low to mid-4% area.

The notes priced just wide of Molina’s 4 3/8% senior notes due 2028, which trade with a 3¾% yield, a source said.

The deal played to heavy demand during bookbuilding with the Long Beach, Calif.-based managed health care service provider is a solid credit with the name well-liked by investors, a source said.

However, the 3 7/8% notes saw a weak break.

While the notes reached as high as par 5/8 after freeing for trade, they were wrapped around par heading into the market close, a source said.

FirstEnergy in focus

FirstEnergy’s capital structure was making gains in active trading on Monday after S&P downgraded the energy company to junk.

FirstEnergy’s 3.4% senior notes due 2050 were up almost 2 points to 94, a source said.

The bonds were among the most actively traded during Monday’s session with $52 million in reported volume.

FirstEnergy’s 2.65% senior notes due 2030 were up 1 3/8 point to 99 1/8.

The 3.9% senior notes due 2027 were up 1 point to 107 5/8.

S&P cut FirstEnergy and its subsidiaries issuer rating to BB+ from BBB- on Oct. 30.

While Moody’s affirmed its Baa3 rating, the outlook remained negative, a source said.

Fitch downgraded FirstEnergy to BBB- from BBB.

While the company is currently split-rated, it is on the verge of becoming a fallen angel, a source said.

In keeping with a trend seen among several fallen angels, FirstEnergy’s capital structure was tightening as it transitioned into high-yield hands.

FirstEnergy’s ratings downgrades were the result of active investigations by the Department of Justice and the Securities and Exchange Commission into allegations the company bribed Ohio state legislators into passing a bailout package for two of its nuclear power plants, Prospect News reported. (See related article in this issue.)

EQT gains

EQT’s 5% senior notes due 2029 were posting gains in active trading on Monday.

The 5% notes were up almost 1 point and stood poised to close the day at 101 5/8, a source said.

There were more than $26 million of the bonds on the tape during Monday’s session.

While the notes priced amid last Friday’s brutal sell-off, they performed well on the break and were trading in the par ¾ to 101 context heading into the market close.

EQT priced an upsized $350 million, from $300 million, issue of the 5% notes at par in a Friday drive-by.

Pricing came tighter than talk in the 5¼% area. Early whispers had the deal coming in the mid-5% area.

The deal was heavily oversubscribed with up to $1.2 billion in orders.

Indexes gain

Indexes were on the rise on Monday after all closed the previous week with losses.

The KDP High Yield Daily index rose 5 points to close Monday at 66.11 with the yield now 5.63%.

The index posted a cumulative loss of 73 bps on the week last week.

The ICE BofAML US High Yield index rose 23.9 bps with the year-to-date return now 0.407%.

The index posted a cumulative loss of 109.1 bps on the week last week.

The CDX High Yield 30 index rose 14 bps to close Monday at 103.64.

The index posted a cumulative loss of 210 bps on the week last week.

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