Primary quiet to end $3.4 billion week; new Centenes up in heavy trading; Manitowoc slates deals

By Paul Deckelman and Paul A. Harris

New York, Jan. 29 – For the first time in seven sessions, the high-yield primary market did not price any new deals on Friday, the last trading session of January.

But junk marketeers looked back at the week with satisfaction, noting the strongest weekly issuance so far in the new year, as well as a considerably better tone in the secondary market versus just a couple of weeks ago.

The lack of any new deals pricing on Friday left issuance for the week right where it had been on Thursday – some $3.4 billion of new U.S dollar-denominated paper from domestic or industrialized-country borrowers having come to market in five tranches. That was well up from the $1.3 billion which got done in two tranches last week, according to data compiled by Prospect News.

The week’s new issuance, in turn, lifted the year-to-date total so far to $5.92 billion having priced in 10 tranches, running some 60.2% behind the issuance pace seen at this time last year, when $14.91 billion of new junk paper had priced in 23 tranches by this point on the calendar. That was less of a gap between the two years than last week’s 73.05% year-over-year difference.

Thursday’s big new deal from healthcare provider Centene Corp. was the dominant name in secondary trading Friday.

Traders said that the two tranches of its giant-sized offering were easily the most actively traded credits in Junkbondland. Each tranche had firmed smartly from the par level at which both had priced on Thursday.

Away from deals which have actually priced, the primary market is looking forward to February, starting the new month with a pair of deals from Manitowoc Co., Inc., a maker of cranes and industrial lifting equipment as well as food-service equipment. The latter unit is being spun off and will be selling $425 million of bonds to help finance a cash dividend to its parent in connection with that transaction; The parent will meantime float its own $250 million bond deal and use the proceeds, plus the money it gets from the spinoff, to repay existing bond and bank debt.

For a second straight session, Freeport McMoRan Inc.’s bonds were among the most active junk credits – but unlike Thursday, they were up across the board, rebounding from the battering they took on Thursday in response to the news that Moody’s Investors Service had slashed the natural resources company’s senior unsecured rating by a hefty four notches.

Indicators of junk market performance were higher across the board for a second straight session on Friday. They had turned upward on Thursday after having been mixed on Wednesday. Friday was their third higher session in the last four trading days.

The indicators were also higher all around from where they had finished the Friday before for a second consecutive week, following two successive weeks before that on the downside. It was the fourth higher week-over-week finish in the last six weeks.

Calendar builds

The Friday session passed with no deals pricing.

However the forward calendar saw a substantial buildup.

Dealers rolled out a pair of offerings related to the spinoff of Manitowoc Food Service, Inc. from Manitowoc Co., Inc.

Manitowoc Food Service plans to start a roadshow on Monday for a $425 million offering of eight-year senior notes.

The roadshow is scheduled to wrap up on Friday.

Goldman Sachs is the left bookrunner. J.P. Morgan, HSBC and Citigroup are joint bookrunners.

Proceeds, together with proceeds from a concurrent term loan B, will be used to pay a $1,388,000,000 cash dividend to Manitowoc ParentCo in connection with spinoff of the New Port Richey, Fla.-based commercial foodservice equipment company, and for general corporate purposes.

Meanwhile Manitowoc Co. plans to start a roadshow on Monday for a $250 million offering of eight-year senior secured second lien notes.

That roadshow is also set to wrap up on Friday.

Again, Goldman Sachs is the left bookrunner.

J.P. Morgan, Citigroup and Wells Fargo are joint bookrunners. BMO Securities is the co-manager.

The issuing entity will be Manitowoc Cranes Escrow Corp., which is to be merged with and into Manitowoc Co.

The Manitowoc, Wis.-based crane manufacturer plans to use the proceeds, together with the $1,388,000,000 cash dividend from Manitowoc Foodservice and an $85 million initial draw on the Manitowoc Co. ABL revolver, to repay all its notes due in 2020 and 2022, as well as to repay and terminate the Manitowoc Co. revolver and term loan, repay other debt of subsidiaries and possibly repay other debt, and for general corporate purposes.

Vizient starts Monday

Elsewhere Vizient, Inc. plans to start a roadshow on Monday for a $400 million offering of eight-year senior notes.

The roadshow wraps up on Thursday and the deal, via sole bookrunner Barclays, is set to price thereafter.

The Irving, Texas-based operator of network not-for-profit health care organizations plans to use the proceeds to finance the acquisition of the Spend and Clinical Resource Management and Sg2 businesses from MedAssets Inc.

Vizient and the two Manitowoc offers climb aboard a forward calendar that also contains the previously announced Endurance International Group Holdings Inc. $350 million offering of eight-year senior notes via left bookrunner Goldman Sachs.

Also in the week ahead, look for Acadia Healthcare Co. Inc. to show up with a $390 million offering senior notes in a deal that will be led by BofA Merrill Lynch and is expected to roll out as early as Monday, according to a portfolio manager.

Centene bonds bound upward

In the secondary market, traders said that Thursday’s new deal from Centene was the busiest name in the junk world.

One said that more than $152 million of the company’s 6 1/8% notes due 2024 traded along with over $128 million of its new 5 5/8% notes due 2021, easily the two most actively traded junk credits of the day.

Centene, a St. Louis-based healthcare company, had priced $1.4 billion of the 5 5/8% notes and $1 billion of the 6 1/8% notes late in the session on Thursday in what primaryside sources were widely calling “a blowout.”

The regularly scheduled forward calendar offering was upsized from an originally announced $2.27 billion and both halves of the solidly oversubscribed issue – the biggest high-yield issue of the year so far – ended up pricing tighter than initial price talk, a reflection of avid investor interest.

That interest carried over once the new deal hit the aftermarket.

A market source said that there had actually been several large-sized trades in the 5 5/8% notes late Thursday, with the bonds shooting up from their par issue price to a 101¾ to 102 bid context.

That exalted level was about where the notes stayed during Friday’s heavy trading.

Late in the session on Friday, a trader pegged those five-year bonds around a 101 7/8 to 102 1/8 context.

“Bonds were getting lifted before that at about 102,” he said, after pushing up from 101 7/8 earlier on.

He saw the notes going home “more wrapped around 102.”

Volume, he said, “was pretty heavy, all round lots, $1 million-plus lots, pretty consistently during the course of the day.

“So there was good activity in them, good volume.”

The 6 1/8% notes ended up doing even better.

The trader saw those bonds, which had not traded at all after pricing on Wednesday, starting out of the gate on Thursday trading between 102¼ and 102¾, up from their par issue price,

He saw the last trades of the day going off at 102 5/8 and 102¾ bid.

Crown Castle moves up

Thursday’s other deal – the $1.5 billion split-rated two-part offering from Houston-based communications antenna tower operator Crown Castle International Corp. – was quoted at solidly higher levels on Friday.

A trader said that its 3.40% notes due 2021 had firmed to 100½ bid, 101½ offered versus the 99.977 level at which that $600 million tranche of bonds had priced on Thursday.

He meantime saw the other half of the deal – the $900 million of 4.45% notes due 2026 – going home at 100¾ bid, 101¾ offered, up from its 99.671 issue price.

Another market source saw the latter bonds at just over 100 5/8 bid on volume of about $48 million.

However, the traders said it was probable that much of that volume came not from traditional high-yield investors but from high-grade investors reaching for a little yield by playing in the quickly shopped Ba1/BBB-/BBB- offering.

The company’s existing 5¼% notes due 2023 – which had eased slightly in active trading on Thursday on news of the big new offering – more than recouped that lost ground on Friday, gaining 1¼ points on the day to go home at 106¾ bid, with over $37 million having changed hands.

Its 4 7/8% notes due 2022, which had actually gained 1 point in busy dealings on Thursday, eased by 1/8 point Friday, a market source said, going out at 104 7/8 bid, with around $12 million having traded.

Recent deals hang in

Several traders agreed that although there was not much volume seen in them on Friday, other recently priced deals continued to hold their own, helped by what one called “a definite improvement in the market’s tone” over the past few sessions.

One of the traders saw TreeHouse Foods, Inc.’s 6% notes due 2024 at 102 7/8 bid, 103 7/8 offered on Friday, calling that up from Thursday’s level at 102 5/8 bid, 103 1/8 offered.

The Oak Brook, Ill.-based packaged food and beverage manufacturer sold $775 million of the notes in a quick-to-market deal that priced on par last Thursday, Jan. 21. Those bonds initially traded in a 101½ to 102½ bid context late last week, moved as high as the 103 bid area as the week closed, and then settled in all of this week around their current levels.

Another recent deal – Hub International Ltd.’s 9¼% senior secured second-lien notes due 2021 – were seen by a trader on Friday “hanging in” around where they had finished out the day on Thursday trading between 102 and 103 bid.

The Chicago-based insurance brokerage company’s quick-to-market $300 million offering had priced at par on Wednesday and had firmed to above the 102 bid level in initial aftermarket dealings, getting as god as 103 bid during the early going on Thursday before coming slightly down from that peak to settle in around its current levels.

Freeport McMoRan rebounds

Away from the new or recently priced issues, traders saw an upturn in the battered bonds of Freeport McMoRan. The Phoenix-based metals mining and oil and natural gas company’s notes had gotten hammered down by several points pretty much across the board on Thursday after Moody’s Investors Service dropped its senior unsecured debt rating down to B1 from Baa3 previously – a four-notch downgrade.

Its 2 3/8% notes due 2018 gained 1½ points on Friday to end at 64 bid, with over $69 million traded, while its 3 7/8% notes due 2023 gained 2 points on the day, ending at 41¼ bid, with more than $34 million of turnover.

Indicators up on day, week

Statistical measures of junk market performance were higher across the board for a second straight session on Friday. They had turned upward on Thursday after having been mixed on Wednesday. Friday was their third higher session in the last four trading days.

The indicators were also higher all around from where they had finished the Friday before for a second consecutive week, following two successive weeks before that on the downside. It was the fourth higher week-over-week finish in the last six weeks.

The KDP High Yield Daily Index 16 basis points on Friday to end at 63.15, its seventh straight gain and eighth such advance in the last 15 sessions, a stretch that included a seven-session losing streak; on Thursday, it had been up by 18 bps.

For a second session in a row, its yield, meantime, came in by 5 bps, closing Friday at 7.19%. It was the seventh consecutive narrowing and eighth such tightening over the last 15 sessions.

Friday’s levels compared favorably with the 62.44 index reading and 7.41% yield at which the index had ended last Friday, Jan. 22.

The Markit Series 25 CDX North American High Yield Index rose by 15/32 point on Friday, its second consecutive gain and third such advance in the last four sessions, ending at 99 23/32 bid, 99¾ offered. On Thursday it had risen by 9/16 point.

Friday’s level was up from 98 31/32 bid, 99 /32 offered seen last Friday.

The Merrill Lynch North American High Yield Master II Index made it seven successive successes in a row on Friday, gaining 0.329%, on top of Thursday’s 0.246% advance.

It was the index’s ninth upturn in the past 10 trading days.

Friday’s improvement cut the index’s year-to-date loss to 1.602% from Thursday’s 1.925% and from the 4.095% deficit seen last Wednesday, Jan. 20 – its worst level for the year so far.

For the week, the index rose by 1.106% – its second consecutive weekly rise, against two weekly losses so far this year. It had also risen by 0.111% last week, leaving the year-to-date loss last Friday at 2.679%.

© 2015 Prospect News.
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