Opportunistic high-yield trades emerge as analysts say buy

By Mariana Santibanez

NEW YORK, Oct 7 (IFR) - Opportunistic borrowers jumped into the US high-yield bond market on Tuesday with big refinancings, undeterred by weaker stocks and wider junk-bond spreads.

US stocks dropped 0.5% following weak European data, with the weakness bleeding into the credit markets, as the HY CDX 22 index dipped a quarter point to 106.73, according to Tradeweb.

But issuers ploughed ahead with deals anyway, taking a chance after a relatively strong recovery in recent days before the latest setback.

And the new deals looked set to come at attractive rates.

The yield-to-worst has tightened to 5.97% from 6.46% in the past four days, according to Bank of America Merrill Lynch data, and strategists urged investors to buy.

"We recommend overweighting US high-yield credit and believe investors should add risk to portfolios," Morgan Stanley (Xetra: 885836 - news) strategists said.

"Over the course of 2014, we have had a cautious view on high yield, with a preference for high quality. We now see risk/reward as more attractive than it has been in over a year. We recommend buying high yield, and within the asset class, lightening up on BBs while increasing exposure to Bs (BSE: BSLIMITED.BO - news) and CCCs."

In a report entitled: "The reports of my death are greatly exaggerated", BAML also said investors should add risk at current levels, amid expectations that yields and spreads would end the year lower.

TAKING THE PLUNGE

With that kind of chatter in the background, and low supply over the past week, Double B rated healthcare company HCA Inc stepped up with a US$1.5bn dual-tranche senior secured bond.

The five-year NCL and a 10.5-year NCL bonds had price talk set at 4.25-4.375% and 5.25-5.375%.

Left-lead Bank of America Merrill Lynch was to close books at 1:30pm New York time, with pricing later in the day.

Morningstar (NasdaqGS: MORN - news) analysts said the deal offered a decent concession, pegging fair value at 3.875% for the five-year and 5.125% for the 10.5, based on where the outstanding 3.75% 2019 and 5% 2024 bonds were trading - with yield-to-worst at 3.81% and 5.00% respectively.

Other comparables included Tenet's 4.375% 2021 secured notes, spotted at a yield of 4.78%, Morningstar said.

Also joining the opportunistic bandwagon was Unitymedia with a dual-currency refinancing split between EUR250m and US$600m tranches. Both pieces are 10-year non-call five.

Price talk on the euro and dollar deals was set at 5% area and 6% area respectively - in line with whispers heard earlier.

A couple of M&A trades are also on tap to price in the coming days.

Sensor manufacturer Sensata Technologies (NYSE: ST - news) is aiming to price a US$400m 10-year bond on Tuesday to partially finance the acquisition of Schrader International from Madison Dearborn Partners (Other OTC: PGPHF - news) for a total enterprise value of US$1bn.

Price talk is out at 5.75% area.

Price talk also emerged on the downsized Albertsons US$1.245bn 8-year non-call three bond at 7.875% area. Books are closing Wednesday.

One trader said a good pricing benchmark was the issuer's 7.75% June 2026, which he saw trading to yield around 8%.

With those deals already in market, and others like Lundin Mining Corp's sizeable US$1bn 2-tranche offering, volumes could soon meet the forecast of up to US$6bn this week.

DEALS EXPECTED TO PRICE TUESDAY:

HCA INC

HCA Inc. Announced a US$1.5bn SEC-Reg (Madrid: SL001.MC - news) 2-tranche senior secured note offering via BAML(left)/BARC/C/CS/DB/GS (KSE: 078935.KS - news) /JPM/MS/RBC/STRH/UBS (NYSEArca: FBGX - news) /WFS. Co-managers are CA/FITB/MIZ/SMBC. Structure will consist of a 5-year NCL and a 10.5-year NCL. USD101 COC put. UOP: Proceeds from the offering will be used to refinance existing indebtedness, pay transaction fees & expenses, and general corporate purposes. BIZ: HCA is one of the largest and most diversified health care services providers, operating acute care hospitals, outpatient facilities, clinics and other patient care delivery settings in the U.S. and U.K.

PRICE TALK: 5-year: 4.25-4.375%, 10.5-year 5.25-5.375%. Books close at 1:30pm, pricing thereafter.

SENSATA TECHNOLOGIES

Sensata Technologies B.V., existing ratings Ba3/BB+, announced a US$400m 10-year senior notes via BARC(left)/MS/RBC/GS. 144a/RegS for life. MWC T+50bp. Covenants: Substantially the same as the obligations under the 4.875% Senior Notes due 2023. UOP: To partially finance the acquisition of Schrader International. BIZ: Developer and manufacturer of sensors and controls.

PRICE TALK: 5.75% area. Books close at 1:30pm, pricing thereafter.

UNITYMEDIA

Unitymedia KabelBW is looking to raise EUR725m-equivalent 10NC5 senior notes, with target tranche sizes of EUR250m and US$600m. The new issue is expected to be rated B3/B and will refinance existing indebtedness. Credit Suisse (NYSE: CS - news) is global coordinator, and joint bookrunners are Barclays (LSE: BARC.L - news) , BNP Paribas (Xetra: 887771 - news) , Deutsche Bank (Xetra: 514000 - news) , ING, Morgan Stanley, Societe Generale (Paris: FR0000130809 - news) and RBS (LSE: RBS.L - news) . Leads are aiming to price today, with a European investor call at 10:30am BST and a US investor call to follow.

PRICE TALK: EUR725m-equivalent 10NC5 senior notes. Euro Books close at 17.15PM BST (UK), US$ books close at 12:15pm today (07Oct), with pricing thereafter.

- US$600m 10-year nc5 at 6.00% area.

- E250m 10-year nc5 at 5.00% area.

DEALS PIPELINE:

PROVIDENCE SERVICES

Providence Services, rated B3 by Moody's, is planning to sell a US$200m 7-year nc3 senior unsecured note offering via BAML. UOP: from the notes, revolver borrowings, and an expanded term loan to help fund the $400 million acquisition of Matrix Medical Network ("Matrix"), a provider of health risk assessments. BIZ: Providence Service Corporation (NasdaqGS: PRSC - news) (PRSC), headquartered in Tucson, Arizona, provides home- and community-based social services, health risk assessments, and non-emergency transportation (NET) services management to government-sponsored clients under programs such as welfare, juvenile justice, Medicaid, and corrections.

LUNDIN MINING CORP (Other OTC: LUNCF - news)

Lundin Mining Corp, rated B+ by S&P, is readying a US$1bn 2-tranche senior secured notes. Structure will consist of a USD500m part due 2020 and a USD500m due 2022. UOP: The company today announced its acquisition of 80% of the Candelaria and Ojos del Salado mines in Chile. All the ratings are subject to Lundin completing the financing as proposed to fund the acquisition. A bridge loan would be used only in the event that Lundin cannot complete the proposed bond offering on or before closing the acquisition. BIZ: Based in Toronto, Canada, Lundin Mining is a multinational minerals company with operations in Sweden, Ireland (Other OTC: IRLD - news) , Spain, Portugal, the Democratic Republic of Congo, and Russia. Further details to follow.

NATURAL RESOURCE PARTNERS

Natural Resource Partners L.P., rated B3/B, announced a US$125m add-on to its 9.125% 10/1/18 notes via WFS(left)/CITI. Co-managers BB&T/BBVA/COMERICA (OTC BB: CMPWW - news) /HUNT/MUFJ. Investor (Other OTC: IVSBF - news) call at 12:30pm on Tuesday (07Oct), with pricing expected Friday morning. 144a/RegS w/reg rights. UOP: to fund a portion of the purchase price of NRP's pending acquisition of non-operated working interests in oil and gas assets located in the Williston Basin in North Dakota. BIZ: Natural Resource Partners L.P. ("NRP") is a master limited partnership headquartered in Houston, TX. NRP is a diversified natural resource company that owns interests in oil and gas, coal, aggregates and industrial minerals across the United States. - The original $300m, B3/B, was sold on September 13, 2013 at 9.375% yield via CITI/WFS.

ALBERTSONS HOLDINGS

Albertsons Holdings LLC (Safeway (NYSE: SWY - news) ), B2/CCC+, announced a US$1.625bn 8-year nc3 senior secured notes via BAML(left)/CITI/CS/MS/BARC/DB. Co-managers are USB/STRH. Road shows: Friday, October 3: West Coast, Monday, October 6: New York Investor Call & NY Lunch at 12:30 PM. Tuesday, October 7: New Jersey, Boston & Baltimore/ Pricing thereafter. 144a for life. USD101 COC put. First (Other OTC: FSTC - news) call at par plus 75% of the coupon. Equity clawback up to 40% at par plus coupon. UOP: Proceeds from the offering will be used together with cash on hand, borrowings under the Senior Secured Credit Facilities, proceeds from the sale of Safeway's eastern division business to New Albertsons Inc. and Sponsors' equity investment to (i) finance our acquisition of Safeway Inc. and (ii) refinance certain existing debt. BIZ: Albertsons and Safeway are leading operators of retail supermarkets.

UPDATE: Albertsons is preparing a new US$250m tack-on to the term loan B-4 to reduce the bond size for its acquisition of Safeway Inc.

PRICE TALK: 7.875% area. Deal was downsized to US$1.245bn, from US$1.625bn. Books close (08Oct) at 10am, with pricing thereafter.

DRYSHIPS INC (NasdaqGS: DRYS - news)

DryShips Inc announced a US$500m senior secured 2017 NCL note offering via sole-book runner Sterne, Agee & Leach Inc. Co-managers are DNB Markets and Cowen. First pay 1/15/15. USD101 COC Put. UOP: to refinance, in part, the Company's outstanding $700 million aggregate principal amount of 5% Convertible Senior Notes due December 1, 2014. The Notes will be secured by first priority liens on certain shares of common stock of the Company's subsidiary, Ocean Rig UDW Inc (NasdaqGS: ORIG - news) ., owned by DryShips, plus certain additional or replacement collateral. BIZ: DryShips Inc. is an owner of drybulk carriers and tankers that operate worldwide.

WHISPERS: 9/1/8-9.25%

PRICE TALK: 9.00 - 9.50%. Not price today, timing still this week.

MPG HOLDCO I INC

MPG Holdco I Inc (Metaldyne Performance Group), B3/B+, announced a US$700m 8-year nc3 senior unsecured notes via DB(left)/GS/BAML/KEY/MS/NOM/RBC. NY Lunch: Monday, October 6th @ 12:30pm. Timing: Roadshow (HKSE: 0888-OL.HK - news) 10/6 (NY) including NY lunch at 12:30pm ET, 10/7 (NJ), 10/8 (Boston), 10/9 (LA). Expected to price on Friday (10/10). First call at par plus 75% of the coupon. Equity clawback up to 35% for 3-years at par plus the coupon. 144a w/o reg rights, registered after completion of IPO Investor call: Monday, October 6th at 12:40pm.. UOP: Along with concurrent credit facility, repay existing debt of HHI, Grede and Metaldyne BIZ: Leading provider of highly engineered components for use in Powertrain and Safety-Critical Platforms for the global light, commercial and industrial vehicle markets.

BPZ RESOURCES INC (NYSE: BPZ - news) .

BPZ Resources Inc. announced a US$150m 5-year senior secured note offering via joint-bookrunners GLOBAL HUNTER (CDNX: BOB.V - news) /THE SEAPORT GROUP. Co-managers are BREAN CAPITAL/CLARKSON (LSE: CKN.L - news) /WUNDERLICH. The deal has been on the road since last week, with pricing expected later this week. UOP: to repay existing indebtedness under the 6.50% Convertible Senior Notes due March 1, 2015 and for general corporate purposes, including without limitation, funding a portion of the Company's planned capital expenditures for field development and drilling in 2014 and 2015, and infrastructure. BIZ: BPZ Energy, which trades as BPZ Resources, Inc. under ticker symbol BPZ on the New York Stock Exchange and the Bolsa de Valores in Lima, is an independent oil and gas exploration and production company with license contracts covering 1.9 million net acres in four blocks located in northwest Peru.

(Reporting by Mariana Santibanez; Editing by Natalie Harrison and Marc Carnegie)