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HG Bonds: Boeing Shops $1.4B, Four-Part Deal Ahead of Two Maturities

Boeing Co. (NYSE: BA) is in market with a $1.4 billion, four-part public offering across five-year notes due 2023, a 10-year issue due 2028, a 20-year tranche due 2038, and 30-year notes due 2048, all with a March 1 maturity date, sources said. The “no-grow” issue is guided to an A/A2/A profile.

Goldman Sachs is a bookrunner across all the tranches. Additionally, Citigroup and J.P. Morgan are marketing the 2023 issue, Barclays and BAML are bookrunners for the 2028 notes, SMBC and Wells Fargo are bookrunners for the 2038 tranche, and Deutsche Bank and Mizuho are marketing the long bonds.

The deal will carry make-whole call provisions and par calls from one and three months prior to maturity for the five- and 10-year notes, and from six months prior to maturity for the 20- and 30-year notes.

According to regulatory filings, the proceeds from the offering will be used for general corporate purposes. Of note, Boeing has two long-term maturities due this year, starting with $350 million of 0.95% notes due on May 15, followed by $250 million of 2.9% notes due Aug. 15, which was issued by subsidiary Boeing Capital Corp., according to S&P Global Market Intelligence.

Initial whispers for today’s proposed offering surfaced at T+55–60 for the 2023 notes, at T+75–80 for the 2028 issue, in the T+85 area for the 2038 notes, and at T+100–105 for the long bonds, indicating reoffer yields near 3.20%, 3.64%, 4%, and 4.15%, based on the tight end of talk.

The Chicago-based company last tapped the market a year ago, when it placed a $900 million, three-part offering, evenly split across 2.125% five-year notes due March 2022 at T+42, or 2.38%; 2.8% 10-year notes due March 2027 at T+60, or 3.07%; and 3.65% 30-year notes due March 2047 at T+85, or 3.91%. For reference, the 2022 issue traded yesterday at T+18 (or at a G-spread equivalent of 30 bps), the 2027 notes changed hands last month at T+49 (at a G-spread of 51 bps), and the 2047 notes traded late last month at T+75 (or at a G-spread of 77 bps), according to MarketAxess.

Since December, Boeing and Brazilian aircraft manufacturer Embraer S.A. have been in discussions about a possible transaction involving a possible merger. According to S&P Global Ratings neither company has specified what form such a deal may take, though it could be a joint venture, a full acquisition of Embraer, or some other deal structure. The government of Brazil maintains a “golden share” in Embraer, which it could use to put pressure on or block the deal.

S&P Global Ratings said Boeing’s ratings will likely not be affected by a possible transaction between the two companies. “We believe that Boeing has flexibility at the current rating to undertake a large multi-billion dollar transaction because the company’s funds from operations (FFO)-to-debt ratio is currently well above our downgrade trigger of 40% (Boeing’s FFO-to-debt ratio was 62% for the 12 months ended Sept. 30, 2017),” the agency, which maintains an A rating and stable outlook, said on Dec. 22, 2017.

“The company currently has about $10 billion in cash and short-term investments and we expect it to generate at least $10 billion of free cash flow over the next 12 months. However, our current forecast assumes that management will use all of the company’s free cash flow and some of its cash on hand for dividends and share repurchases,” analysts added.

Last April, Fitch affirmed its A rating and stable outlook on Boeing. “Large acquisitions, although not anticipated, also could affect the ratings, as could debt-funded share repurchases. Sustained consolidated FFO-adjusted leverage approaching 2.0x could lead to a negative action,” Fitch said at the time. — Gayatri Iyer

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Community Health High Yield, Leveraged Loan Debt Swoons as Earnings Underwhelm

Community Health bonds fell sharply in late afternoon trading Wednesday after the hospital operator rolled out preliminary second-quarter earnings that underwhelmed analyst expectations.

Community Health 6.875% notes due 2022 were the most actively traded, falling 3.5 points, to 86.5, according to MarketAxess. Over in loans, the issuer’s term loan H dipped about three quarters of a point on the day, to 99.75/100, sources said.

Adjusted EBITDA for the quarter is expected to clock in at roughly $435 million, according to a company release, or nearly 15% shy of analyst expectations of $510 million, based on consensus data provided by S&P Global Market Intelligence.

“The lower than anticipated results were primarily caused by lower than expected volume and the resulting lower net operating revenues,” the company noted in the release. “The results were also impacted by increases in medical specialist fees, purchased services and information systems expense.”

Community Health expects to book net operating revenue for the quarter of about $4.14 billion, compared with $4.59 billion in 2Q16.

Net cash provided by operating activities is expected to be about $261 million, and roughly $503 million for the first half of the year. This compares with $338 million and $632 million for 2Q16 and 1H16, respectively.

Community Health bonds had climbed sharply over the past few weeks as repeal efforts encountered enough resistance from GOP senators to potentially dispel the damaging potential impact on rural facility operators.

But the bonds shed gains this week as Senate Republicans moved to open a debate on at least a scaled-down version of repeal-and-replace legislation for the extant Affordable Care Act.

Franklin, Tenn.–based Community Health (NYSE: CYH) is an operator of general acute-care hospitals and outpatient facilities in communities across the U.S. — James Passeri

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High Yield Bond Trading Prices Post Biggest Gains in 2 Months

The average bid of LCD’s flow-name high-yield bonds climbed 73 bps in today’s reading, to 102.45% of par, yielding 6.05%, from 101.72, yielding 6.28%, on July 13. Within the 15-bond sample, there were 13 gainers, one decliner, and one issue was unchanged.

The average bid is now 65 bps higher over the last two weeks and 47 bps higher over the last four weeks. Today’s result shows the largest gain since the May 23 reading, when the average bid was 101.55, representing an increase of 82 bps.

The largest gainer was Frontier Communications 11% notes due 2025, which increased 1.5 points, to 89.5. Gains of 1.25 points were recorded for Community Health 6.875% notes due 2022, at 90.25; Valeant Pharmaceuticals 5.875% notes due 2023, at 87.25; Post Holdings 5% notes due 2026, at 101; and Sprint 7.875% notes due 2023, at 114.75.

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Valeant High Yield Bonds Climb in Secondary on Debt Paydown News via iNova

Valeant Pharmaceuticals 6.125% notes due 2025 were the most active early movers on Thursday, climbing half a point, to 80.875, according to MarketAxess, after the debt-laden drug maker announced its sale of iNova Pharmaceuticals for $930 million, with proceeds slated to pay down a portion of Valeant’s term debt.

Asset sales have been a primary focus among creditors to the Laval, Quebec–based drug maker, which has been scrambling to shore up cash in order to pay down its substantial debt load, which totaled more than $28 billion as of March 31, according to Valeant’s quarterly filing with the Securities and Exchange Commission.

Meanwhile, the issuer’s Series F term loan (L+475, 0.75% LIBOR floor) was at a 101.5 bid today, down about an eighth of a point on the day, sources said. The paper was bracketing 102 at the start of this week, a record high for the loan. As of March 31, there was $6.83 billion outstanding on the loan, SEC filings show.

Shares of Valeant (NYSE: VRX) were also up roughly 8% in morning trading.

The iNova subsidiary has been sold to a company jointly owned by funds advised and managed by Pacific Equity Partners and the Carlyle Group, according to a company release. The transaction is expected to close in the second half of the year, subject to customary regulatory approvals.

Goldman Sachs acted as financial adviser to Valeant in the sale, and Baker McKenzie served as legal adviser.

iNova manages over-the-counter prescriptions, in areas including weight management, pain relief, cardiology and cold and cough products.

Valeant Pharmaceuticals is a specialty pharmaceutical company — James Passeri/Kelsey Butler

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High Yield Bond Bids Surge Anew, Hit 10-Week Peak

The average bid of LCD’s U.S. flow-name high-yield bond sample surged 82 bps in today’s reading, to 101.55% of par, yielding 6.26%, from 100.73, yielding 6.27%, on May 18. Within the 15-bond sample, there were 11 gainers, two decliners, and two unchanged issues.

us high yield bond bids

The average bid is now up 66 bps over the last two weeks and 130 bps over the last four weeks. Today’s results show the highest average bid price for the sample since March 2, when the average bid price was 102.10.

While the majority of the constituents were in the black in today’s assessment, there were a few standouts. Community Health 6.875% notes due 2022 increased three points, to 89.25. Also, PetSmart 7.125% notes due  2023 were two points higher, at 94.5. The retailer’s sole existing bond issue has been active in the secondary market following the launch of a $2 billion, two-part offering to back the purchase of Chewy.com.

Meantime, the decliners in today’s reading were Altice 7.75% notes due 2022 at 106, and Dollar Tree 5.75% notes due 2023 at 106.25, both a quarter of a point lower.

MGM Resorts 6% notes due 2023, and Post Holdings 5% notes due 2026 were both unchanged.

The average yield to worst was one basis point lower, at 6.26%, and the average option-adjusted spread tightened nine basis points, to T+436. However, both the average yield and average spread remain wider in comparison to broad high-yield market indices. For example, the S&P Dow Jones U.S. Issued High Yield Corporate Bond Index II closed on May 22 with a yield to worst of 5.38% and an average option-adjusted spread to worst of T+417.

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Neiman Marcus High Yield Bonds Slump in Trading Amid Retail Pressure

Neiman Marcus 8% cash-pay notes due 2021 slumped 5.25 points to a new all-time low on Monday, breaking through 60 for the first time as the issuer continues to come under heavy scrutiny amid pressure across the brick-and-mortar retail sector.

The majority of the sell-off was driven by short sellers, with some lightening up of positions reported by investors looking for a better entry point following the recent string of disappointing earnings out of the sector. “They don’t believe it’s a restructuring name, they are just leaning on it because they can and because the cost of carry is just too high,” said one source.

The 8.75% senior PIK-toggle notes lost three points, to 55. Those bonds were issued in 2013 to finance a buyout by Ares Management and the Canada Pension Plan Investment Board.

Further up the capital structure, Neiman Marcus’ TLB (L+325, 1% LIBOR floor) was quoted at 81.25/82.25, down about a point from the last session, sources said. Before the last few weeks, the last time the term debt fell to the low 80s was in early 2016, when the once luxury retailer in January shelved its IPO plans after it reported in December its fifth straight quarter of declining sales and a 25% drop in EBITDA. December’s drop in EBITDA followed a 40% EBITDA decline in its September quarter.

In addition to the string of poor earnings from retailers fueling expectations that Neiman Marcus’ numbers will be weak when it reports in the second week of March, sources also point to weak foot traffic and post-election traffic disruption on Fifth Avenue in New York potentially impacting Neiman Marcus’ Bergdorf Goodman store.

Furthermore, investors are reportedly concerned about the company’s inventory levels, particularly in light of the company’s operational challenges related to the launch of its new common merchandising system, NMG1.

Dallas, Texas–based Neiman Marcus Group, Inc., through its subsidiaries, operates as an omni-channel luxury fashion retailer primarily in the United States. As of Oct. 29, the retailer’s long-term debt totaled $4.77 billion, according to SEC filings. The company is rated B–/B3 with negative outlook on both sides. — Rachelle Kakouris/Kelsey Butler

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Mallinckrodt High Yield, Loan Debt Slides re $100M FTC Price-Fix Settlement

Debt backing Mallinckrodt sold off late in the session after the U.K.-based pharmaceutical company said it had settled with the Federal Trade Commission (FTC) over allegations that it used its monopoly to hike drug prices.

According to a statement from the FTC, Mallinckrodt ARD Inc., formerly known as Questcor Pharmaceuticals, Inc., and its parent company, Mallinckrodt plc, have agreed to pay $100 million to settle FTC charges that they violated the antitrust laws when Questcor acquired the rights to a drug that would otherwise threaten its monopoly in the U.S. market for adrenocorticotropic hormone (ACTH) drugs.

Acthar is a specialty drug used as a treatment for infantile spasms, a rare seizure disorder afflicting infants, as well a drug of last resort used to treat other serious medical conditions.

The 5.5% notes due 2025 led the downward move, falling 3.5 points to 86.5 immediately following the news, while the shorter-dated 5.75% notes due 2022 lost 1.5 points, to 92.

The company’s term loan due 2021 (L+275, 0.75% floor) was down more than a point to a 99 bid, from quotes above par before the news.

The New York Times earlier today reported that the FTC “is preparing to file charges” against the company “for allegedly using its monopoly to jack up the price of” its Acthar Gel drug by more than 2,100 percent, to $28,000 per dose.

The FTC’s complaint alleges that, while benefiting from an existing monopoly over the only U.S. ACTH drug, Acthar, Questcor illegally acquired the U.S. rights to develop a competing drug, Synacthen Depot. The acquisition stifled competition by preventing any other company from using the Synacthen assets to develop a synthetic ACTH drug, preserving Questcor’s monopoly and allowing it to maintain extremely high prices for Acthar.

“Questcor took advantage of its monopoly to repeatedly raise the price of Acthar, from $40 per vial in 2001 to more than $34,000 per vial today—an 85,000 percent increase,” said FTC Chairwoman Edith Ramirez in a statement. “We charge that, to maintain its monopoly pricing, it acquired the rights to its greatest competitive threat, a synthetic version of Acthar, to forestall future competition. This is precisely the kind of conduct the antitrust laws prohibit.”

Mallinckrodt public limited company develops, manufactures, markets, and distributes branded and generic specialty pharmaceutical products and therapies in the United States, Europe, the Middle East, Africa, and internationally. — Rachelle Kakouris/Kelsey Butler

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US High Yield Bond Prices Rise in Trading Mart thanks to NRG Energy

The average bid of LCD’s flow-name high-yield bonds gained 45 bps in today’s reading, to 99.20% of par, yielding 7.10%, from 98.75%, yielding 7.22%, on Dec. 8. Within the 15-bond sample, there were nine gainers, three decliners, and three unchanged issues.

Today’s reading represents the highest level for the average bid since Oct. 27. While the majority of the sample was in the green, NRG Energy 6.625% notes due 2027, buoyed by recent bullish market sentiment toward commodities, saw the largest increase, surging 1.75 points, to 95.5. The other big gainers were Chrysler Group 5.25% notes due 2023, which rose 1.50 points, to 102, and Altice 7.25% notes due 2022, which advanced a full point, to 106.75.

Declines were relatively modest among the constituents. Scientific Games 10% notes due 2022 shed half of a point, to 96.75, while  PetSmart 7.125% notes due 2023 lost a quarter of a point, to 102.75, and Dollar Tree 5.75% notes due 2023 fell a quarter of a point as well, to 106.75.

On Dec. 1, the sample was updated to include the PetSmart bonds after Constellation Brands 4.25% notes due 2023 were removed from the sample following the company’s upgrade to investment-grade status.

With the change to the sample, no evaluation of trailing two-week and four-week data will be presented.

The average yield to worst slipped 12 bps, to 7.10%, and the average option-adjusted spread retracted 20 bps, to T+498.

The average yield remains wider when compared to high-yield’s broader market averages, while the spread is tighter. The S&P Dow Jones U.S. Issued High Yield Corporate Bond Index closed on Dec. 12 with a yield to worst of 5.93% and an option-adjusted spread to worst of T+544. – Staff reports\

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High Yield Bond Prices Sink in Trading to Lowest Point Since July

The average bid of LCD’s flow-name high-yield bonds fell 27 bps in today’s reading, to 98.06% of par, yielding 7.15%, from 98.33, also yielding 7.15%, on Nov. 1. Within the 15-bond sample, there were 10 decliners, three gainers, and two unchanged constituents.

This is the fourth consecutive drop for the average bid, which is read twice each week, and it follows Tuesday’s dramatic plunge of 204 bps, which put the sample below par for the first time since Sept. 27. The current reading is the sample’s lowest level since 97.10 on July 7.

The biggest decliner was NRG Energy 6.625% notes due 2027, which fell three points, to 91.25. Frontier Communications, MGM Resorts, Sprint Corp., Dish Network, and Charter Communications were all down a point or more since Tuesday.

The Valeant Pharmaceuticals International 5.875% notes due 2023 jumped 3.75 points, to 81, in today’s reading, topping the short list of gainers, as investors were pacified by the company’s plans to sell its stomach-drug business for a hefty $10 billion. In Tuesday’s reading, the notes were the largest decliner following reports that its ex-CFO and ex-CEO are the focus of a criminal probe. The Community Health Systems 6.875% notes due 2022 also posted a hefty gain of 2.25 points, to 75.75.

Today’s result puts the average down 349 bps from two weeks ago and 319 bps from four weeks ago.

The average yield to worst was unchanged at 7.15% in today’s reading. The average option-adjusted spread to worst rose 11 bps, to T+564. The average yield and spread remain wider when compared to high-yield’s broader market averages. The S&P Dow Jones U.S. Issued High Yield Corporate Bond Index closed on Wednesday, Nov. 2 with a yield to worst of 6.21% and an option-adjusted spread to worst of T+504.

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Sell-off: High Yield Bond Secondary Prices Tumble Below Par

The average bid of LCD’s flow-name high-yield bonds nosedived 204 bps in today’s reading, to 98.33% of par, yielding 7.15%, from 100.37, yielding 6.64%, on Oct. 27. All 15 constituents in the sample were in the red.

This is the first below-par reading for the average bid price since Sept. 27. It is also the lowest reading since Sept. 15, when the average bid was recorded at 98.85 ahead of the September meeting of the Federal Open Market Committee. Similarly, today’s drop comes with the FOMC’s November session currently underway, as well as one week ahead of the U.S. presidential election.

Additionally, headlines affecting Community Health Systems and Valeant Pharmaceuticals International also weighed on the sample. Valeant 5.875% notes due 2023 shed five points, to 77.25, as news reports surfaced that U.S. prosecutors are examining the actions of former top executives for possible accounting fraud related to the online pharmacy Philidor Rx Services, which Valeant secretly controlled.

Also, Community Health 6.875% notes due 2022 were 6.25 points lower in today’s reading as the market continues to brace for the company’s quarterly report. The hospital operator said last week it expects a 10% drop in revenue for the three months ended Sept. 30, 2016.

The average bid is now down 286 bps over the past week, 270 bps from two weeks ago, and 283 bps from four weeks ago.

The average yield to worst gained 51 bps, to 7.15% in today’s reading, and the average option-adjusted spread to worst rose 48 bps, at T+553. Both the average yield and spread remain wider when compared to high-yield’s broader market averages. The S&P Dow Jones U.S. Issued High Yield Corporate Bond Index closed on Monday, Oct. 31 with a yield to worst of 6.04% and an option-adjusted spread to worst of T+483. – Staff Reports

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