PennyMac, Northern Oil, U.S. Steel price; calendar grows; Wynn Las Vegas gains; energy sector strong

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 8 – The domestic high-yield primary market saw an active start to the week with several deals pricing and the forward calendar growing.

PennyMac Financial Services Inc. drove-by with an upsized $650 million offering of eight-year senior notes (B1/BB-).

Northern Oil and Gas, Inc. also priced an upsized $550 million issue of seven-year senior notes (Caa1/B/B) at the conclusion of a roadshow.

United States Steel Corp. priced an upsized $750 million of eight-year notes.

Meanwhile, it was another strong day in the secondary space although volume was light as activity surrounding recent issues died down, a source said.

As market players awaited the new deals in the pipeline, attention turned to outstanding issues with corporate news the driving force for trading activity.

U.S. Steel’s 12% senior notes due 2025 were in focus and making gains after the company announced its intention to redeem the notes with proceeds from the new offering.

Wynn Las Vegas’ 5¼% senior notes due 2027 were also making gains after the company announced a new equity offering.

The energy sector was on the rise on Monday with several distressed energy names the major winners of Monday’s session as crude oil futures continued their upward momentum.

Monday’s primary

In line with the early parts of every week thus far in 2021 the Feb. 8 week got off to a highly active start during a Monday session that was replete with drive-bys, deal completions and roadshow starts.

Among the session’s drive-by issuers PennyMac Financial Services priced an upsized $650 million issue (from $500 million) of 4¼% eight-year senior notes (B1/BB-) at par, at the tight end of yield talk.

Shortly after Monday's close the new PennyMac 4¼% notes were trading at par ¾ bid, 101 ½ offered, according to an investor.

Timing was accelerated. When announced early Monday the deal was scheduled to remain in the market until Tuesday.

Meanwhile, Northern Oil and Gas completed a roadshow and priced an upsized $550 million issue (from $500 million) of 8 1/8% seven-year senior notes (Caa1/B/B) at par, 12.5 basis points inside of talk.

The market for the new Northern Oil and Gas 8 1/8% notes was 101½ bid, 102 offered after Monday's close, according to a trader who added that the deal was heard to be close to five-times oversubscribed (see related stories in this issue).

U.S. Steel priced $750 million, upsized from $500 million, of 6 7/8% eight-year notes at par.

U.S. Steel’s redemption

U.S. Steel’s 12% senior notes due 2025 were in focus on Monday with the notes making large gains on news they would soon be redeemed.

The 12% notes rose 2½ points to 118¾ heading into the market close.

There was more than $17 million of the bonds on the tape.

They were trading up to their takeout price, a source said.

Proceeds from U.S. Steel’s latest offering will be used to redeem the remaining $687 million of the notes outstanding. (See related article in this issue)

Wynn Las Vegas gains

Wynn Las Vegas’ 5¼% senior notes due 2027 were making large gains in active trading after the company announced a secondary offering.

The 5¼% notes rose 1¾ point.

They were changing hands in the 105¾ to 106 context heading into the close, a source said.

The notes were on the rise after Wynn Resorts announced a secondary offering of 5.5 million shares with a greenshoe of 825,000 shares.

The offering would equal $740 million based on last Friday’s closing price, according to a market source.

The equity offering was a credit positive for the bonds. “It gives them more of a cushion,” a source said.

Energy gains

Several distressed energy names continued to be bid up on Monday as crude oil futures extended its rally.

Nabors Industries Inc.’s 5¾% senior notes due 2025 rose another 2½ points to close Monday at 76¼.

The notes have been on a tear over the past week, climbing 4 points last Friday.

Transocean Inc.’s 8% senior notes due 2027 were up 3 5/8 points to 56½ in decent volume.

Distressed energy names continued to be bid up as crude oil futures continued their rally.

WTI crude oil futures settled at $57.97 on Monday, an increase of $1.12, or 1.97%.

There is speculation the rally in crude oil will continue with WTI futures running up to $65 a barrel, a source said.

$175 million Friday inflows

Actively managed high-yield funds saw $175 million inflows on Friday, the most recent session for which data was available at press time, according to a market source.

The cash flows of the high-yield ETFs were flat on the day, the source said.

Indexes gain

Indexes launched the week on firm footing.

The KDP High Yield Daily index gained 7 points to close Monday at 69.75 with the yield now 3.81%.

The index posted a cumulative gain of 43 points on the week last week.

The ICE BofAML US High Yield index rose 13.3 bps with the year-to-date return now 1.222%.

The index crossed the 1% threshold last Friday after posting a cumulative gain of 57.9 bps on the week.

The CDX High Yield 30 index rose 11 points to close Monday at 109.6.

The index posted a cumulative loss of 49 points on the week last week.

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