Novelis megadeal, NRG Yield, upsized Sinclair drive by, new Murphy keeps firming; Chesapeake busy on tender

By Paul Deckelman and Paul A. Harris

New York, Aug. 15 – The high yield primary market continued to churn out new deals on Monday, with a trio of opportunistically timed and quickly shopped deals totaling $1.9 billion of new paper having come to market, up from Friday’s $650 million of new issuance in two tranches.

Aluminum producer Novelis Corp. led the drive-by parade with a solidly upsized $1.15 billion of eight-year notes, the proceeds of which will be used for debt refinancing. That latter fact helped to give a boost to the company’s existing bonds, in active dealings.

Broadcaster Sinclair Television Group, Inc. did an upsized $400 million of 10.5-year notes, while power generation company NRG Yield, Inc. priced $350 million of 10-year notes. Both were active in the aftermarket, trading around or a little above their respective issue price levels.

Syndicate sources meantime said that the stage was being set for a continuation of brisk primaryside activity on Tuesday, despite it being mid-August, the time of the traditional late-summer lull in Junkbondland.

They said that price talk came out on hospitality company Diamond Resorts International Inc.’s upsized $1 billion two-part issue of seven- and eight-year secured and unsecured bonds. Pricing is expected after the deal’s order books close.

Also seen on tap for Tuesday are more modestly sized, newly announced deals from wood products manufacturer and building materials distributor Boise Cascade Co. and from integrated media company National CineMedia, LLC.

Among issues which have already priced, Friday’s offering from energy company Murphy Oil Corp. was among the busiest issues of the day, continuing to add to the solid gains notched in initial aftermarket dealings following its pricing.

Away from the new issues, Chesapeake Energy Corp.’s debt was active across its capital structure, trading mixed on the day as the oil and natural gas company launched a cash tender offer for 10 series of notes, as well as two series of convertible bonds.

Statistical market performance measures turned higher across the board on Monday after having been mixed three straight sessions before that. Monday was the fifth higher session in the last eight trading days.

Novelis, big upsize and tight

Never mind the Dog Days of August.

Counter to the expectations of some, the high yield new issue market continued to crank on a mid-August Monday.

Three issuers priced drive-by deals, raising a combined total of $1.9 billion.

Hot market signals continued to flash.

Two of the deals were upsized.

Two priced in the middle of talk while one priced at the tight end.

Novelis Corp. priced an upsized $1.15 billion issue of eight-year senior notes (B2/B) at par to yield 6¼%.

The issue size was increased from $525 million.

The yield printed at the tight end of the 6¼% to 6 3/8% yield talk.

Morgan Stanley, Barclays, Deutsche Bank, Wells Fargo, JP Morgan, Standard Chartered, BofA Merrill Lynch, Citigroup and Credit Suisse were the joint bookrunners for the debt refinancing deal.

Sinclair Television upsizes

Sinclair Television Group, Inc. priced an upsized $400 million issue of 10.5-year senior notes (B1/B+) at par to yield 5 1/8%.

The issue size was increased from $350 million.

The yield printed in the middle of the 5% to 5¼% yield talk.

Wells Fargo was the left bookrunner. JP Morgan, Deutsche Bank, RBC, SunTrust, BofA Merrill Lynch and MUFG were the joint bookrunners.

The Hunt Valley, Md.-based television broadcasting company plans to use the proceeds, including the additional $50 million of proceeds resulting from the upsizing of the deal, to call its 6 3/8% senior notes due 2021, and for general corporate purposes.

NRG oversubscribed

NRG Yield, Inc. priced a $350 million issue of 10-year senior notes (existing Ba2/confirmed BB+) at par to yield 5%.

The yield printed on top of yield talk as well as early guidance.

The deal was heard to be two-times oversubscribed, according to a trader.

JP Morgan, RBC, Barclays, Citigroup, Credit Suisse, Goldman Sachs and MUFG were the joint bookrunners.

The Princeton, NJ-based energy generation company plans to use the proceeds to pay off its revolver, with any remaining proceeds to be used for general corporate purposes including acquisitions and investments.

Diamond price talk

The Tuesday session also promises to be a busy one.

Diamond Resorts International, Inc. set price talk in its upsized $1 billion offering of high yield notes on Monday.

The deal includes $400 million of seven-year senior secured notes (B1/B+) talked to yield in the 7¾% area.

In addition the company is selling $600 of eight-year senior unsecured notes (Caa1/CCC+) talked to yield in the 10¾% area.

Books are scheduled to close at noon ET on Tuesday.

Monday’s swarm of deal announcements relegated Diamond Resorts to the back burner, but the deal should get done, a trader said.

The acquisition-financing notes offer was upsized to $1 billion from $600 million with the addition of the $400 million senior secured notes tranche last week.

At the same time the company downsized its concurrent term loan to $800 million from $1.2 billion.

RBC is the left bookrunner. Barclays and Jefferies are the joint bookrunners.

The unsecured notes offering ran an Aug. 1 to Aug. 4 roadshow and was subsequently delayed when the company elected to restate earnings.

Boise Cascade is Tuesday business

Boise Cascade Co. plans to take part in an investor conference call at 11:30 a.m. ET on Tuesday.

The Boise, Idaho-based manufacturer and distributor of lumber and building materials intends to sell $300 million of eight-year senior notes (expected ratings B1/BB-) in a deal slated to price on Tuesday afternoon.

Wells Fargo is the left bookrunner for the debt refinancing deal. BofA Merrill Lynch, JP Morgan, US Bancorp and Goldman Sachs are the joint bookrunners.

National CineMedia 10-year notes

National CineMedia, LLC is expected to price a $250 million offering of 10-year senior notes on Tuesday.

Guidance is 5 7/8% to 6%.

JP Morgan has the books.

The Centennial, Colo-based integrated media company plans to use the proceeds to redeem $200 million of its senior notes due 2021 and for general corporate purposes including paying down its revolver.

Parsley Energy tapping 6¼% notes

Parsley Energy, LLC, a subsidiary of Parsley Energy, Inc., announced in a Monday press release that it intends to place a $200 million add-on to its 6¼% senior notes due June 1, 2024.

JP Morgan is leading the deal.

The Austin, Texas-based oil and gas exploration and production company plans to use the proceeds, along with proceeds from a concurrent offering of up to 8.05 million common shares, to fund the acquisition of oil and gas interests in Glasscock County, Texas, with any remaining proceeds to be used to fund a portion of Parsley's capital program and for general corporate purposes, including potential future acquisitions.

Friday inflows

The cash flows of the dedicated high yield bond funds were positive on Friday, the most recent session for which data was available at press time, a trader said.

High yield ETFs saw $72 million of inflows on the day.

Actively managed funds saw $455 million of inflows on Friday.

Dedicated bank loan funds were also flat to slightly positive on the day, seeing $5 million of inflows on Friday.

New Sinclair, NRG issues active

In the secondary area, traders saw considerable initial aftermarket activity in the new deals from Sinclair Television Group and NRG Yield.

A trader saw Sinclair’s new 5 1/8% notes due in February of 2027 trading in a 100¼ to 100¾ bid context, up from its par issue price.

At another desk, a trader quoted the notes at 100½ bid, on volume of more than $21 million.

NRG Yield’s new 5% notes due 2026, which came to market via the company’s NRG Yield Operating LLC subsidiary, generated more than $13 million of turnover when they hit the aftermarket, a trader said, pegging the bonds at an even par, their pricing level.

Another trader opined that the new paper “didn’t trade well,” seeing them at 99¾ bid.

Another market source saw the notes in a 99¾ to 100¼ bid range.

Existing Novelis notes busy

The big new deal from Atlanta-based aluminum rolled products and recycling company Novelis hit the tape too late in the day for traders to immediately report any initial aftermarket dealings.

However, one said that the company’s established 8¾% notes due 2020were fairly busy, with over $14 million having changed hands.

He said that the notes traded up 1/8 point at 104¾ bid, apparently helped by the news that proceeds from the new deal will go for debt refinancing – although there was little actual trading in the existing issue being taken out using proceeds from the new notes, its $1.1 billion of outstanding 8 3/8% senior notes due December 2017.

That paper – generating just a handful of smallish trades Monday – was hovering around the anticipated takeout level, a little north of 102.

Murphy move continues

Among recently priced offerings, Murphy Oil Corp.’s new 6 7/8% notes due 2024 remained near the top of the Most Actives list for a second successive session.

A trader estimated that the El Dorado, Ark.-based independent oil and natural gas company’s deal “was maybe the second or third busiest” among junk credits on Monday, with around $30 million of volume.

They were trading between 102 ½-and 103 bid.

Another trader located the bonds at 102 5/8 bid, calling that a gain of 3/8 point on the day, while a third saw them ½ point better, trading at 102 ½ bid, 103½ offered.

Murphy Oil had priced $550 million of the notes at par on Friday after the regularly scheduled forward calendar offering was upsized from an originally announced $500 million.

More than $72 million of the notes traded on Friday – tops among all junk issues – as the new notes roared out of the gate on the break and jumped above the 102 bid level.

Chesapeake active on tender launch

Among established issues without new-deal connections, Chesapeake Energy announced a cash tender offer on Monday for 10 series of notes and two series of convertible bonds.

The Oklahoma City-based oiler plans to use proceeds from a new $1 billion term loan to fund the offer.

A total of $650 million notes will be accepted on a priority basis. Another $275 million of the convertibles will be taken in.

On the news, a trader said the 8% second-lien notes due 2022 were “very active,” with over $32 million traded, although that issue is not part of the tender – which might explain why the debt dropped nearly a point to 91¼.

But another market source said the 6 5/8% notes due 2020 – part of the third priority class – inched up almost 2 points to 85.

Noteholders will receive par plus accrued interest for the validly tendered and accepted debt. Holders of the convertible paper will get between $920 and par for each $1,000 of convertibles tendered.

The tender offer expires at 11:59 p.m. ET on Sept 12.

The offer is contingent upon a minimum amount of notes being tendered.

Chesapeake plans to use proceeds from a new $1 billion term loan to fund the offer.

Market ‘well-bid’

A trader said that although he didn’t see that much activity, outside of the trading in the new or recently priced issues, “the market feels very well-bid.”

He said that “it’s difficult to source paper. A lot of people are waiting for these new issues to price.”

He noted new issue volume topping the $7 billion mark in each of the past two weeks, “and they’re all coming as drive-bys.”

But he sounded a cautious tone.

“I think guys are trying to get in before the market gets upset.”

He said “the Fed is pretty much out of the picture for the balance of the year,” in terms of hiking interest rates, “but it seems there’s an overwhelming sense of dread out there – you’ve got stocks at all-time highs and Treasuries don’t really seem to be going anywhere. The market seems to be set up for a pullback.”

He further pointed out that “we’re in that time of the year when that usually happens – the next two months – and you’ve got an election on top of it.”

“So there is some nervousness out there.”

Indicators move higher

But statistical market performance measures were showing no signs of any jitters – they turned higher across the board on Monday after having been mixed three straight sessions before that. Monday was the fifth higher session in the last eight trading days.

The KDP High Yield index jumped by 20 basis points to 70.08, after having risen by 8 bps on Friday. It was the index’s second straight gain and its seventh advance in the last eight sessions.

Monday’s close marked its second straight new high for the year so far and 52-week high, surpassing the old mark of 69.88 set on Friday.

Its yield came in by 9 bps, to 5.34%, its second consecutive narrowing and seventh the last eight sessions. It had also tightened by 4 bps on Friday,

The Markit Series 26 CDX index meantime bounced back on Monday from Friday’s loss, gaining slightly more than ¼ point to close at 104 29/32 bid, 104 31/32 offered. On Friday, it had lost 3/32 point. Monday’s gain was its second in the last three sessions

The Merrill Lynch High Yield index was meanwhile up for a ninth successive session on Monday, firming by 0.218%, on top of the 0.093% gain seen on Friday.

The streak-prone index’s gains of the last nine sessions follow a six-session slump before that.

Monday’s advance brought the index’s year-to-date return up to 13.837% its seventh straight new peak level for the year, versus Friday’s 13.589%, the former peak level.

Stephanie N. Rotondo contributed to this review.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.