Noble gains on new deal, other energy names struggle; hospitals higher, Frontier firms; Exact Sciences drops

By Paul Deckelman

New York, Jan. 17 – The new high-yield bond deal from global offshore energy driller Noble Corp. made the company’s several series of existing notes popular on Wednesday, pushing those issues up.

But new and existing notes from drilling-sector peers such as Nabors Industries, Inc. and Ensco plc failed to keep pace.

And energy credits generally such as California Resources Corp. and EP Energy Corp. were unchanged to lower despite gains in crude oil prices.

Elsewhere, hospital operators such as Community Health Systems Corp. and Tenet Healthcare Corp. firmed smartly in active dealings.

Frontier Communications Corp. paper improved for a second consecutive session. But communications satellite operator Intelsat SA’s paper traded off.

In the convertibles market, Exact Sciences Corp.’s recently priced notes got hammered in active trading as the biotech firm’s underlying shares tanked in response to a positive clinical trial from a Taiwan-based competitor.

New, existing Noble notes gain

Traders saw solid gains in Noble Corp.’s new Noble Holding International Ltd. 7 7/8% senior guaranteed notes due 2026, following that quick-to-market $750 million issue’s par pricing. The deal was upsized from an originally announced $500 million.

One trader pegged the new bonds in a broad par-to-102 bid range, while a second saw them going home at 101 1/8 bid, on volume of more than $94 million, making it among the day’s busiest credits.

A trader meantime said that Noble’s existing 7¾% notes due 2024 were trading up 2 points on the day at 95¾ bid, exclaiming “Wow!” at the move.

He said that more than $56 million of that paper changed hands.

The Cayman Islands-based offshore energy drilling company’s 7.70% notes due 2025 were finishing at 93¼ bid, up 1¼ point from their most recent prior round-lot levels last week, with over $15 million traded.

Other drillers drop

The good reception for Noble’s new and existing notes, however, did not translate into sector strength from other drilling names.

For instance, a trader called the new Nabors Industries 5¾% notes due 2025 “off a little bit” at 99 7/8 bid.

A second trader who saw the bonds at that level called them down ½ point on the day.

More than $186 million of those notes changed hands, easily topping the junk market’s Most Actives list for Wednesday.

Nabors, a Hamilton, Bermuda-based onshore oil, natural gas and geothermal drilling contractor, priced $800 million of those notes at par on Tuesday in a quick-to-market transaction upsized from $600 million originally.

The notes had pushed as high as 100 3/8 bid on initial volume of over $10 million.

Nabors’ existing 5½% notes due 2023 meantime eased by ¼ point on Wednesday, finishing at 101¼ bid, with over $10 million having traded.

Sector peer Ensco plc’s new 7¾% notes due 2026 were seen down ¼ point at 101 bid, on “pretty good volume,” a trader said.

Another market source said the London-based driller’s new paper was down ¼ point at 101 bid, with over $24 million of volume.

Ensco priced $1 billion of those notes at par on Thursday after that regularly scheduled forward calendar offering was upsized from an originally announced $500 million.

Energy issues off despite crude gains

In the energy sphere, a trader said “the E&Ps were kind of active, with oil trading up a little bit” – but they failed to get any kind of a boost from that crude strength.

He saw Los Angeles-based oil and natural gas exploration and production operator California Resources Corp.’s 8% senior secured second-lien notes due 2022 down 3/8 point at 87 1/8 bid, with over $20 million having changed hands.

Houston-based E&P company EP Energy Corp.’s 9 3/8% notes due 2024 were unchanged at 86¾ bid, with just under 410 million traded.

Oklahoma City-based gas and oil producer Chesapeake Energy Corp.’s 8% notes due 2027 lost ½ point to end at par, on volume of over $14 million.

Crude oil prices rebounded a little on Wednesday after having fallen on Tuesday – their first drop after five straight sessions of upside before that.

Key domestic grade West Texas Intermediate for February delivery gained 24 cents per barrel in New York Mercantile Exchange dealings Wednesday, settling in at $63.97, while the main international grade, March-contract North Sea Brent crude, was up by 23 cents per barrel in London futures trading, ending at $69.38.

Healthy gains in hospital names

Away from the energy sphere, a trader said “the hospital bonds have all rallied smartly,” seeing the Community Health Systems Inc.’s 6 7/8% notes due 2022 – which just recently “was trading in the 50s” up ¾ point on Wednesday at 66¾ bid on “a bunch of trades.”

A market source at another shop estimated volume in the Franklin, Tenn.-based healthcare company’s issue at over $10 million

Dallas-based sector peer Tenet Healthcare’s 6 ¾% notes due 2023 were up by ½ point at 99 7/8 bid, also with over $10 million changing hands.

Frontier firming continues

A trader said that Frontier Communications’ bonds “caught a little bid today,” moving up for a second consecutive session.

He saw its 10½% notes due 2022 were up by 1¼ points, while its 11% notes due 2025 were up “almost a point or so” on “pretty decent trading volume.”

The Stamford, Conn.-based wireline telecommunications company’s notes, including the 10½s and the11s, had gained around 1½ points in Tuesday’s trading, though traders did not immediately see any positive news about the company that might explain that rise.

Elsewhere among telecommunications names, satellite operator Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023 down 1½ points at 44¼, while its 7¾% notes due 2021 were down 1¼ points to 46½ bid.

Exact Sciences ‘is murder’

In the convertibles market, Exact Sciences Corp.’s 1% notes due 2025 – which made their debut in the secondary market on Friday – dropped about 5 points in active trading on Wednesday as the underlying equity swooned.

“Exact Sciences is murder today,” a market source said.

The notes dropped 5 points to trade well below par, moving around in a 96-to-97 range for most of the day.

Exact Sciences stock closed the market Wednesday at $47.68, a decrease of 9.95%.

The notes were trading in line and were up slightly on a dollar-neutral basis, a market source said. While the notes were up for arbitrageurs, that is expected to be short-lived, a market source said. The drop is terrible for outright players, the source said.

Exact Sciences “just stuffed the whole convertibles market,” the source said. “If the stock keeps cracking, nobody will be happy about it.”

The Madison, Wis.-based molecular diagnostics company, which is focused on the early detection of colorectal cancer, priced $600 million of seven-year convertible notes with a 1% coupon and fixed conversion premium of 37% at an issue price of 98.75 after market close on Jan. 11.

The deal carries a $90 million greenshoe.

The notes solidified to around 102 bid prior to Wednesday’s sell-off, which was triggered by positive results in a clinical study from a Taiwan-based competitor.

The clinical study for a blood-based colorectal cancer screening test appeared to offer better results in a less obtrusive manner than Cologuard, a stool based test that is Exact Sciences’ only product on the market.

Analysts have lined up to defend Exact Sciences with many calling the sell-off “overdone.” The impact the rival clinical study had on Exact Sciences stock, in addition to the outpouring of support for the company, also mystified some market sources.

“I don’t know why it went down as hard as it did,” a market source said. “It still hasn’t been tested here and it’ll be years before it makes it to the market.”

Abigail W. Adams 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.