Global Partners breaks ice, but more new junk soon; First Quantum surges on buyout murmurs

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 3 – Global Partners LP brought the first bond deal to the junk market in the new year.

Market participants indicated they are expecting a rapid pickup in the primary now that the first new paper is circulating.

Meanwhile, the secondary space remained weak on Wednesday with the cash bond market shedding another 3/8 to ½ point.

The exuberance over rate cuts that drove the market to its heights in the final weeks of 2023 continued to fade following the release of the Federal Open Market Committee minute notes on Wednesday.

While the rate-hike campaign is widely believed to have come to an end, rate cuts may not be as imminent as the market has hoped.

While the broader market was weak, there was an uptick of activity in the secondary space as the first new paper was released and topical news drove activity in outstanding issues.

First Quantum Minerals Ltd.’s capital structure surged on Wednesday as news circulated that Barrick Gold Corp. was sounding out a potential takeover of the company with investors.

The beleaguered mining company’s senior notes (B), which suffered badly in December as its copper mine in Panama was forced to shut down, jumped 1 to 5 points following the news.

While topical news catapulted First Quantum higher, the broader market drifted lower.

Tenet Healthcare Corp.’s 6 1/8% senior notes due 2028 (B3/B-), for instance, were weaker alongside the broader market in active trade.

Icebreaker

Global Partners LP and co-issuer GLP Finance Corp. priced 2024’s first junk bond deal on Wednesday, a $450 million issue of eight-year senior notes (B2/B+) that came at par to yield 8¼%.

The notes marched into the secondary market where they were trading at par 7 /8 bid, 101 offered, according to a bond trader.

The yield printed at the tight end of the 8¼% to 8 3/8% yield talk. Initial guidance was 8½% to 8¾%.

Order books were three-times deal size when price talk circulated at midmorning on Wednesday, a market source said.

Meantime EnerSys talked a $300 million offering of eight-year senior notes (Ba3/BB+) to yield in the 6¾% area.

The offer was playing to demand in excess of $600 million on Wednesday afternoon, according to a trader.

The offer was announced as Thursday business when dealers took off the wrapper on Wednesday morning. Later in the day some market participants were watching for a timing acceleration that would have had the terms coming ahead of Wednesday’s close. However, no terms were available at press time.

The market anticipates around $20 billion of January issuance, a trader said on Wednesday.

Should the primary generate that amount of monthly issuance, or better, it would be robust, in the context of recent history.

New issue volume has topped $20 billion in only four of the past 12 months, according to Prospect News data.

The last month in which the primary market topped the $25 billion mark was November 2021 ($32.2 billion), capping a 12-month period during which new issue volume hurtled at a screeching $41.4 billion monthly pace.

By comparison, average monthly issuance during the past 12 months has been $14.9 billion.

Notwithstanding the past year’s modest issuance volume, some are looking at a much more substantial pickup in the early 2024 primary.

A sellside source, speaking on the phone just ahead of Wednesday’s close, disclosed hearing a client forecast that January new deal volume could come to almost $40 billion!

First Quantum surges

First Quantum’s senior notes added 1 to 5 points in active trade as news circulated that Barrick Gold was sounding out a takeover of the company.

First Quantum’s 8 5/8% senior notes due 2031 were the largest benefactor of the news.

The notes jumped 5 points to close the day at 89½ with the yield about 10¾%, a source said.

There was $18 million in reported volume.

The 6 7/8% senior notes due 2026 were up 1½ points to 91 with the yield 11¾%.

There was $5 million in reported volume.

The 6 7/8% notes due 2027 jumped 4½ points to 89 with the yield about 10½%.

First Quantum surged on Wednesday as news circulated that Barrick Gold has been in touch with investors to sound out a potential takeover bid of the company, a source said.

Barrick Gold has long expressed interest in acquiring First Quantum with an informal offer previously rejected in June 2023.

First Quantum’s capital structure suffered badly in the fourth quarter with its copper mine in Panama, which was its largest source of revenue, forced to close due to widespread protests.

Tenet lower

Tenet Healthcare’s 6 1/8% senior notes due 2028 were drifting lower with the broader market on Wednesday.

The notes were down about ¾ point to close the day on a 98-handle.

They were trading in the 98 to 98¼ context heading into the market close, a source said.

The yield was about 6½%.

There was $17 million in reported volume.

Fund flows

The high-yield ETFs sustained big daily cash outflows of $822 million on Tuesday, and are on track to post their first weekly net outflows in nine weeks, as the market awaits a Thursday report on the weekly cash flows of the various asset classes from fund-tracker Refinitiv Lipper, a market source said.

Actively managed high-yield funds had $80 million of daily inflows on Tuesday, according to the market source.

Indexes

The KDP High Yield Daily index was down 16 basis points to close Wednesday at 50.51 with the yield 6.88%.

The ICE BofAML US High Yield index fell 44 bps with the year-to-date return now negative 0.95%.

The index fell 51.5 bps on Tuesday.

The CDX High Yield 30 index fell 49 bps to close Wednesday at 105.01.

© 2015 Prospect News.
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