Ultra Resources’ two-parter, Unisys, Alliance cap $6 billion week; Talen bonds retreat

By Paul Deckelman and Paul A. Harris

New York, April 7 – The high-yield primary sphere closed out the first trading week of April and the second quarter with a flourish on Friday, as a trio of issuers brought four tranches of new dollar-denominated and fully junk-rated paper to market totaling just over $2 billion.

Oil and natural gas operator Ultra Resources, Inc. priced $1.2 billion in two regularly scheduled tranches off the forward calendar – $700 million of five-year notes and $500 million of eight-year paper, which came at a discount to par. Both firmed by more than a point when they hit the aftermarket.

Information technology company Unisys Corp. did a $440 million five-year secured issue.

And coal producer Alliance Resource Partners, LP brought a downsized $400 million issue of eight-year notes to market.

The day’s new deals brought the week’s issuance total up to $6.13 billion, down somewhat from the $7.33 billion that priced the week before, ended March 31.

Among recent transactions, traders said that Thursday’s issue from power generation company Talen Energy Supply, LLC – which already priced at a steep discount to par – moved even lower in active initial aftermarket dealings before coming off its lows but still ending below its issue price.

At the other end of the performance spectrum, industrial component manufacturer Park-Ohio Industries, Inc.’s 10-year issue continued to trade at a handsome premium to par.

Statistical market performance measures were mixed for a fourth straight session on Friday. They had turned mixed on Tuesday and stayed that way the rest of the week after improving across the board on Monday.

The indicators ended the week higher all around versus where they had been last week, ended March 31, their second consecutive stronger Friday-over-Friday week

Ultra sells $1.2 billion

Three issuers brought a total of four tranches, raising an overall $2.03 billion on Friday.

Ultra Resources priced $1.2 billion of senior notes (B2/BB-/BB) in two tranches.

The deal included $700 million of five-year notes which priced at par to yield 6 7/8%. The yield printed at the tight end of yield talk that had been set in the 7% area.

In addition the company priced $500 million of 7 1/8% eight-year notes at 98.507 to yield 7 3/8%. The yield printed at the tight end of yield talk in the 7½% area.

The deal was oversubscribed, according to market sources.

The bonds were highly active in the secondary market, with the 6 7/8% notes, which priced at par, trading at 101½ bid, while the 7 1/8% notes, which priced at 98.507, were trading at 99 5/8 bid, a trader said.

Joint bookrunner Barclays will bill and deliver for the deal related to the reorganization of parent company Ultra Petroleum Corp. Goldman Sachs and BMO were also joint bookrunners.

Unisys prices secured notes

Unisys priced a $440 million issue of five-year senior secured notes (B1) at par to yield 10¾%.

There was no widely circulated price talk in the market, according to a New York-based trader.

JP Morgan was the lead.

Unisys, a Blue Bell, Pa.-based information technology company, plans to use the proceeds to redeem its outstanding 6¼% senior notes due 2017 and for general corporate purposes which may include funding cost reduction and savings initiatives, obligations under its defined benefit plans and investments in next-generation services and technologies.

Alliance Resource downsizes

Alliance Resource Partners priced a downsized $400 million issue of eight-year senior notes (B1/BB-) at par to yield 7½%.

The issue size was cut from $500 million.

J.P. Morgan led the deal.

The Tulsa, Okla.-based coal producer plans to use the proceeds to repay debt under its revolving credit facility and term loan, with a portion of the proceeds to be used to repay its outstanding series B senior notes due 2018 and the remainder to be used for general corporate purposes.

Tennant starts Monday

Looking to the week ahead, Tennant Co. plans to start a roadshow on Monday for a $300 million offering of eight-year senior notes (B2).

Goldman Sachs is the left bookrunner for the debt refinancing deal.

Tennant climbs aboard a thin dollar-denominated deal calendar that includes Australian mining concern Barminco, expected to sell $300 million of five-year secured notes, also via left bookrunner Goldman Sachs.

The week ahead encompasses the Passover and pre-Easter religious observations, which could crimp supply somewhat, sources say.

However watch for Garda World Security Corp. to show up with $630 million of senior notes (B-), with Barclays on the tiller, a buyside source advised.

In Europe, Colfax Corp. plans to start a roadshow on Monday for a €350 million offering of eight-year senior notes.

Credit Suisse and JP Morgan are the joint global coordinators in a syndicate of banks that also includes BofA Merrill Lynch, HSBC, Morgan Stanley and RBC.

The Fulton, Md.-based manufacturer of gas- and fluid-handling and fabrication technology products plans to use the proceeds to repay debt and for general corporate purposes.

The coming holidays could damp down supply in Europe, as well, a London-based debt capital markets banker said.

However there ought to be one or two deals, the banker added.

Nomad Foods Ltd. is expected to launch €500 million of seven-year senior secured notes in the week ahead, according to the source who added that Goldman Sachs is expected to lead the deal.

Goldman sent out a save-the-date memo on Friday, the source said.

Although no issuer was mentioned in the memo, the market is expecting the Nomad Foods bond deal to surface in that context, the banker said.

Flat Thursday flows

The daily cash flows for dedicated high-yield bond funds were mixed but essentially flat on Thursday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $12 million of inflows on the day.

However asset managers sustained $10 million of outflows on Thursday.

Flows for dedicated bank loan funds were more robust, at positive $115 million, the trader said, adding that of that amount $61 million flowed into the bank loan ETFs.

Weekly issuance slows

With the three deals that got done on Friday, $6.13 billion of new dollar-denominated and fully junk-rated paper from domestic and industrialized-country borrowers had priced in 12 tranches during the week, according to data compiled by Prospect News.

That was down from the $7.33 billion which priced in 14 tranches the week before, ended March 31, but up from the $3.65 billion which gotten done in six tranches the week before that, ended March 24.

This week’s primary activity raised brought year-to-date issuance to $90.53 billion in 161 tranches – more than double the $44.29 billion which had priced in 61 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Full-year issuance in 2016 finished at $226.78 billion in 359 tranches – which ran 12.9% behind the $260.02 billion which had gotten done in 408 tranches in 2015.

Ultra bonds trade up

Traders said that both tranches of the new Ultra Resources deal firmed by at least 1 point in initial aftermarket action.

One trader saw the 6 7/8% notes due 2022 bid at 101¼, up from their par issue price, although he did not see any offered levels.

A second trader did see two-sided markets in the issue, quoting them at 101 bid, 101½ offered.

The traders also saw better levels in the other half of the Houston-based unit of oil and natural gas exploration and production company Ultra Petroleum Corp.’s megadeal.

One said that those 7 1/8% notes due 2025, which had priced at 98.507, traded on the break at 99¼ bid. He saw the notes going home at 99¼ bid, 99 5/8 offered.

Another trader saw the bonds finishing up in a 99 7/8 to par bid context.

Talen issue trades off

Among recently priced deals, traders saw Thursday’s offering from Talen Energy trading at lower levels versus its already heavily discounted issue price.

One trader said that those 9½% notes due July 2022 “started out weaker” and then continued to lose ground before coming off their bottom level for the day – but still ended up lower on the session.

The Allentown, Pa.-based energy and power generating company had priced its scheduled forward calendar deal – downsized to $400 million from an originally shopped $500 million – at 97 to yield 10.23%.

They were not seen trading around immediately after that late-Thursday pricing but when they hit the aftermarket on Friday the trader saw them get hammered down as low as 95½ bid.

He saw the notes rebound later, “but they were still trading below issue,” finally going home at 96¾ bid.

Another trader saw the notes finishing down ½ point on the day at 96½ bid, and said that more than $30 million had changed hands – the volume leader on a not-very-busy trading day in Junkbondland.

Park-Ohio hangs in

Wednesday’s deal from Park-Ohio Industries – the clear standout performer among this week’s new issues – continued to hold the hefty gains that it had notched in active aftermarket trading on Wednesday and Thursday.

A trader saw the Cleveland-based supply-chain logistics service provider and industrial components manufacturer’s 6 5/8% notes due 2027 “still up there” in a 102 to 102¼ bid context, well up from the par level at which that $350 million forward calendar offering had priced.

Another pegged the bonds at 102 bid, 102¼ offered, calling them unchanged on the day.

But a market source at another desk said that volume was well down from the more than $48 million which had traded on Thursday, “not even breaking the $10 million mark” on Friday.

Indicators stay mixed

A trader opined that the junk market “definitely got softer as Treasuries sold off at the end of the day.”

But statistical market performance measures stayed mixed for a fourth straight session on Friday. After improving across the board on Monday, they had turned mixed on Tuesday and had stayed that way the rest of the week. The indicators were also mixed last Friday following three sessions on the upside.

The indicators ended the latest week higher all around versus where they had been last week, ended March 31. It was their second consecutive stronger Friday-over-Friday week and their third stronger week in the last four. They had been down across the board during the week ended March 24 and stronger the week before that, ended March 17.

The KDP High Yield Daily Index edged upward by 1 basis point on Friday to end at 72.01, its third rise in a row. That followed gains of 8 bps on Thursday and 9 bps on Wednesday. The index had been unchanged on Tuesday after five gains before that.

Its yield came in by 1 bp on Friday, ending at 5.21%, its third consecutive narrowing. It had tightened by 2 bps on Thursday and 4 bps on Wednesday, which followed unchanged sessions on Monday and Tuesday. That followed six consecutive tightenings before that.

Friday’s levels compare favorably with the 71.82 index reading and 5.28% yield seen last Friday.

The Markit CDX Series 28 Index was lower on Friday, retreating by nearly 1/16 point to close at 107¼ bid, 107 9/32 offered. On Thursday it had gained around 1/8 point on the day, reversing Wednesday’s 1/8 point loss.

For the week, the index was up from last Friday’s 107 5/32 bid, 107 7/32 offered finish.

The Merrill Lynch North American High Yield Index firmed by 0.077% on Friday; continuing a recently choppy pattern which also saw the index ease by 0.008% on Thursday after rising 0.202% on Wednesday. On Tuesday it had fallen by 0.011%, its first loss after five consecutive upside sessions before that.

Friday’s gain pushed the index’s year-to-date return back above the psychologically significant 3% marker for the first time since March 3, as it ended the latest session at 3.004%, up from Thursday’s 2.924% close.

Those levels remain below the 2017 peak of 3.19%, set on March 1

For the week, the index rose by 0.288%, its second consecutive weekly gain and 11th advance in the 14 weeks since the start of the new year against just three weekly declines. It had been up by 0.935% last week, when the Friday year-to-date return was 2.708%.

© 2015 Prospect News.
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