Primary takes a breather; new Sabine bonds move up; Molycorp, Sears, new Suburban active

By Paul Deckelman and Paul A. Harris

New York, May 14 - The high-yield primary market finally headed for the sidelines on Wednesday, as no new U.S. dollar-denominated, fully junk-rated bonds priced - the first such goose egg seen in nearly three weeks, since Friday, April 25, according to data compiled by Prospect News.

Market participants were not surprised that a degree of new-deal fatigue, however temporary, may have set in; in the past week alone, issuance had totaled some $15.21 billion in 29 tranches, according to the data, including Tuesday's hefty payload of $3.28 billion in four tranches.

With no new dollar deals having come to market during the session, some of those recently priced deals that came on Monday or Tuesday were seen moving around on Wednesday.

Traders saw Tuesday's big deal - the $2 billion of new 10-year secured notes from natural gas operator Sabine Pass Liquefaction, LLC - having moved up smartly in second-day aftermarket activity. Some its existing bonds were also firmer.

Tuesday's late-pricing deals from Alpha Natural Resources, Inc. and Avis Budget Car Rental, LLC also were freed for secondary trading, recording modest gains. Coal miner Alpha's existing bonds, though, were on the downside in apparent response to the big lump of new secured debt that now goes into the company's capital structure above them.

Monday's offering from fuel marketer and distributor Suburban Propane Partners LP continued to trade fairly actively, still at a roughly 1½ point premium.

Away from the new deals, Molycorp Inc.'s bonds were among the day's most active issues in Junkbondland and were down by several points, while the miner of rare earth compounds' shares were also being buried.

Another downsider in busy dealings was Sears Holdings Corp.; news the company may seek to sell its Canadian operations conflicted with less-favorable news about its vendors.

Statistical market performance measures were mixed for a second consecutive session.

Glasstank prices, trades higher

No dollar-denominated deals were priced on an unusually quiet Wednesday session in the United States.

However two non-dollar deals did cross the finish line.

Glasstank BV priced €185 million issue of 8½% five-year senior secured notes (confirmed Caa1/expected CCC) at 91.05 to yield 10 7/8%.

The coupon came on top of coupon talk. The yield printed at the tight end of yield talk in the 11% area.

The deal traded to 94½ bid, according to a trader who added that the Rotterdam, Netherlands-based glass container and tableware company circled up accounts a couple of months ago before walking away from a potential deal. Hence when Glasstank returned, there was already demand.

Citigroup was the sole bookrunner for the debt refinancing and general corporate purposes deal.

Glasstank operates as Yioula Glass in Greece and the Balkans.

AutoCanada at the tight end

The Wednesday session also saw terms roll out on a Canadian dollar-denominated deal.

AutoCanada Inc. priced a C$150 million issue of seven-year senior notes (/B+/) at par to yield 5 5/8%.

The yield printed at the tight end of yield talk in the 5¾% area.

RBC and Scotia were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Big European volume expected

Elsewhere in the European primary market on Wednesday, Motor Oil (Hellas) Corinth Refineries SA talked a €300 million offering of five-year senior notes to yield in the 5¼% area.

The deal is set to price on Thursday via global coordinator and joint bookrunner HSBC and joint bookrunners Alpha Bank, Citigroup, Credit Suisse, NBG Securities and Piraeus.

Also parked on the new deal calendar as euro-denominated business expected to price before the end of the week is the Ovako AB €285 million offering of five-year senior secured notes (/B/) via J. P. Morgan, Nordea and Deutsche Bank.

Price talk is pending, but early guidance has the deal coming in the mid-6% range, according to a trader.

And English retailer Matalan is in the sterling-denominated market with a £492 million two-part offering of senior secured notes.

Again, formal price talk is pending.

A £342 million tranche of five-year first-lien notes (expected ratings B2/B-) is in the market with early guidance in the low 7% range, and a £150 million tranche of six-year second-lien notes (expected ratings Caa2/CCC) is being guided in the low 9% range.

Morgan Stanley, Lloyds and Barclays are the leads.

Beyond Friday, watch for the new issue floodgates in Europe to open, sources say.

The May 19 week could see as many as 10 European deals, according to a London-based debt capital markets banker.

Kissner talk is 7¼% area

Turning to the dollar-denominated market, Kissner Milling Co. Ltd. talked its $200 million offering of five-year senior secured notes (B3//) to yield in the 7¼% area.

The deal, via Jefferies, is set to price on Thursday.

Elsewhere, timing surfaced for the CareTrust $260 million offering of seven-year senior notes (B2/B+).

Price talk is expected on Thursday morning, and the deal is set to price Thursday afternoon.

Ratings firmed up, with Moody's assigning its B2 rating to the notes, and Standard & Poor's assigning the notes its B+ rating.

Enova starts roadshow

One new dollar-denominated roadshow deal was announced on Wednesday.

Enova International, Inc. plans to market a $500 million offering of seven-year senior notes on an investor roadshow set to run through the middle part of the week ahead.

Jefferies is the sole bookrunner.

Proceeds will be used to repay inter-company loans and to fund a distribution in connection with the spinoff of Enova, a Fort Worth-based provider of online financial services, from Cash America International, Inc.

Sabine bonds better

In the secondary market, the new Sabine Energy Partners 5¾% senior secured notes due 2024 added to the gains seen on Tuesday when they had begun trading around after the natural gas company's upsized, quick-to-market offering had priced.

The operating subsidiary of Houston-based corporate parent Cheniere Energy Partners LP brought its $2 billion deal to market at par, after first upsizing it from an originally announced $1.5 billion. The new bonds had initially traded as high as a 101¼ to 101½ context; on Tuesday, several traders saw the paper above 102 bid, with one of them calling it a 1-point gain on the session to 102 bid, 102½ offered.

A second trader said the issue traded inside of a 101¾ to 102¼ context "pretty much all day."

But another trader who pegged the new bonds at 102 bid, 102¼ offered said that despite its great liquid size, he "didn't see a lot of trading in it."

The existing Sabine Pass 5 5/8% notes due 2021 meanwhile had firmed a little in fairly active dealings. Those bonds had finished out last week trading around 103½ bid and had fallen to 103 by Monday's close.

After the Tuesday morning announcement that Sabine Pass would be doing its megadeal, the bonds gained 7/8 of a point to 103 7/8 bid on volume of more than $9 million.

Volume remained brisk on Wednesday at over $8 million, with the bonds firming a little more to around the 104 bid mark.

Its 6½% notes due 2020 were heard by a market source to have gained 7/8 of a point on the session, finishing at 107¼ bid. Over $3 million of those old notes changed hands. They had traded around 106½ bid before the new deal was announced.

Avis, Alpha start to trade

Traders saw secondary market dealings in two of the other deals that had priced on Tuesday too late for any kind of aftermarket activity at that time.

Avis Budget Car Rental's 5 1/8% notes due 2022 were seen by one trader in a 100 3/8 to 100 7/8 context, while a second saw them bid between 100½ and 1003/4.

At another desk, a trader quoted the bonds at a very tight 100 9/16 to 100 5/8, "believe it or not."

"Everyone is fighting over trades," he added. "It's just silly. There's no spread on any of this stuff."

Parsippany, N.J.-based vehicle-rental giant Avis drove by with its $400 million issue, which had priced at par after having been upsized from an originally announced $350 million.

Meanwhile, the Bristol, Va.-based coal mining company Alpha Natural Resources' 7½% senior secured notes due 2020 did not stray far from their par issue price when they finally hit the secondary market. One trader saw the bonds at 100 1/8 to 100 7/8, while a second located them at 100¼ to 1003/4.

The company's existing paper was all seen unchanged to lower. A trader said that its 6% notes due 2019 lost ¾ point, easing to 79¾ bid on volume of over $12 million.

He saw its 9¾% notes due 2018 slide by 1¾ points to around 981/4. However volume was a puny $2 million, "so that movement could have just been on one trade," he suggested.

He saw over $16 million of its 6¼% notes due 2021 changing hands but ending about unchanged at 77½ bid.

At another shop, a trader - asked whether the outstanding bonds were down on investor displeasure over the presence of a sizable new piece of senior secured debt going into the capital structure senior to that existing paper - theorized that it really shouldn't matter much.

"ANR has a huge amount of bank debt that is secured on a first-lien basis. The new bonds are just second-lien instruments. If you play ANR with the new bonds, if there's any kind of restructuring, maybe you'll get par - or maybe you won't get it.

"If you play it with the 61/4s, they're in the 70s now - so you've got 25 points of [potential] upside, plus the coupon.

"I would rather make that bet than buy the [new] second-lien notes around par and a premium."

Alternatively, he said, "you could just keep driving by and ignore [ANR]."

With continued troubled coal market conditions, particularly in terms of weak demand for metallurgical coal used in the production of steel and other metals, "both [the new and old issues] are cruddy pieces of paper," he declared - but added that of the two, "the 61/4s are more attractive. If you're right on the 71/2s, you'll get maybe a little upside, plus the coupon. If you're right on the 61/4s, it's 25 points of upside, plus the coupon."

Suburban stays busy

Monday's $525 million deal from Whippany, N.J.-based propane and fuel oil retail marketer and distributor Suburban Propane Partners and co-issuer Suburban Energy Finance Corp. was seen on Wednesday among the day's more active credits, with a market source estimating volume at over $16 million.

More than $47 million of the new notes had changed hands on Monday after the quick-to-market deal had priced, and volume remained brisk on Tuesday as well at over $20 million, the source said.

The bonds had priced at par and traded up to around 101 5/8 bid in initial aftermarket dealings. On Tuesday, they had been quoted in a 101½ to 101¾ bid context, up about ¼ point.

On Wednesday, a trader saw the bonds trading around 101 5/8 bid, calling that down around ¼ point.

Molycorp gets mauled

Away from the new or recently priced deals, traders saw Molycorp's 10% notes due 2020 at or near the top of the most actives list, with one estimating turnover of more than $35 million.

He saw the bonds down 2 points on the day, at 89¾ bid.

Another trader saw them finishing lower, around 88¾ bid on volume of over $32 million.

The Greenwood, Village, Colo.-based rare-earth miner's New York Stock Exchange-traded shares sank by 20 cents, or 6.43%, to go out at $2.91. Volume of 8.6 million shares was nearly twice the norm.

A bond trader said that he had heard a rumor of "a big seller of the 10s." He noted that "there are only a few big holders of the 10% notes," although he did not profess to know who they are.

"It could be that one big account is getting out" in the wake of the recent release of a poor earnings report and equity downgrades by JPMorgan and several other shops.

Sears struggles on

A trader said that Sears Holdings' 6 5/8% notes due 2018 was ending down around 923/4, which he called down from about a 93 to 94 context.

A second trader saw them down ¼ point at 93 bid, on volume of over $20 million.

Investors mulled the news that Sears will explore strategic options for its 51%-owned Sears Canada subsidiary, possibly including a sale of its stake.

However, late in the day, Sears bonds and shares were roiled by a news report indicating that some of the insurance companies that provide protection to vendors who sell merchandise to Sears, guaranteeing that they will be paid, have scaled back their policies in recent months, including reportedly declining to provide new trade credit policies to some vendors.

Sears, meanwhile, said that there has been no disruption in the flow of products to its shelves from the vendors.

Indicators stay mixed

Statistical junk performance indicators were seen by market sources mixed for a second straight day on Wednesday, after two straight sessions of having been higher across the board on Friday and again on Monday.

The Markit Series 22 CDX North American High Yield index eased by 1/32 point on Wednesday to close at 107 3/16 bid, 107¼ offered. It was the first loss seen after five straight sessions on the upside, including Tuesday, when the index had edged upward by 1/32 point.

But the KDP High Yield Daily index gained 3 basis points to finish at 75.01 on Wednesday. It had lost 4 bps on Tuesday, which had followed two consecutive winning sessions before that.

Its yield meantime declined by 2 bps to 5.09% after having risen on Tuesday by 1 bp - its first such widening out after having narrowed for five straight sessions before that.

The widely followed Merrill Lynch High Yield Master II index defied any superstitious concerns and notched its 13th straight advance on Wednesday, gaining 0.075% on top of Tuesday's 0.082% improvement.

The latest gain raised the index's year-to-date return to 4.358%, its 13th consecutive new peak level for 2014 so far. The prior high point had been Tuesday's 4.28% reading.

Other index components were also setting new levels for the year so far on Wednesday. Its yield to worst declined to 5.111%, its third straight new low point for the year. The previous low yield for the year had been 5.141%, set on Tuesday.

And its measure of average bond price rose to 105.0349, its second consecutive new high for the year. The previous high had been 104.974052, seen on Tuesday; before that, the high-water mark had been 104.915794, set back on Feb. 28.

© 2015 Prospect News.
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