Centennial is lone pricing as primary calms; some Tuesday deals busy; Murray slides as Bowie buyout dies

By Paul Deckelman and Paul A. Harris

New York, Nov. 15 – Fresh off one of the biggest new-issuance days of the year, the high-yield primary market took a well-earned one step backwards on Wednesday, with just a single new dollar-denominated junk bond deal seen having priced – oil and natural gas company Centennial Resource Development, Inc.’s upsized $400 million regularly scheduled forward calendar offering of eight-year notes.

That modest-sized solitary pricing stood in contrast to Tuesday’s whirlwind of primaryside action, which saw some $3.81 billion of such paper from six issuers come to market in seven tranches – the most new junk notes the market had seen since more than $5 billion came clattering down the chute, also in seven tranches, back on June 5, according to data compiled by Prospect News.

In the secondary market, traders saw brisk activity in some of Tuesday’s new issues, notably Valeant Pharmaceuticals International, Inc., Talen Energy Supply, LLC, Navios Maritime Holdings, Inc. and PDC Energy, Inc.

There was less going on Wednesday in the new notes from Lennar Corp. and SRC Energy Inc.

Away from the new deals, the various bonds of global telecommunications company Altice moved higher, after the cable, broadband and phone service provider said that it would shift its focus from acquisitions to easing its estimated €50 billion net debt load.

Recently embattled U.S. telecom operator Frontier Communications Corp.’s paper moved up in active dealings.

On the downside, energy issues such as California Resources Corp. continued to retreat, in line with yet another downturn in crude oil prices.

Coal miner Murray Energy Corp.’s paper fell sharply on the news that sector peer Bowie Resources Partners LLC had canceled a deal that would have let Murray and other investors acquire Bowie.

Statistical market performance measures were down for a seventh consecutive session on Wednesday; they had turned lower all around last Tuesday after two straight mixed sessions before that, and then stayed that way for the rest of last week and on into this week.

Centennial Resource upsizes

In Wednesday's primary market Centennial Resource Development, Inc. priced an upsized $400 million issue of eight-year senior notes (B3/BB-) at par to yield 5 3/8%.

The issue size increased from $350 million.

The yield printed in the middle of the 5¼% to 5½% yield talk.

J.P. Morgan, Wells Fargo and RBC managed the sale.

The Denver-based oil and gas company plans to use the proceeds to pay off its revolving credit facility and for general corporate purposes.

Alight Solutions talk 98.26 to 99

Alight Solutions talked a $200 million add-on to the Tempo Acquisition, LLC and Tempo Acquisition Finance Corp. 6¾% senior notes due June 1, 2025 (existing ratings Caa1/CCC+) at 98.26 to 99 on Wednesday.

Books close at noon ET Thursday, and the deal, via left bookrunner Barclays, is set to price thereafter.

Away from Alight, the active calendar includes at least seven offerings expected to price before the Thanksgiving holiday weekend gets underway following the Nov. 22 early close.

The market awaits official talk and timing.

Initial talk of 8¾% to 9% was out Wednesday on the Welltec A/S $340 million offering of senior secured notes due 2022 (expected ratings B2/B-), via Goldman Sachs.

Meanwhile, MultiPlan, Inc. got the market's attention on Tuesday when it kicked off a $1.3 billion offering of five-year senior holdco PIK toggle notes, proceeds from which will be used to fund a shareholder dividend.

Although the market perceives it as an aggressive deal, it will probably get done, a trader said on Wednesday.

Verisure prices €1.15 billion

In the European market Verisure priced €1,145,000,000 equivalent of six-year senior notes (Caa1/CCC+) in two tranches on Wednesday.

The deal included €980 million of fixed-rate notes that priced at par to yield 5¾%. The yield printed on top of yield talk in the 5¾% area.

A SEK 1.65 billion amount of Stibor plus 575 basis points (0% Stibor floor) floating-rate notes also priced at par. The spread came on top of spread talk in the Stibor plus 575 bps area.

Joint global coordinator and physical bookrunner Goldman Sachs will bill and deliver. Nordea was also a joint global coordinator and a physical bookrunner for the krona-denominated notes only.

The Malmo, Sweden-based provider of security systems plans to use the proceeds, together with drawings on its proposed upsized existing senior credit facilities, to take out the senior notes due 2023, to repay outstanding amounts under the revolving credit facility, to make a distribution to shareholders and for general corporate purposes.

Some Tuesday deals busy...

In the secondary realm, traders saw a healthy volume of activity in some of the new deals that priced during Tuesday’s $3.8 billion bond barrage.

Valeant Pharmaceuticals International’s add-on to its existing 5½% senior secured notes due Nov. 1, 2025 was the most active of the group, with over $26 million having changed hands.

A trader said that those notes “hung in around 100½, not too much there.”

That was a little firmer than the 99¾-to-100¼ bid context seen in morning dealings.

It was also about unchanged from the levels those notes had hit in their initial aftermarket trading on Tuesday, after the Laval, Que.-based drug manufacturer had priced its $750 million add-on at par in a regularly scheduled forward calendar transaction.

Talen Energy Supply’s 10½% senior guaranteed notes due Jan. 15, 2026 moved up to a 98½-to-99 bid context, with more than $25 million traded.

That was well up from the 96.029 level at which the Allentown, Pa-based power generation company had priced its quick-to-market $400 million deal Tuesday, yielding 11¼%.

Navios notes sink

Navios Maritime Holdings’ 11¼% senior secured notes due Aug.15, 2022 were seen on the rocks in Wednesday’s trading, with several traders at different shops reporting the notes down 1½ points on the day at 96 bid, on turnover of more than $24 million.

The Monte Carlo, Monaco-based dry-bulk transport ship operator had priced its slightly upsized $305 million scheduled offering of 4.75-year paper at 97 on Tuesday, yielding 12.113%.

The issue had retreated to a 96½ bid level in initial aftermarket dealings Tuesda, and continued to lose ground during Wednesday’s session.

There was also fairly robust trading activity Wednesday in PDC Energy’s 5¾% notes due May 15, 2026, with a trader seeing them “off slightly” around 100 1/8 bid.

The Denver-based oil and natural gas exploration and production company’s $600 million 8.5-year drive-by deal had priced at par and firmed to 100 5/16 bid when it first hit the aftermarket.

On Wednesday, the notes were seen to have eased by around 1/8 point, with over $18 million having traded.

Lennar, SRC little moved

Traders meantime did not see much activity in Tuesday’s new deals from SRC Energy and Lennar Corp.

A trader said of the latter name that “there was nothing, really, to speak of there, no activity.”

Lennar’s 2.95% notes due 2020 were seen by a market source to have finished at 99¾ bid – down 3/8 point, – with around $7 million traded.

Its 4¾% notes due 2027 were more active, with volume up to the $13 million mark, but the issue unchanged at 100½ bid.

The Miami-based homebuilder had priced a quickly shopped $300 million of the three-year notes and $900 million of the 10-year paper, both at par, on Tuesday.

Denver-based oil and gas company SRC Energy’s 6¼% notes due 2025 gained 1/8 point, ending at 100 3/8 bid, though on only a couple of sizable trades, versus the more than $60 million which had traded Tuesday after the company had priced that $550 million regularly scheduled issue at par.

Altice up on debt pledge

Away from the new deals, a trader noted that Netherlands-based Altice’s various bonds were better on the day, after company executives vowed on their third-quarter conference call to shelve the aggressive acquisition strategy which had built the telecom operator into one of the world’s largest players in that sector, and to instead focus on reducing its estimated €50 billion equivalent ($59 billion) net debt load.

Its Altice FINCO SA 7 5/8% notes due 2025 were ½ point better on the day at 97½ bid, with over $42 million having traded.

Its Altice SA 7¾% notes due 2022 gained 1 full point to end at 102 bid, on volume of over $31 million.

Altice Financing SA’s 6 5/8% notes due 2023 also ended at 102 bid, up ¾ point, with over $23 million having changed hands.

The Altice US Finance I Corp. 5½% notes due 2026 bucked the mostly positive trend, losing ¼ point to close at 101½ bid, on $20 million of volume.

Bonds of Altice subsidiary Numericable-SFR SA also were pushed upwards on the parent company’s news, with the SFR 7 3/8% notes due 2026 up more than 1¼ point at 104¼ bid, with over $35 million traded.

Frontier firms up

Among domestic telecom operators, a trader said that Frontier Communications “did a little better, considering the fact that they had been getting hammered just about every day.”

He quoted the Stamford, Conn.-based company’s issues better by ½ to ¾ point, with its 10½% notes due 2022 up 5/16 point at just over 75½ bid, while its 11% notes due 2022 gained ¾ point to close at 76 bid, on volumes of $28 million and $23 million, respectively.

Monroe, La.-based sector peer CenturyLink Inc.’s 7½% notes due 2024 firmed by ¼ point to 96 7/8 bid.

Energy issues off again

It was another downside day in the energy patch, led by California Resources’ benchmark 8% notes due 2022.

“They were really active today,” he said of the Los Angeles-based E&P company’s notes, pegging the issue down ¾ point at 69½ bid – well down from recent levels as high as the 75 bid mark.

Over $48 million traded, the busiest issue in Junkbondland.

Calgary, Alta.-based MEG Energy Corp.’s 7% notes due 2024 were down a deuce on the day at 87 bid, on top of Tuesday’s 1¼ -point downturn.

Those credits fell in line with a continued slide in world crude oil prices.

December-contract West Texas Intermediate was down for a second day in a row, losing 37 cents per barrel to settle at $55.33 on Wednesday, after plunging by $1.06 per barrel Tuesday on the New York Mercantile Exchange.

North Sea Brent for January delivery likewise retreated by 34 cents per barrel in Wednesday London futures trading, its fourth consecutive loss, closing at $61.87; on Tuesday, it had slid by 95 cents per barrel.

Murray mauled as Bowie deal pulled

Murray Energy’s 11¼% due 2021 issue was the big loser on the day, plunging by more than 7 points to 45¾ bid, after having traded around 53 on Monday.

More than $36 million was traded.

St. Clairsville, Ohio-based coal miner Murray’s bonds were battered after sector peer Bowie Resource Partners announced that it was canceling a deal that would have had Murray and other investors take over Louisville, Ky.-based Bowie.

Murray would have gotten a 30% stake in Bowie, which was to have been renamed Canyon Consolidated Resources.

Bowie last week was heard by high-yield syndicate sources to have withdrawn a planned $510 million junk bond offering that would have financed the takeover, including refinancing Bowie’s existing debt.

Big outflow expected

Overall, traders said that the junk market was again weaker on Wednesday, with one noting that “a big outflow number is expected tomorrow [Thursday] night,” when flows of investors cash into or out of high-yield mutual funds and exchange-traded funds – considered a reliable proxy for overall junk market liquidity trends – are reported for the Thursday-to-Wednesday week.

He noted that that daily outflows from the funds “are already trending at more than $3 billion for the week to date.”

Over the past two weeks, some $1.82 billion more has left those funds in the form of investor redemptions than has come into them, including a $622 million net outflow reported for the week ended last Wednesday, Nov. 8.

Indicators continue slide

Statistical market performance measures were down for a seventh consecutive session on Wednesday; they had turned lower all around last Tuesday after two straight mixed sessions before that, and then stayed that way for the rest of last week and on into this week.

The KDP High Yield Daily Index suffered its seventh consecutive loss on Wednesday, in freefall with a 28 bps drop to 71.24, on top of Tuesday’s 16 bps nosedive. Before that, it had fallen back by 8 bps on Friday and another 6 bps on Monday. Those moderate-sized losses follow a 25 bps swoon on Thursday, when the index had closed below the 72.00 mark for the first time late August, on top of another 16 bps plunge last Wednesday.

Its yield widened out for an eighth straight session, rising by9 bps to 5.50%, which followed Tuesday’s 6 bps gain. It was also up by 1 bp on Monday and 2 bps on Friday, and had ballooned out by 9 bps last Thursday.

The Markit CDX Series 29 High Yield Index saw its seventh loss in a row on Wednesday, easing by 1/32 point to finish at 107 1/32 bid, 107 3/32 offered. On Tuesday, it had fallen by around ¼ point to end, and by 3/32 point on Monday for a second consecutive session, matching Friday’s downturn.

And the Merrill Lynch North American High Yield Master II Index made it an even 10 straight setbacks on Wednesday, surrendering 0.312%. On Tuesday, it had dropped by 0.24%, about a ten-fold increase from Monday’s 0.024% easing. On Friday, it had edged downward by 0.005%.

The latest loss dropped the index’s year-to date return to 6.051% from 6.303% at the close on Tuesday.

The year-to-date return also remains well down from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

© 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.