Icahn, Equitrans price; Studio City on deck; liquidity thin; Genesis below par; Talos gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 4 – The new issue market saw a purposeful reactivation on Monday following its customary late-year dormancy surrounding the holidays.

Two issuers priced a combined three tranches in drive-by action.

Equitrans Midstream Corp. sold an upsized $1.9 billion of senior notes (Ba3/BB-/BB) in two bullet tranches.

And Icahn Enterprises LP priced an upsized $750 million issue of eight-year senior bullet notes (Ba3/BB).

The forward calendar also grew with Studio City International Holdings Ltd. on deck with a benchmark offering of eight-year senior notes (B1/BB-), which is expected for Tuesday.

Meanwhile, the secondary space was soft on Monday with surging Covid cases and Georgia’s looming run-off election, which will determine control of the Senate, dragging down risk assets in the New Year.

However, liquidity remained thin as market players awaited the new deals in the pipeline.

The energy sector continued to be in focus as crude oil futures sank. However, names in the sector were moving in opposite directions.

Genesis Energy, LP’s 8% senior notes due 2027 (B1/B+) remained below par in active trading.

However, Talos Production Inc. 12% second-priority senior secured notes due January 2026 (B3/B+/B) continued to move higher.

Both issues were among the final deals of 2020 as energy companies rushed to take advantage of the rally in crude oil futures.

Monday’s primary

In the primary, the market got straight back to work after the holidays as two issuers brought deals, both drive-bys and both upsized.

Each of the sellers upsized its offer.

Notwithstanding volatility in the stock market, which saw the Dow Jones industrial average drop as much as 2.4% in intraday trading as investors reacted to more negative news on the pandemic front, the inaugural high-yield issuers of 2021 saw sharp executions, with all tranches pricing tight to talk.

Equitrans Midstream priced an upsized $1.9 billion offering of senior notes (Ba3/BB-/BB) in two bullet tranches.

The deal, which was increased from $1.75 billion, featured $800 million of eight-year notes which priced at par to yield 4½%. The yield printed at the tight end of the 4½% to 4¾% yield talk. Initial guidance was in the high 4% area.

The company also priced $1.1 billion of 10-year notes at par to yield 4¾%. The yield printed at the tight end of the 4¾% to 5% yield talk and inside initial guidance in the 5% area.

In addition to the upsizing, the market was anticipating the addition of a tranche of 12-year notes, sources said, adding that the longer tranche ultimately did not materialize.

Icahn Enterprises priced an upsized $750 million issue of eight-year senior bullet notes (Ba3/BB) at par to yield 4 3/8%, at the tight end of the 4 3/8% to 4½% yield talk. Initial guidance was in the 4½% area.

Increased from $500 million, the deal was heard to be playing to orders in excess of $1.2 billion as of noon ET Monday, a trader said.

Just ahead of the close the new 4 3/8% notes due February 2029 were trading at par bid, par ½ offered, the trader added.

Studio City for Tuesday

In addition to the Equitrans Midstream and Icahn drive-bys, Macau-based Studio City International Holdings Ltd. began shopping a benchmark offering of eight-year senior notes (B1/BB-) for pricing on Tuesday morning.

Talk is in the 5¼% area, tightened from initial guidance in the 5½% area.

Although the specific size of the offering remains to be announced, the market anticipates $650 million, according to a trader who added that the order book was heard to be slightly less than two times oversubscribed at that amount.

The deal is playing to traditional high-yield bond accounts as well as emerging markets investors, sources say.

Monday’s burst of action, on a day in which the market traditionally sees limited activity as players return to their desks from the holidays, suggests that although a lot of market participants were officially off work during at least part of the holidays, because of the pandemic some were unable to gain a meaningful amount of distances from their screens, a trader said.

Further into the first week of market activity in 2021, new issue volume is expected to increase substantially, sources said on Monday.

Genesis below par

Genesis Energy’s recent issue of 8% senior notes due 2027 remained below par in active trading on Monday.

The notes were changing hands in the 99½ to 99¾ context heading into the market close, according to a market source.

There was more than $20 million on the tape by late afternoon.

The 8% notes dropped to a 99-handle late last week.

They initially popped in the aftermarket, trading as high as 102 after breaking for trade on Dec. 10.

However, they have steadily come in as the rally in crude oil futures has waned.

Crude oil futures settled at $47.35, a decrease of $1.17 or 2.41%, on Monday.

Futures moved lower after OPEC failed to reach an agreement on production policy with the meeting set to reconvene on Tuesday, MarketWatch reported.

Talos gains

While the overall energy space was soft amid a pullback in crude oil futures on Monday, Talos’ 12% senior notes due 2026 continued to gain, with the notes well above their deeply discounted issue price.

The 12% notes were up about ¼ point to 97½ in active trading, according to a market source.

There was about $13 million on the tape heading into the market close.

Talos priced a $500 million issue of the 12% notes at 91 to yield 14.583% on Dec. 17.

The offering was among the last wave of new issues to price before the primary market closed for 2020.

The notes have traded well above their reoffer price since breaking for trade.

Indexes

The KDP High Yield Daily index closed on Monday at 68.99 with the yield now 4.3%.

The ICE BofAML US High Yield index launched 2021 in the red with year-to-date returns of negative 0.027%.

The CDX High Yield 30 index closed on Monday at 108.78.

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