W&T Offshore prices; Resideo hovers at par; Cable & Wireless trades up; HCA drops

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 5 – On a quiet Friday ahead of an extended holiday weekend, the domestic and European high-yield primary markets each saw one deal clear.

W&T Offshore, Inc. priced $625 million of five-year second-lien notes (B3/B) at par to yield 9¾%.

Playtech plc priced €530 million of five-year senior secured notes (expected ratings Ba2/BB) at par to yield 3¾%.

While the domestic primary market wrapped an active week, the forward calendar is thin with market conditions likely to stifle new issue activity in the week ahead.

Those market conditions were apparent in the secondary space which was again soft as the backup in Treasuries began to take its toll, sources said.

Despite the down day, Cable & Wireless Communications Ltd.’s 7½% senior notes due 2026 (B2/BB-/BB-) remained strong with the notes trading more than 1 point above issue.

Intertape Polymer Group Inc.’s 7% senior notes due 2026 (B2/B+) and Resideo Funding Inc.’s newly priced 6 1/8% senior notes due 2026 (B1/BB+) were trading at a slight premium to their issue price.

Meanwhile, HCA Inc.’s junk bonds were down ½ to 1 point in active trading in the secondary space.

W&T Offshore prices within talk

W&T Offshore priced $625 million of five-year second-lien notes (B3/B) at par to yield 9¾%.

The yield came in the middle of yield talk set in the 9¾% area.

Initial talk had the bonds coming with a yield in the 10% area, according to a bond trader.

Morgan Stanley was the global coordinator, as well as a joint bookrunner. The other joint bookrunners were Stifel, Seaport Global, TD Securities, SG CIB, Natixis Securities, ABN Amro and ING.

The Houston-based oil and natural gas exploration and production company plans to use the proceeds to refinance debt.

Playtech €530 million secured

In the European market, Playtech also completed a secured deal within talk.

Playtech priced a €530 million issue of five-year senior secured notes (expected ratings Ba2/BB) at par to yield 3¾%, in the middle of yield talk announced in the 3¾% area.

Active bookrunner UBS will bill and deliver. NatWest Investments and Santander were also active bookrunners.

The Isle of Man-based gaming technology company plans to use the proceeds to repay bank debt and redeem outstanding Snaitech high-yield bonds.

Cloudy ahead

As W&T Offshore and Playtech cleared the market on Friday, they emptied the active forward calendar, leaving it bereft of offerings heading into the extended Columbus Day weekend.

With stock prices trending downward toward the end of the Oct. 1 week, along with weaker crude oil prices impacting a sector that represents 15% of the high yield index, the week ahead is a question mark, syndicate bankers said Friday.

And while the news on stocks and oil prices has not been good, the most formidable hurdle the new issue market now faces is spiking Treasury yields.

The 10-year government paper was paying 3.23% late Friday, off a little from highs near 3¼%, the highest levels seen since 2011, a syndicate banker said.

High yield bonds are bound to come under pressure in the face of such a dramatic surge in Treasuries, they say.

Factors such as these are apt to keep opportunistic issuers on the sidelines, syndicate bankers said, as they professed no certain visibility on business expected to roll out early in the week ahead.

That could change quickly if volatility eases, in which case there could be another pickup in the drive-by market, an investment banker said.

Cable & Wireless stays strong

While trading of Cable & Wireless’ 7½% senior notes due 2026 was light on Friday, the notes remained strong in the secondary space.

The notes were seen at 101 1/8 bid, 101 5/8 offered early in Friday’s session. They were largely wrapped around 101 after breaking for trade on Thursday.

Cable & Wireless priced a $500 million issue of the 7½% notes at par on Thursday.

The yield printed at the tight end of the 7½% to 7 5/8% yield talk and inside initial price talk in the high 7% area.

Intertape quiet

Intertape’s new 7% senior notes due 2026 were quiet in the secondary space with few bonds trading during Friday’s session, sources said.

However, the notes were quoted at a premium to their issue price. They were seen at par ¼ bid, 101 offered early in the session, according to a market source.

Intertape priced a $250 million issue of the 7% notes at par on Thursday.

The yield printed at the wide end of the 6¾% to 7% yield talk, as well as initial price talk, which was set in the high 6% area to 7%.

Resideo holds

Resideo’s 6 1/8% senior notes due 2026 were also holding a slight premium in secondary trading on Friday.

The notes were quoted at par 1/8 bid, par 5/8 offered early in the session and were seen trading between par ¼ and par 3/8 in the afternoon, sources said.

“The underwriters are backstopping it well,” a market source said.

Resideo priced a $400 million issue of the 6 1/8% notes on Thursday.

The yield printed at the tight end of yield talk announced in the 6¼% area.

HCA drops

HCA’s junk bonds were losing ground in high-volume trading on Friday.

With more than $19 million of bonds in play, HCA’s 5½% senior notes due 2047 were the most active issue of the day.

The notes dropped 1 point to close Friday at 98¾, according to a market source.

HCA’s 5 7/8% notes were also active with about $16 million bonds trading during Friday’s session. The notes were down ½ point to close the day at 102¾, a source said.

Mixed Thursday flows

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

High-yield ETFs, which started the week with dramatic daily inflows, sustained $339 million of outflows on Thursday, the source said.

The size of the outflow is almost certain to grow because the Thursday flow for the HYG ETF was unavailable for inclusion in the tally, the source said.

It was the second consecutive noteworthy daily outflow for the ETFs, which suffered $482 million of outflows on Wednesday.

Actively managed high yield funds saw $60 million of inflows on Thursday, the trader said.

Combined, the ETFs and actively managed funds have seen $24.2 billion of outflows thus far in 2018, the trader said, adding that $20.7 billion of that amount came out of the actively managed funds, while $3.5 billion flowed from the ETFs.

The majority of the outflows took place in the first quarter of the year, the trader added.

Indexes

After a strong start to the week, three benchmarks for the high-yield secondary market closed with large losses.

The KDP High Yield Daily index dropped 16 basis points to close Friday at 70.38 with the yield now 5.83%.

The index dropped 12 bps on Thursday after a gain of 1 bps on Wednesday, 4 bps on Tuesday, and 17 bps on Monday.

The index was down 6 bps on the week.

The ICE BofAML US High Yield index was again down after a large drop on Thursday. The index slid 17.7 bps with the year-to-date return now 2.032%.

The index dropped 52.2 bps on Thursday and dropped 2.7 bps on Wednesday, after a 5 bps gain on Tuesday and a 22.5 bps gain on Monday.

The index was down 45.1 bps on the week.

The CDX High Yield 30 index dropped 20 bps to close Friday at 106.78.

The index was down 52 bps on the week.

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