Primary eyes Sept.; Sanchez Energy, California Resources on the move; Husky Injection drops

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 21 – The domestic primary market remained dormant on Tuesday and is expected to stay that way through the end of August. However, September promises to be a big month for new issue activity, sources said.

While no dollar-denominated deals are on the active forward calendar, two Nordic deals from Teekay LNG Partners LP and WOW Air are in the works.

Meanwhile, the secondary space remained quiet with trading volume “extremely low,” a market source said.

“Low volume is the name of the game,” another source said.

Names in the energy sector remained active as the barrel price of West Texas intermediate crude oil for September delivery rose almost $1.

California Resources Corp.’s 8% senior secured second-lien notes due December 2022 were volume leaders on Tuesday with the notes gaining about 1 point.

Sanchez Energy Corp.’s junk bonds continued to rise alongside the broader energy sector with the notes up 2 points.

While the bonds have made gains over the past few days, they are still well below their levels prior to the release of the company’s second-quarter earnings report in early August.

Husky Injection Molding Systems Ltd.’s junk bond dropped about 7 points on Tuesday after the company reported disappointing earnings.

Nordic deals

Nothing moved the needle in the major currencies new issue market on Tuesday, sources said.

However, there are a couple of Nordic deals being shopped.

Teekay LNG Partners was scheduled to participate in a conference call with fixed income investors on Tuesday, ahead of a contemplated Norwegian krone-denominated offering of five-year senior unsecured bonds.

Global coordinators DNB Markets and Nordea and joint bookrunners Danske Bank and Swedbank have the mandate for the Rule 144A and Regulation S transaction.

Also, Iceland-based low-cost air carrier WOW Air is seeking to place three-year senior secured floating-rate notes, expected to come in euro-denominated bonds or Swedish krona-denominated bonds, via Pareto Securities.

Elsewhere the new issue market remained dormant on Tuesday, as the dog days of August play out ahead of the extended Labor Day holiday weekend, which gets underway following the Friday, Aug. 31 close, sources said.

Announcements of major currency deals are unlikely in the run-up to Labor Day, they added.

Big September

September is shaping up to be a big month in the new issue market with high profile merger and acquisition deals expected to appear sooner rather than later in the month ahead, a debt capital markets banker said Tuesday.

Pending the demand for new paper, count on some opportunistic issuers to be waiting in the wings, gauging the market for the best time to come, the source added.

It would not be impossible to see $20 billion to $25 billion in September, the source added, noting that much hinges upon how hungry the market is.

The Jewish holidays, Rosh Hashanah on Sept. 10-11 and Yom Kippur on Sept. 19, might constrict September new issue activity to a certain extent, the banker added.

California Resources active

California Resources 8% senior notes due 2022 remained active on Tuesday as the barrel price of West Texas intermediate crude oil continued to improve.

The notes were quoted at 88 3/8 offered, 88 7/8 bid early Tuesday. They were seen trading at 88¼ Tuesday afternoon after closing Monday at 87 3/8.

As California Resources 8% senior notes improved, so too did the price of crude oil. West Texas intermediate crude oil for September delivery expired on Tuesday at $67.35, a 92 cent increase.

The rise in crude oil was attributed to tightening global supplies due to Iranian sanctions and an anticipated decline in oil inventories after the American Petroleum Institute reported a larger than expected oil inventory draw.

Crude oil dropped more than $2 on Aug. 15 after U.S. crude oil inventories were larger than expected.

Sanchez’s climb continues

Sanchez Energy’s junk bonds continued to rise alongside the broader energy sector with the notes seen up another 2 points on Tuesday.

The 7¾% senior notes due 2021 were quoted at 70 bid, 71 offered on Tuesday with trades seen around 70¼, sources said.

The notes were quoted at 68 bid, 69 offered on Monday.

The 7¾% notes saw decent trading volume on an otherwise quiet day, a market source said.

Sanchez Energy’s 6 1/8% senior notes due 2023 reached as high as 56 bid, 57 offered during Tuesday’s session. However, the notes lost some steam into the afternoon and were seen at 55½ bid, 56 offered.

The 6 1/8% notes closed Monday at 53½ bid, 54½ offered.

While Sanchez Energy’s notes have posted gains over the past couple trading sessions alongside the price of crude oil, they are still well below their levels prior to the company’s second-quarter earnings report.

The 7¾% notes were trading around 88 and the 6 1/8% notes were trading around 69 in the run up to the report, which was released on Aug. 7.

Sanchez reported a large earnings miss which was largely attributed to its hedging of 20,000 barrels of oil a day at $52.61 a barrel in the second-quarter.

Husky drops

Titan Acquisition Ltd./Titan Co-Borrower, LLC (Husky Injection Molding Systems Ltd.) 7¾% senior notes due 2026 dropped several points on Tuesday.

The notes were seen down 7 points. They were quoted at 83½ bid, 84½ offered on Tuesday. The 7¾% notes were quoted at 90½ bid, 91½ offered on Monday, according to a market source.

The privately held supplier of machinery for injection molding of plastics reported disappointing numbers, a market source said.

Titan Acquisition Ltd. was formed by global investment firm Platinum Equity to handle its acquisition of Husky Injection Molding in a $3.85 billion deal.

The acquisition was completed on March 29, according to a company news release.

Mixed Monday flows

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

High-yield ETFs saw $184 million of inflows on the day.

However actively managed high-yield funds sustained $53 million of outflows on Monday, the trader said.

Indexes gain

Three benchmarks for the high-yield secondary market posted gains on Tuesday after opening the week either flat or with gains.

The KDP High Yield Daily index was up 5 basis points on Tuesday to close the day at 70.44 with the yield now 5.84%. The index was up 2 bps on Monday.

The Merrill Lynch High Yield index was up 9 bps on Tuesday with the year-to-date return now 1.684%. The index was up 10 bps on Monday.

The CDX High Yield 30 index was up 18 bps to close Tuesday at 106.9. The index was flat on Monday at 106.72.

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