Dollar primary quiet; market awaits Vizient; new Kinetic Concepts bond busy; energy names up

By Paul Deckelman and Paul A. Harris

New York, Feb. 3 – The high-yield primary market was relatively quiet on Wednesday, with no new dollar-denominated, fully junk-rated issues heard to have priced during the session.

The day’s sole pricing activity came out of Europe. France-based Labeyrie Fine Foods SAS was heard by syndicate sources to have priced an €80 million add-on to its existing 2021 secured notes.

Back among the dollar-denominated names, Tuesday’s new deal from medical products manufacturer Kinetic Concepts Inc. was meanwhile the most actively traded issue in Junkbondland Wednesday, moving up by nearly another point on top of the initial aftermarket gains the new issue posted after pricing.

The syndicate sources meantime said that health-care provider network Vizient, Inc. is expected to bring its upsized $500 million eight-year issue to market, possibly as soon as Thursday.

Away from the new-deal arena, a sharp rise in crude oil prices spurred by a lower dollar and the possibility of an international oil producers’ meeting to discuss possible output cutbacks helped push oil and natural gas exploration and production names like SandRidge Energy, Inc., Whiting Petroleum Corp., Oasis Petroleum Inc. and Energy XXI Ltd. multiple points higher.

Freeport McMoRan Inc. paper continued to gain for a fourth straight session following the metals mining and oil and gas company’s ratings downgrade as junk investors stepped in to buy the split-rated bonds that high-grade accounts were getting out of.

Statistical measures of junk market performance turned mixed on Wednesday after having been lower across the board on Monday and Tuesday; it was their second mixed session in the last six trading days.

Labeyrie prices rich

Labeyrie Fine Foods priced Wednesday's sole deal, an €80 million add-on to its 5 5/8% senior secured notes due March 15, 2021 (existing ratings /B/B+) that came at 99.75 to yield 5.681%.

The reoffer price came at the rich end of price talk in the 99.5 area.

Global coordinator BNP Paribas will bill and deliver for the acquisition financing deal. Deutsche Bank was also a global coordinator. Credit Agricole, HSBC and Natixis were joint bookrunners.

Vizient upsizes, sets talk

Vizient upsized its offering of eight-year senior notes (Caa1/CCC+) to $500 million from $400 million and talked the notes to yield 10¼% to 10½%.

Books close Thursday afternoon, and the offering, via bookrunner Barclays, is set to price thereafter.

With the upsizing of the notes the concurrent term loan was downsized to $1,375,000,000 from $1,475,000,000.

Acadia a blowout

Elsewhere on the calendar, Acadia Healthcare Co. Inc.'s $390 million offering of eight-year senior notes (B) is a blowout, a trader said on Wednesday.

Talk should surface early on Thursday, said the trader.

Early guidance has the deal pricing in the low 7% yield context, but it will probably tighten to the high 6% area, the trader said.

Acadia could price on Thursday, sources say.

Looking further out on the active dollar-denominated calendar, talk is widening on some deals, the trader said. This list includes the Manitowoc Food Service, Inc. $425 million deal, which has been in the market with initial guidance of 10%, and the Manitowoc Cranes $250 million deal, which has been in the market with initial guidance of 10½% to 11%, the source added.

Mixed flows

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

The exchange-traded funds saw outflows of $594 million on the day.

However, actively managed high-yield funds were positive on the day, seeing $35 million of inflows.

Dedicated bank loan funds, meanwhile, saw $30 million of outflows on Tuesday.

New KCI bonds climb

In the secondary arena, the new Kinetic Concepts 7 7/8% first-lien secured notes due 2021 “traded up quite a lot,” a trader said, seeing the bonds moving around in a range between 101¾ and 102 13/16.

He said that the final trades of the session were taking place at or near their highs for the day, between 102½ and 102 13/16.

The KCI issue was easily the most actively traded junk credit of the day, with over $87 million changing hands.

At another desk, a trader saw the bonds finishing up in a 102½ to 102¾ context, a gain of nearly 1 full point.

KCI, a San Antonio, Texas-based provider of wound-care therapies, priced $400 million of those notes at par late in the session on Tuesday as a regularly scheduled transaction off the forward calendar.

Despite the relative lateness of the hour at which it emerged, the deal still managed to see some aftermarket action, with over $13 million traded in their initial dealings.

A market source pegged the new bonds at 101¾ bid on Tuesday, well up from their par issue price.

Oil prices boost energy names

Away from new or recently priced issues, a trader said that one of the main drivers of activity on Wednesday was the steep climb in world crude oil prices, “which gave a bid” to the energy sector.

For instance, he saw Houston-based oil and natural gas exploration and production company Oasis Petroleum’s 6 7/8% notes due 2022.

He said that the bonds had closed on Tuesday at 56¼ bid. As Wednesday’s session opened up, the bonds were trading at 57½ bid and by the end of the session had pushed up to 59 bid, a gain of some 2¾ points on the day, on volume of over $11 million.

The company’s 7¼% notes due 2019 did even better than that, firming by some 4 points on the day, finishing at 61¾ bid. Volume came to about $7 million.

One of the most active names in the energy patch on Wednesday was Oklahoma City-based E&P operator SandRidge Energy. Its 8¾% notes due 2020 gained more than 3 points on the session, closing at around 24½ bid, with over $28 million having changed hands.

“On Tuesday, they had traded between 20 1/8 and 21½,” another trader said, “while today they were between 21½ and 24½. At the end of the day, they kept trading higher.”

Denver-based Whiting Petroleum’s 6½% notes due 2018 jumped more than 5 point, to just over 60 bid, though on only a handful of large-sized trades.

Houston-based Energy XXI’s 9¼% notes due 2017 – big losers during Tuesday’s session, surrendering almost all of their remaining value – were on the rebound on Wednesday, gaining back 2 7/8 points to end at 3 bid.

Its 8¼% notes due 2018 also gained back most of their value, ending a little over 4 bid.

A trader said that “with oil having a bid like it did today and a good run” – he cited “chatter” about the possibility of one of OPEC’s South American producers such as Venezuela or Ecuador calling for an emergency meeting of the cartel to discuss possible output cuts – “that’s what’s been driving those bonds.”

March West Texas Intermediate crude, the U.S. benchmark grade, saw its first gain on Wednesday after two consecutive losses, rising by $2.40 per barrel on the New York Mercantile Exchange to settle at $32.28 – in sharp contrast to losses of $2.00 on Monday and $1.74 on Tuesday.

Global benchmark Brent crude for April delivery was up by $2.32 per barrel on the London ICE Futures Exchange, settling at $35.04, after having fallen by $1.75 on Monday and another $1.52 on Tuesday.

Freeport keeps firming

Phoenix-based Freeport McMoRan – with interests in both oil and natural gas exploration and in metals mining – “was still trading on heavy volume across the [capital] structure,” a trader said, estimating its bonds up by 1 to 2 points. It was their fourth straight session on the rise following last Thursday’s four-notch ratings downgrade by Moody’s Investors Service, which hammed the bonds down last Thursday.

He theorized that the initial selling was done by high-grade accounts that could no longer hold the paper once Moody’s had cut it to Ba1 from Baa3.

Since then, “the buying has been from the high-yield side.”

Its 3.55% notes due 2022 gained 1¼ points to end at 45¼ on Wednesday, with over $43 million traded.

Indicators turn mixed

Statistical measures of junk market performance turned mixed on Wednesday after having been lower across the board on Monday and Tuesday; it was their second mixed session in the last six trading days.

The KDP High Yield Daily index surrendered 17 basis points on Wednesday, finishing at 62.65. It was the index’s third decline in a row after seven straight gains, which, in turn, had followed a seven-session losing streak before that. On Tuesday, the index had lost 29 bps.

Its yield, meanwhile, rose by 3 bps on Wednesday to end at 7.36%, its third consecutive widening after seven straight sessions before that during which the yield had come in. On Tuesday, the yield had jumped by 12 bps.

The Markit Series 25 CDX North American High Yield index was up nearly ½ point on Wednesday, going out at 99 1/16 bid, 99 3/32 offered. It was the index’s first gain after two straight losses and its third strengthening in the last five sessions; it had plunged by 1 full point on Tuesday.

The Merrill Lynch North American High Yield Master II index posted its third straight loss on Wednesday after having risen over the previous seven sessions. It was down by 0.225%, adding to Tuesday’s 0.504% loss.

The setback raised the index’s year-to-date loss to 2.483% from Tuesday’s 2.263%, although the cumulative loss still remains well down from the index’s worst red-ink level for the year so far, the 4.095% deficit seen on Jan. 20.

© 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.