OneMain two-part prices, await Westmoreland terms, JBS postpones deal; oil names battered again

By Paul Deckelman and Paul A. Harris

New York, Dec. 8 – The high-yield primary market opened the new week on Monday with an upsized $1.5 billion pricing from OneMain Financial Holdings, Inc. Traders did not report any initial aftermarket dealing in the consumer lending company’s two-part offering of five-year and seven-year notes.

Another deal heard to have gotten done was Westmoreland Coal Co.’s $400 million offering of secured notes, although terms were expected to be announced on Tuesday.

Syndicate sources meantime heard that meatpacker JBS USA LLC had postponed its planned $750 million 10-year issue, citing market conditions.

Traders saw a modest amount of activity in the new Constellium NV eight-year issue, which priced on Friday.

But they said the market’s real focus remained the beleaguered energy sector – and most of those bonds were on the slide on Monday, some by multiple points, as world crude oil prices tumbled to five-year lows.

Among the credits getting clobbered were such familiar oil and natural gas exploration and production names as California Resources Corp., Halcon Resources Corp. and Linn Energy LLC, along with coal producer Cliffs Natural Resources Inc.

There was also some modest upside activity in the bonds of Kodiak Oil & Gas Corp. and Whiting Petroleum Corp., as Whiting officially completed its previously announced acquisition of E&P sector peer Kodiak, triggering a change-of-control offer for the latter’s outstanding notes.

Statistical market-performance measures were seen lower across the board for a second consecutive session on Monday. They had also eased all around on Friday, after having been mixed on Thursday.

OneMain upsizes

The new issue news flow remained thin on Monday.

One deal was priced amid speculation that the Dec. 8 week could be the last week to see any new issue activity at all before the end of the year.

OneMain Financial completed $1.5 billion of senior notes (B2/B+) in an upsized two-part transaction.

The company priced $700 million of five-year notes at par to yield 6¾%, and $800 million of seven-year notes at par to yield 7¼%.

Both tranches came on top of yield talk.

The overall amount of issuance was increased from $1 billion.

Citigroup was the bookrunner.

Proceeds, including those resulting from the upsizing, will be used to refinance debt.

Also on Monday Westmoreland Coal was heard to have crossed the finish line with its $400 million seven-year senior secured first-lien notes deal (existing Caa1/confirmed B), via BMO.

Terms will be available on Tuesday, according to an informed source.

Kindred roadshow

The Monday session saw two prospective issuers roll out deals expected to price before the end of the week.

Kindred Healthcare Inc. began a roadshow for a $1.35 billion two-part offering of senior notes to help fund its merger with Gentiva Health Services, Inc.

The deal includes a tranche of eight-year notes and a tranche of 10-year notes. Tranche sizes remain to be determined.

Citigroup is the left bookrunner. J.P. Morgan, Guggenheim and Morgan Stanley are the joint bookrunners.

Siemens Audiology to roadshow

Auris Luxembourg II SARL, the holding company for Siemens Audiology Solutions, plans to start a roadshow on Tuesday in Paris for a €315 million offering of eight-year senior notes (B2/).

The roadshow continues in London on Wednesday and Thursday.

Joint bookrunner Deutsche Bank will bill and deliver. Goldman Sachs International and UBS are also joint bookrunners.

Proceeds, together with a senior facilities agreement, will be used to fund the acquisition of Siemens Audiology Solutions by a group of investors led by EQT VI and Santo Holding, from Siemens AG.

JBS USA postpones

JBS USA postponed its $750 million of 10-year senior notes (expected Ba3/confirmed BB) due to market conditions.

The deal was talked on Friday with a yield in the 6 1/8% area.

BofA Merrill Lynch, BMO, Deutsche Bank, Morgan Stanley and Wells Fargo were the leads on the debt refinancing deal.

Riding the tide

Sentiments round about the high-yield market remained negative on Monday, sources said.

Oil and gas bonds, as well as those of companies that provide such infrastructure as drill rigs and pipelines, continued to be under pressure, a trader said, noting that a barrel of West Texas Crude fell below $63 on Monday, down from $65.60 on Friday. It went for $103 in June.

Distressed players are beginning to take note of events in the energy sector, although it is still too early to predict whether distressed exchange deals are on the horizon, sources said.

Impacted energy issuers tend to have hedges in place, and right now they appear prepared to ride the tide, a syndicate banker said.

Big bellwether deal

In the face of forecasts which hold that the sands of time are quickly draining down for the 2014 new issue market, sources continued to assert that the Dec. 8 week will feature at least one big deal, although no one thus far has disclosed the identity of the issuer.

On Monday one source said that the “big bellwether deal” appears to still be in the works, although timing remains uncertain.

If the deal does appear it will do so against a negative technical backdrop, sources say.

Cash flows for dedicated high-yield funds remained negative on Friday. High-yield exchange-traded funds saw $6 million of outflows, while actively managed funds sustained $160 million of daily outflows.

OneMain an aftermarket no-show

In the secondary realm, traders said that they had not seen any immediate aftermarket dealings in the big new two-part offering from OneMain Financial Holdings.

They cited the lateness of the hour at which the Baltimore-based consumer loan company formerly known as Citi Financial had priced its upsized and regularly scheduled forward calendar offering.

Kindred expected to do well

Market participants meantime noted Kindred Healthcare’s announcement of its plans for a $1.35 billion two-part deal to finance its acquisition of sector peer Gentiva Health Services, which will be shopped to potential investors via a roadshow.

Independent research service Gimme Credit LLC senior analyst Vicki Bryan said in a note Monday that the Louisville, Ky.-based healthcare facilities operator’s eight- and 10-year notes “could price attractively at near 6.5% and 7.5%, respectively.”

Bryan noted that the debt portion of the funding for the $1.8 billion purchase will be a little smaller than initially anticipated, due to what she called a “meaningful” amount of equity proceeds from the company’s recent sale of common stock and tangible equity units.

She added: “This plus the excellent call protection offered and likely above-average yields means the deal should be well-received and potentially oversubscribed, so get ‘em while they’re hot.”

Constellium hangs in

Among recently priced new issues, a trader said that Constellium’s 8% notes due January 2023 were trading in a par to 100¼ context, on “light volume – about $5 million to $7 million changing hands.”

However, at another shop, a trader pegged the bonds somewhere between 99 and par bid, down about 1 point from the level he had seen on Friday, after the Amsterdam-based aluminum products manufacturer had priced $400 million of the notes at par.

Those notes came to market as part of a €565 million equivalent two-part forward calendar offering – upsized from €535 million equivalent – that also included €240 million of 7% notes due January 2023.

Among other recent deals, a trader saw about $5 million of Cott Beverages, Inc.’s 6¾% notes due 2020 trading at 99¾ bid, par offered.

The Mississauga, Ont.-based soft-drink bottler priced $625 million of the notes at par on Thursday, after the deal was upsized from an originally announced $615 million. They traded below par in their initial aftermarket dealings and stayed down there on Friday and again on Monday.

At another shop, a trader said that “Dana [Holding Corp.] was the only one I saw trading” among the recently priced issues, “wrapped around par.”

The Maumee, Ohio-based automotive components manufacturer drove by the market on Thursday with a $425 million issue of 5½% notes due 2024, which priced at par and then remained slightly above that level.

Going back a little further, a market source saw Scientific Games International, Inc.’s 10% notes due 2022 at 91¾ bid, down 1¼ point, on trading of more than $11 million, placing it among the day’s most active issues.

The New York- based producer of technology for the gaming industry priced $2.2 billion of those notes on Nov.14 at 89.865 to yield 12%, as part of an upsized $3.15 billion forward calendar deal – upsized from $2.9 billion originally – that also included $950 million of 7% senior secured notes due 2021 that priced at par.

Oil angst continues

But as has been the case over the previous few sessions, a trader said that new or recently priced deals were not really the main center of attention in Junkbondland.

“The focus – with oil prices down almost another $3 – was on the E&P and oilfield service names that were just for sale.

“They took another leg downward.”

He saw California Resources’ several issues of notes “down another couple of points, and all three were pretty good traders” volume-wise.

A second trader said the Los Angeles-based energy company’s 6% notes due 2024 were down 2¾ points on the day at 85¼ bid, on volume of more than $32 million, tops among the traditional junk credits, excluding technically high-yield rated long-duration hybrid securities from high-grade-rated financial companies such as J.P. Morgan Chase.

The CalRes 5½% notes due 2021 lost 1¾ points to end at 86½ bid, on over $12 million traded.

Other sector names taking it on the chin included Houston-based Halcon Resources, whose 8 7/8% notes due 2021 lost 1½ points to end at 72¾ bid, on volume of over $28 million, while its 9¾% notes due 2020 eased by ½ point to 74 bid, with over $23 million having changed hands.

Houston-based Linn Energy’s 8 5/8% notes due 2020 fell by 1½ points to 87¾ bid, with over $11 million traded.

The bonds’ continued slide came against a backdrop of falling oil prices, with the benchmark U.S. West Texas Intermediate crude dropping by 4.2%, or $2.79, to end at $63.05 a barrel – its lowest finish since July 2009.

The oilers were not the only energy segment getting hit hard on Monday; Cleveland-based coal and iron-ore producer Cliffs Natural Resources’ 3.95% notes due 2018 ended off by around ¾ point at 69 bid on over $17 million traded – while its 6¼% bonds due 2040 plunged by 4 3/8 points to end at 55 bid, on turnover of more than $16 million.

A trader cited “weak data from China,” a major coal importer, adding that “there’s not a big demand for coal right now.”

Kodiak, Whiting rise

The news that Whiting Petroleum had completed its previously announced acquisition of sector peer Kodiak Oil & Gas pushed the latter’s bonds up in anticipation of a change-of-control offer for that paper.

A trader saw Kodiak’s 5½% notes due 2022 up ½ point on the day to end at 100¾ bid. More than $12 million of the bonds changed hands.

“That was set to happen – it was expected to close,” a second trader said, “so they’re going to trade right up around the [101] change-of-control” in a 100¾ bid neighborhood.

Another trader meantime said that Whiting has “a bunch of different issues trading, maybe $1 million of $2 million of volume on each, up ½ point or down ½ point, with no big trend.”

Another market source saw the Denver-based energy company’s 5½% notes due 2021 up 9/16 point at 100¾ bid, on volume of around $10 million.

Indicators push lower

Statistical indicators of junk market performance were lower for a second consecutive session on Monday, after having turned downward on Friday and been mixed on Thursday.

The KDP High Yield Daily Index lost 13 basis points on Monday to close at 71.08, after easing by 2 bps on Friday, its first loss after two straight gains.

Its yield rose by 5 bps to 5.71%, after having gone up by 3 bps on Friday – its first widening after having narrowed by 2 bps in both of the previous two sessions.

The Markit CDX North American High Yield Series 23 index saw its third loss in a row, dropping by 19/32 point to end at 106 3/16 bid, 106 5/16 offered. It had fallen by ¼ point on Friday and by 9/32 point on Thursday as it broke a two-session winning streak before that.

The Merrill Lynch U.S. High Yield Master II Index was down for a second successive session on Monday, losing 0.254%, on top of Friday’s 0.111%, which had been its first setback after two straight gains.

The latest loss dropped its year-to-date return to 2.742% from Friday’s 3.003% – its first time under the psychologically significant 3% mark since Oct. 16, when it had closed at 2.638%. The year-to-date return also remained well below its peak level for the year of 5.847%, recorded on Sept. 1.

Several other index components notched new marks for the year. Its yield to worst rose to a new high for the year at 6.478%, eclipsing the previous highest yield of 6.455%, established on Sept. 29.

Its spread to worst rose to 496 bps over comparable Treasuries, widening from its previous high point of 493 bps, which had been set on Oct. 14.

And its average price fell to 99.58192, down from its previous low for the year of 99.89719, set this past Friday.

According to the FINRA-Bloomberg Active US High Yield Bond Index, junk market volume fell for a fourth consecutive session on Monday, ending at $3.023 billion, versus $3.268 billion on Friday.

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