Tekni-Plex prices below talk; energy names droop with crude; funds gain $967 million

By Paul A. Harris

Portland, Ore., Oct. 12 – The high-yield primary saw a single, modest-sized deal come to market – but it priced richer than talk.

Tekni-Plex, Inc. priced a $260 million issue of eight-year senior notes (Caa2/CCC+) in a deal that beat the low end of talk by 12.5 basis points.

Meanwhile secondary levels were a little softer.

The Markit CDX HY 29 index finished at 107.963 bid, 108.043 offered, down 0.071 points on the day and a hedge fund manager characterized the market as a little lower on Thursday.

High-yield mutual funds – seen as an indicator of overall market liquidity trends – were again in positive territory, seeing $967 million of inflows during the week to Wednesday’s close, according to information reported by Lipper US Fund Flows.

It was the fourth consecutive addition of cash.

Tekni-Plex below than talk

Tekni-Plex priced a $260 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 6 5/8% on Thursday.

The yield came tighter than the 6¾% to 7% yield talk.

The deal was completely spoken for through the price talk, an investor said.

Jefferies, Credit Suisse and BMO were the joint bookrunners.

Proceeds will be used to help fund the buyout of the King of Prussia, Pa.-based provider of specialty packaging solutions by Genstar Capital Partners, LLC

Catalent sets talk

Also in primary news Thursday, Catalent Pharma Solutions, Inc. talked its $450 million offering of eight-year senior notes (B3/B+) in the 5% area.

The deal appears poised to price richer than that talk, according to market sources who say that the order book was six-times oversubscribed at midday on Thursday.

Books closed at the end of business on Thursday except for investors on the West Coast of the United States who have meetings at 10 a.m. ET on Friday.

The deal is set to price on Friday.

Morgan Stanley, J.P. Morgan, RBC and BofA Merrill Lynch are the joint bookrunners.

The Somerset, N.J.-based provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products plans to use the proceeds to finance the acquisition of Cook Pharmica.

Oil glut

In the secondary market energy names, especially exploration and production companies, were generically off ¾ point on Thursday, sources said.

The move came with a substantial drop in oil prices. Crude fell 1.3% on news that output gains in the United States are expected to offset efforts to rebalance the oil market.

No relief to the persistent glut appears to be in sight, an investor said.

Still, there is definitely a bid out there, although people are being more insistent in terms of price, said a trader who operates in the energy space.

Actively traded names on Thursday included Targa Resources Partners LP and Anadarko Petroleum Corp.

The distressed bonds of California Resources Corp. were down a point, although the move was not necessarily tied to the drop in crude prices, according to a trader who added that the bonds just seem to move around.

California Resources’ 8% senior secured second lien notes due December 2022 were spotted at 62½ bid Thursday morning and at 63 bid late in the afternoon.

Another source saw the notes going home at 63 bid, 63¾ offered.

The bonds is the biggest liquid energy name and people use it to track the oil market, an investor commented.

One exception to the rule was Genesis Energy, LP which disclosed information on Thursday that was deemed beneficial to bondholders.

Genesis Energy 5 5/8% notes were up ¼ to ½ point on the day at 97 3/8 bid.

The company announced it is decreasing its target leverage ratio to 3.75x by year-end 2020 and will use excess over the coverage of its unit distribution and increased EBITDA to pay down debt.

Beacon near par

Among recent issues, Beacon Roofing Supply Inc.’s new 4 7/8% notes due November 2025 (B3/B+) were at par bid, par 3/8 offered on Thursday morning.

The $1.3 billion deal came at par on Wednesday.

It was a blowout deal and the underwriters took all the juice out of it, a trader remarked, recounting that the 4 7/8% paper traded to par 5/8 bid, par 7/8 offered, on the break, Wednesday afternoon, but subsequently faded.

$967 million inflows

The dedicated high yield bond funds saw $967 million of inflows in the week to Wednesday’s close, according to information from a source familiar with the data from Lipper US fund flows.

It trails the previous week’s $646 million of net inflows.

According to a Prospect News analysis of the data, this week’s inflow was the 21st so far this year, versus 20 outflows during that time.

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