Range Resources, Studio City price; Equitrans in focus; Icahn improves; Apache volatile

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan 5 – The domestic high-yield primary market saw one straight junk bond and one cross-over trade clear the market during Tuesday’s session.

In a heavily oversubscribed offering, Range Resources Corp. priced an upsized $600 million issue of eight-year senior notes (B2).

Macau-based Studio City International Holdings Ltd. priced a $750 million issue of eight-year senior notes (B1/BB-) in an offering that played to both emerging-markets and high-yield accounts.

The primary market is expected to remain active heading into the latter part of the week.

Meanwhile, the secondary space was largely unchanged on Tuesday after a soft start to the New Year.

New deals jumpstarted activity in the secondary space with trading volume picking up.

Equitrans Midstream Corp.’s newly priced tranches of senior notes (Ba3/BB-/BB) were in focus with the notes gaining strength into the close alongside the broader market.

Icahn Enterprises LP’s 4 3/8% senior notes due 2029 (Ba3/BB) were also improved in actively trading.

Outside of recent issues, Apache Corp.’s 4¾% senior notes due 2043 were volatile following news the energy company would transition to a holding company structure.

Tuesday’s primary

In Tuesday's sole straight-up high yield play, Range Resources priced an upsized $600 million issue (from $500 million) of eight-year senior notes (B2) at par to yield 8¼% in a drive-by.

The yield printed at the tight end of the 8¼% to 8½% yield talk. Initial guidance was in the mid-to-high 8% area.

The deal was five-times oversubscribed, according to a trader who spotted the new Range Resources 8½% notes due 2029 trading at 101¾ bid, 102¼ offered late Tuesday.

Meanwhile, in a deal heard to have played to an audience comprised of high-yield and emerging-markets accounts Macau-based Studio City International Holdings priced a $750 million issue of eight-year senior notes (B1/BB-) at par to yield 5%.

The yield printed 12.5 basis points inside of yield talk in the 5¼% area, and 37.5 bps inside of initial talk in the 5½% area.

The final size came higher than the $650 million that had been telegraphed to the market when the deal was announced at benchmark size on Monday, a trader said.

Action in the new-issue market is expected to increase in the later part of the first week of 2021, market sources say.

Equitrans in focus

Equitrans two tranches of senior notes were in focus on Tuesday with both issues gaining momentum as the session progressed.

The midstream company’s 4¾% senior notes due 2031 were wrapped around par ¼ early in the session.

However, the notes gained strength as the session progressed and were changing hands in the 101 to 101 1/8 context heading into the close, a source said.

There was more than $101 million in reported volume during Tuesday’s session.

The 4½% senior notes due 2029 were trading at a slightly lower level.

The notes were changing hands at par early in the session but rose to trade in the par 5/8 to 101 context heading into the market close.

There was more than $80 million in reported volume during the session.

In addition to the general market, the notes were bolstered by surging crude oil futures, which topped $50 in intraday activity before settling at $49.80, an increase of $2.18 or 4.58%.

Crude oil futures were posting gains following OPEC’s announced production cuts.

Equitrans priced an $800 million issue of the 4½% notes at a $1.1 billion issue of the 4¾% notes at par on Monday.

The 4½% notes priced at the tight end of the 4½% to 4¾% yield talk. The 4¾% notes priced at the tight end of the 4¾% to 5% yield talk.

Icahn improves

Icahn’s 4 3/8% senior notes due 2029 were improved in active trading on Tuesday.

The notes were changing hands in the par 5/8 to par ¾ context heading into the market close.

There was more than $67 million on the tape.

The 4 3/8% notes closed out the previous session at par ½ after breaking for trade.

Icahn priced a $750 million issue of the 4 3/8% notes at par on Monday. Pricing came at tight end of the 4 3/8% to 4½% yield talk.

Apache volatile

Apache’s 4¾% notes due 2043 were volatile in active trading on Tuesday.

The notes were “all over the place,” a source said. They traded as low as 99 and as high as 102½ before closing the day wrapped around 101½.

There was more than $18 million of the bonds on the tape during Tuesday’s session.

The notes were on a 103-handle on Monday.

Apache announced on Monday that it was transitioning to a holding company structure.

Traders were reacting to the news and attempting to determine what it meant for the bonds, a source said.

Fund flows

The dedicated high-yield bond funds saw $504 million of net outflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained heavy outflows of $664 million on the day.

Actively managed high-yield funds were positive on Monday, seeing $160 million of inflows on the day, the source said.

The combined funds are tracking $295 million of net outflows for the week that will conclude with Wednesday's close, the market source noted.

Final fund flow numbers for the year 2020 have become available, the source added.

The dedicated high-yield bond funds saw a massive $44.4 billion of net inflows in 2020.

For the same year the dedicated bank loan funds sustained $26.9 billion of net outflows.

Indexes

The KDP High Yield Daily index gained 2 points to close Tuesday at 69.01 with the yield now 4.29%.

The ICE BofAML US High Yield index gained 1.9 bps with year-to-date returns now 0.008%.

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