Upsized Dynegy deal drives by; Concordia International on tap; Peabody, other coal names gain

By Paul Deckelman and Paul A. Harris

New York, Oct. 5 – After several days of relative inactivity, the high-yield primary sphere got back into the pricing business on Wednesday, as power generating company Dynegy Inc. brought a quickly shopped and upsized $750 million offering of 10.25-year notes to market.

It was the first junk-rated, dollar-denominated paper to price since Friday, when Quality Care Properties Inc. and Vertiv each did a $750 million deal.

Syndicate sources said Canadian pharmaceutical company Concordia International Corp. is expected to price a $350 million offering of 5.5-year secured notes during Thursday’s session. The company’s existing paper was up solidly.

Traders did not see very much activity Wednesday among recently priced issues, with the exception of some of Alcoa Inc.’s new paper and Cheniere Energy Partners, LP.

Away from the recent deals, the traders saw considerable activity in coal names such as Peabody Energy Corp., whose beleaguered bonds firmed smartly, and Murray Energy Corp., also on the upside for the day.

Statistical market performance measures turned higher across the board on Wednesday, after having been mixed on Monday and again on Tuesday.

Dynegy upsized and tight

Dynegy priced Wednesday's sole dollar deal, an upsized $750 million issue of senior notes due Jan. 15, 2025 (B3/B+) that came at par to yield 8%.

The issue size was increased from $500 million.

The yield printed at the tight end of yield talk in the 8 1/8% area. Initial guidance had the deal coming to yield 8% to 8¼%.

Morgan Stanley & Co. LLC, Barclays, BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC, MUFG, RBC Capital Markets and UBS Investment Bank were the joint bookrunners.

The Houston-based energy company plans to use the proceeds, together with proceeds from the sale of Dynegy's 50% stake in Elwood Energy, LLC and cash on hand, to fund the Energy Capital Partners buyout and partially repay Dynegy's tranche B-2 term loans.

Concordia for Thursday

Concordia International plans to price a $350 million offering of 5.5-year senior secured notes on Thursday, following an investor call.

Goldman Sachs is the bookrunner.

The Oakville, Ont.-based pharmaceutical company plans to use the proceeds for general corporate purposes including cash management requirements, funding the launch of pipeline products and funding small regional product acquisitions.

Alliance Automotive adds on

In the European market, Alliance Automotive Finance plc priced a €180 million add-on to its 6¼% senior secured notes due Dec. 1, 2021 (B2) at 106 to yield 4.915%.

The reoffer price came at the rich end of the 105.5 to 106 price talk.

Joint global coordinator Credit Suisse was the left lead for the quick-to-market deal. UBS was also a joint global coordinator. Royal Bank of Scotland was the joint bookrunner.

The Greny, France-based automotive parts supplier and repair services provider plans to use the proceeds to finance the acquisition of FPS Distribution Ltd. and its subsidiaries and to fund cash on the balance sheet.

Hellenic Petroleum this week

Greece-based Hellenic Petroleum plans to price €300 million of non-callable five-year senior notes before the end of the week.

An investor roadshow is set to end on Thursday.

Credit Suisse and HSBC are the global coordinators. Eurobank Ergasias, Alpha Bank, NBG and Piraeus are the joint bookrunners for the debt refinancing deal.

Tuesday inflows

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

High-yield exchange-traded funds saw $208 million of inflows on the day.

Actively managed funds saw $60 million of inflows on Tuesday.

New Dynegy bonds unseen

In the secondary realm, traders did not immediately report any initial aftermarket dealings in Dynegy’s new 8% notes due January 2025, given the relative lateness of the hour at which that upsized issue priced.

Existing Concordia bonds gain

Ahead of Concordia International’s upcoming 5.5-year secured issue, traders saw brisk activity in the company’s existing paper.

One market source saw its 9½% notes due 2022 climb some 2¼ points on the day, ending at 76¼ bid, with over $11 million of that paper having changed hands.

Alcoa, Cheniere active

A trader said that most of Junkbondland’s recently priced issues “were pretty quiet today,” on not much volume.

One exception, though, was Alcoa’s 7% notes due 2026, which he quoted up ¼ point on the day at 104 3/8 bid, with over $15 million traded.

The New York-based aluminum products company’s deal has been solidly rising pretty much continually since it priced that $500 million issue at par in a regularly scheduled forward calendar offering back on Sept. 22, along with $750 million of 6¾% notes due 2024, which have also firmed solidly from their par issue price since then but were not heavily traded on Wednesday.

Cheniere Energy Partners’ 5% senior secured notes due March 2027 were 3/8 point better Wednesday at 103 3/8 bid, with over $12 million traded.

The Houston-based natural gas company priced $1.5 billion of those split-rated (Ba2/BBB-) notes at par on Sept. 19.

Coal names climb

Away from new or recently priced issues, coal names were in focus on Wednesday, according to market sources.

“‘Coal stuff [went] to the moon,” a trader said. “Coal just keeps ripping.”

Peabody Energy improved the most of its sector peers, adding 8 to 9 points on the day.

“Peabody continues to surge,” a trader said, calling the 6¼% notes due 2021 up “another 8½ points” at 36.

He also said there was “heavy volume” in the issue, with more than $38 million changing hands.

As for the 6% notes due 2018, they rose 9 points to 36½, while the 10% notes due 2022 firmed 8½ points to 55¾. Over $32 million traded.

A second trader deemed the unsecured notes up 8 points, trading around 35. He said the 10% notes were up a like amount, trading at 55.

Murray Energy Corp.’s 11¼% notes due 2021 were also better. One trader pegged the issue at 65 3/8, up 3 points. Another trader said the bonds were “up a couple more [points]” at 64½.

Coal prices have been under pressure in the years after the financial crisis. To combat that, many miners have curbed production. A fair few, including Peabody, ultimately had to enter Chapter 11 protections in order to weather the storm.

However, in the last few months, coal prices have been recovering, recently hitting four- or five-year highs, depending on whom you asked and what flavor of coal you were looking at. As such, coal bonds have been steadily climbing higher.

As for other sector news, Arch Coal Inc. emerged from its bankruptcy case on Wednesday with a reduced debt profile. The company filed for bankruptcy on Jan. 11.

Indicators turn better

Statistical market performance measures turned higher across the board on Wednesday, after having been mixed on Monday and again on Tuesday. It was the second upside session for the indicators in the last four trading days.

The KDP High Yield index jumped by 22 basis points on Wednesday to end at 71.22, its 13th straight gain after six consecutive losses before that. On Tuesday, the index had risen by 10 bps.

Its yield came in by 4 bps to end at 5.16%, after having been unchanged on Monday and having tightened by 2 bps on Tuesday. It was the yield’s fifth narrowing in the last six sessions.

The Markit Series 27 CDX index finished up more than 3/16 point on Wednesday at 104 9/32 bid, 104 5/16 offered, rebounding from two straight losses, including Tuesday’s nearly 7/32 point downturn.

The Merrill Lynch High Yield index improved by 0.131% on Wednesday, its sixth consecutive gain after two straight losses. On Tuesday, the index had gained 0.113%.

Wednesday’s advance raised the index’s year-to-date return to 15.727%.

That established a fifth straight new peak level for the year, up from the former mark of 15.576%, which had been set Tuesday.

It was the index’s highest close since Dec. 31, 2009, when it had closed out that year at 57.512%.

Stephanie N. Rotondo contributed to this review

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