Pinnacle Foods drives by, recent Microsemi deal stays strong; energy names fall, First Quantum off

By Paul Deckelman and Paul A. Harris

New York, Jan. 11 – The high yield market opened the new week on Monday by pricing a quickly shopped $350 million offering of eight-year notes for branded foods producer Pinnacle Foods Inc.

The new issue was said to have been driven by a significant amount of reverse inquiry and was considerably oversubscribed. It was quoted modestly higher after pricing.

Last week’s $450 million offering of 7.25-year notes from high-tech components manufacturer Microsemi Corp. continued to trade well in the aftermarket on Monday, several points above the bonds’ issue price.

Away from the new deals, the continued slide in world crude oil prices – which hit their lowest levels since 2003-2004 – once again caused investors to flee oil and natural gas names like Chesapeake Energy Corp., California Resources Corp. and Oasis Petroleum Inc.

Each was off by multiple points in very active dealings.

Similar negative dynamics across commodity-based sectors led to losses in names like First Quantum Minerals Ltd., whose ratings were downgraded by Moody’s Investors Service on Friday.

Statistical measures of junk market performance were mixed for a second consecutive session Monday.

Pinnacle Foods quoted higher

In the secondary market, a trader quoted the new Pinnacle Foods 5 7/8% notes due 2024 at 100¾ bid, up from the par level at which the Parsippany, N.J.-based producer of such food brands as Duncan Hines cake mixes and Vlasic pickles had priced its quick-to-market issue late in the session.

Microsemi bonds keep gaining

The first such syndicated junk bond deal of the new year – Thursday’s offering of 9 1/8% notes due in April of 2023 from Microsemi Corp. – continued to firm solidly on Monday.

A trader quoted the bonds on Monday morning at 103¼, about 1 point up from where he had seen them on Friday.

A second trader, who had seen the bonds at 103 ½ bid Friday afternoon, pegged them in a 103½ – to-104 bid context on Monday.

Yet another trader saw the bonds get as good as 104¼ bid by the end of the day.

But he saw activity levels fall off from Friday, when over $15 million of the new issue had changed hands. He estimated that Monday’s volume on the new credit was around $3 million.

Microsemi, an Aliso Viejo, Calif.-based producer of semiconductors and other high-tech electronic and computer components, priced its drive-by offering at par on Thursday, moving up to 101½ bid in initial aftermarket dealings later that same session, with some $9 million changing hands by the close, setting the stage for Friday’s busier session and for the continued price gains on both Friday and Monday.

The deal had seen considerable reverse inquiry from potential investors, and was two times oversubscribed, a market source said.

Energy names trade off

Away from the new issues, one of the traders said that Chesapeake Energy’s recently issued 8% senior secured second-lien notes due 2022 “were the clear volume leader.”

He saw the Oklahoma City-based oil and natural gas exploration and production company’s paper – issued at the end of 2015 as part of an exchange offer – finishing Monday’s session at 49 bid, calling that down 2½ points on the day.

A second trader also saw those bonds down more than 2 points on the day to close at 49 bid, estimating volume in the credit at over $36 million – tops in Junkbondland Monday.

The first trader also saw a fair amount of activity in California Resources’ 8% notes due 2022, seeing them down at least three points on the day.

Another market source saw Los Angeles-based CRC’s 8% paper down some 2 13/16 bid, ending at 49, with over $20 million having traded.

At another desk, the company’s 6% notes due 2024 were seen having dropped to 28 5/8 bid, 29 5/8 offered, a fall of some 2 1/8 points.

Houston-based E&P operator Oasis Petroleum’s 6 7/8% notes due 2022 were off by 1 5/8 points on Monday at 62¼ bid, with over $17 million having changed hands.

Crude oil prices were down for a sixth straight session Monday.

The benchmark U.S. crude oil grade, West Texas Intermediate, for February delivery, lost $1.75 per barrel, or 5.3%, in Monday trading on the New York Mercantile Change, settling in at $31.41 per barrel, its lowest level since April 2004.

Meanwhile, the February contract for the benchmark international Brent crude grade was down a deuce on the day, or 6%, to $31.55 on Monday, versus $33.55 per barrel in trading on Friday at the London ICE Futures Exchange.

First Quantum folds

Elsewhere, a trader said that mining issues were weaker, perhaps none more so than First Quantum Minerals’ 6¾% notes due 2020.

A trader said they were down as much as 6 points during the session, falling as low as 54¾ bid.

Another source saw the bonds late in the day at 58¾ bid, calling them down 3 points, with over $13 million traded.

On Friday, Moody's Investors Service downgraded the Vancouver-based copper, nickel, gold and zinc-mining company’s corporate family rating and probability of default ratings to Caa1 and Caa1-PD from B2 and B2-PD, respectively.

It also cut its ratings on all the company’s senior unsecured notes to Caa2 from B3, with a negative outlook on all ratings.

Indicators stay mixed

Statistical measures of junk market performance were mixed for a second consecutive session on Monday.

The KDP High Yield Daily Index fell by 12 basis points on Monday to finish at 63.62, its second loss in the last three sessions. It had risen by 10 bps on Friday, after having slid by 21 bps on Thursday.

Its yield rose by 2 bps, to 7.12%, its second widening in the last three sessions, after tightening by 4 bps on Friday.

However, the Markit Series 25 CDX North American High Yield Index turned positive with a 1/16 point gain, its first advance after three straight losses.

The Merrill Lynch North American Master II High Yield index, on the other hand, retreated by 0.268% on Monday, in contrast to its 0.110% improvement on Friday.

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