MDC, Icahn tap price; Nabors, Laredo Petroleum on deck; Oasis, Whiting, Western Midstream gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 6 – The domestic high-yield primary market returned to action on Monday with one new deal and one add-on pricing and the forward calendar growing.

In a split-rated deal M.D.C. Holdings, Inc. priced an upsized $300 million issue of 10-year senior notes (Ba2/BB+/BBB-).

Icahn Enterprises LP and Icahn Enterprises Finance Corp. priced an upsized $550 million in add-ons to two tranches.

The calendar also grew with Nabors Industries Ltd. planning to price $800 million in two tranches on Tuesday and Laredo Petroleum, Inc. marketing a $900 million two-tranche offering, which is slated to price on Friday.

Meanwhile, the secondary space was soft at the launch of Monday’s session but closed the day largely flat.

The energy sector was again in focus with single B energy names making large gains.

Oasis Petroleum’s 6¼% senior notes due 2026 (B2/B+) and Whiting Petroleum Corp.’s junk bonds (B2/BB-) were among the major gainers of Monday’s session.

Western Midstream Partners LP’s junk bonds also gained in active trading following news Occidental Petroleum Corp. had reduced its stake in the company to enable its spinoff.

News of Nabors’ new offering sparked activity in its 4 5/8% notes due 2021, which were trading just shy of their tender price.

2020 primary gets underway

Trailing a seasonal holiday interval that extended through the Jan. 5-6 weekend for a significant portion of the market, the high-yield new issue bourse resumed activity on Monday, a session that saw a vigorous news flow.

In a split-rated deal, M.D.C. Holdings, Inc. priced an upsized $300 million issue of 10-year senior notes (Ba2/BB+/BBB-) at par to yield 3.85% in a quick-to-market trade.

The issue size increased from $250 million.

The yield came inside of yield talk in the low 4% area.

The deal priced on the investment grade syndicate desk.

The new M.D.C. 3.85% notes were trading on the high-yield desk, according to a bond trader, who added that investment grade accounts were expected to take the greatest amount of interest in the new paper.

Meanwhile, Icahn Enterprises priced an upsized $550 million amount of senior notes (expected ratings Ba3/BB+) in a quick-to-market trade which came in the form of two add-on tranches.

The overall amount of issuance increased from $300 million.

The New York-based diversified holding company priced a $300 million add-on to its 4¾% senior notes due Sept. 15, 2024 at 102. The issue price came on top of talk. Initial talk was in the 102 area.

The deal also featured a $250 million add-on to the 5¼% notes due May 15, 2027, which priced at 101.435. The issue price came on top of final talk. Initial talk was in the 101.5 area.

A calendar

The session ended with a modest active forward calendar in place.

Nabors Industries plans to price $800 million of senior guaranteed notes in two tranches on Tuesday, trailing a 10 a.m. ET investor call.

The deal includes six-year notes and eight-year notes. Tranche sizes remain to be determined.

And Laredo Petroleum is in the market with a $900 million two-part public offering of senior notes (expected ratings B3/B+) coming in a pair of $450 million tranches.

The short-duration tranche features five-year notes, initially guided to yield in the 9½% area.

The long tranche features eight-year notes initially guided to yield in the 10% area.

The deal is expected to price Friday.

Pointing out that both Nabors and Laredo come from the badly battered high-yield energy sector, one trader noted with interest that both companies were attempting passes at the primary market early in the new year.

After rallying more than 4% in December crude oil prices notched another 2.8% higher since the beginning of the year, pushing north as brinksmanship in the Persian Gulf intensified following the Jan. 2 assassination of Iranian general Qassem Soleimani by U.S. forces.

Iran, which swears vengeance for the slaying, might elect to disrupt the seaborne transportation of crude oil through the Straits of Hormuz, which separate the Persian Gulf from the Gulf of Oman, the Arabian Sea and the Indian Ocean, a trader said.

Such fears may be losing their bite, however, the source added.

The recent rally notwithstanding, the barrel price of West Texas Intermediate crude oil for February 2020 delivery slid 0.55%, or 35 cents, on Monday, to $62.92, the source added.

Away from the gyrating fortunes of the energy sector, the way ahead for high-yield bonds looked good, from an interest rate standpoint, to one buyside source on Monday.

Fed funds futures are now fully pricing in a one-quarter point cut by the end of 2020, the source said.

That probability is up from around 70% since last Thursday's airstrike that killed General Soleimani, the source added.

The energy sector eyed

While the overall secondary space was flat on Monday with few notable price movements, the energy sector continued to post gains.

Single B credits in the energy sector were the major players of Monday’s session.

Investors are looking to higher rated companies in the sector as a safer bet as they chase yield, a market source said.

Oasis Petroleum’s 6¼% senior notes due 2026 rose more than 2 points in higher than average volume.

The notes closed Monday at 90½ with the yield 8.2%, according to a market source.

The bonds saw more than $20 million in reported volume.

Whiting Petroleum’s junk bonds were also on the rise in active trading.

Whiting’s 6 5/8% senior notes due 2026 rose 3½ points to 74½ with the yield 12.8%.

The Denver, Co.-based oil and gas company’s 6¼% senior notes due 2023 were up 1¼ point to 89½ with the yield over 10%.

The bonds saw more than $14 million in reported volume each, according to a market source.

The energy sector, which lagged the broader high-yield market for much of 2019, closed December with monthly returns of 5.4%.

It was the third best monthly gain the sector has seen in the past 10 years, according to a BofA Global Research note.

The late year rally pushed returns in the sector into positive territory with the sector closing 2019 with returns of 5.1%.

CCC credits were largely responsible for the late year comeback and also saw some of the largest monthly gains in almost a decade.

CCC credits closed December with a monthly return of 5.6% and an annual return of 9.1%, according to the BofA research note.

However, investors interested in playing the energy space may be looking to higher rated energy companies.

Crude oil futures were volatile on Monday after a 3% gain during Friday’s session following escalating tensions between the U.S. and Iran.

The barrel price of WTI crude oil for February delivery began Monday’s session with gains, dipped into negative territory in intra-day trading, but settled at $63.27, an increase of 22 cents, or 0.36%.

Western Midstream gains

Western Midstream’s junk bonds were also on the rise on Monday following news that Occidental Petroleum had reduced its stake in the company, which will aid its spinoff.

Western Midstream’s 5½% senior notes due 2048 rose 2¾ point to 74½, according to a market source.

The 5.3% senior notes due 2048 rose 2 points to 90 7/8.

Occidental took over Western Midstream as part of its buyout of Anadarko Petroleum Corp. in 2019.

Occidental previously tried to divest Western Midstream; however, Occidental put the plan on hold in October 2019 due to the lack of an attractive offer.

Nabors active

News of Nabors’ refinancing deal sparked activity in its 4 5/8% senior notes due 2021, which will be taken out with proceeds from the new offering.

The 4 5/8% notes were trading just shy of their tender offer price.

They traded up 1½ points to 101¾ in decent volume, according to a market source. More than $13 million of the bonds were on the tape by the late afternoon.

Proceeds from Nabors’ new offering will be used to fund the tender for four series of notes, including the 4 5/8% notes.

Nabors is offering $972.50 for $1,000 in principal for the 4 5/8% notes with an early tender premium of $50 for a total of $1,022.50, Prospect News reported.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were positive Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $196 million of inflows on the day.

Actively managed high-yield funds saw $65 million of inflows on Friday, the source said.

Weekly flows over the holidays were negative, the source noted.

The combined funds saw $190 million of net outflows in the week to the Dec. 25 close, and $445 million of net outflows in the week to the Jan. 1 close.

High-yield bond funds saw $18.9 billion of net inflows in the year 2019, the source said, also noting that the dedicated bank loan funds saw a record $37.8 billion of net outflows last year.

Indexes mixed

Indexes were mixed at the start of the week with some largely flat and others posting large gains.

The KDP High Yield Daily index rose 2 points to 71.97 although the yield was flat at 4.85%.

The ICE BofAML US High Yield index jumped 81 bps on Monday with year-to-date returns now 0.286%.

The CDX High Yield 30 index rose 2 bps to close Monday at 109.6.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.