Tenneco 10-year drives by, moves up; new Spectrum firmer; more energy angst, Claire’s climbs

By Paul Deckelman and Paul A. Harris

New York, Dec. 2 – Tenneco Inc. came to market on Tuesday with a $225 million 10-year offering. The automotive parts maker’s drive-by transaction was heard by traders to have firmed from its issue price.

They meantime said that Monday’s quickly shopped $250 million 10-year issue from consumer products manufacturer Spectrum Brands, Inc. had moved up from the initial aftermarket levels the bonds reached after pricing.

Away from the deals that have actually priced, syndicate sources heard price talk out on German cable TV operator Unitymedia KabelBW’s upsized and restructured €1.18 billion equivalent two-part deal, which includes $500 million of dollar-denominated 10-year senior secured notes, as well as a similar euro-denominated tranche. That transaction is expected to price on Wednesday.

They also heard that Westmoreland Coal Co. will be shopping a $400 million seven-year secured offering around to potential investors.

Away from the new deals, traders said that oil and natural gas names like Halcon Resources Corp. and SandRidge Energy Inc. were being pushed lower for yet another session, after crude oil prices gave up the rare gains they had notched on Monday.

Outside of the energy arena, Claire’s Stores Inc.’s bonds rose, ahead of Wednesday’s scheduled release of the retailer’s latest earnings data.

Statistical market performance indicators turned mixed, after having been on the downside all around over the previous two sessions.

Tenneco prices 10-year deal

For the second consecutive session, news flow in the new issue market was light on Tuesday.

Tenneco priced the day’s sole deal, a $225 million drive-by issue of 10-year senior notes (Ba3/BB) that came at par to yield 5 3/8%, in the middle of the 5¼% to 5½% yield talk.

A trader saw the new Tenneco 5 3/8% notes at par ½ bid, 101 offered in the secondary market and remarked that there was a decent amount of the paper trading.

Wells Fargo was the left bookrunner. Citigroup and Morgan Stanley were the joint bookrunners.

The Lake Forest, Ill.-based manufacturer plans to use the proceeds to refinance its 7¾% notes due 2018.

Unitymedia upsizes

Unitymedia KabelBW set upsized and set price talk for its €1.18 billion equivalent dual-currency offering of senior secured notes due Jan. 15, 2025 (expected ratings Ba3/BB-).

A €785 million tranche is talked to yield 4%. That talk comes at the tight end of earlier guidance of 4% to 4¼%, according to a market source.

A $500 million tranche is talked to yield in the 5% area.

Books closed Tuesday afternoon for accounts in the United States. For European accounts books are scheduled to close at 4 a.m. ET on Wednesday.

The deal is set to price at the Wednesday market open in New York.

Unitymedia announced the notes early Tuesday as a €785 million euro-only offer, and in that early incarnation it was expected to price before Tuesday’s close.

With the announcement of the upsizing came the news that the deal would be in the market overnight.

Joint bookrunner Goldman Sachs will bill and deliver. Barclays, BNP Paribas, Credit Agricole CIB, J.P.Morgan, SG CIB and UBS are also joint bookrunners.

The issuing entities are Unitymedia Hessen GmbH & Co. KG and Unitymedia NRW GmbH.

The Koln, Germany-based cable operator plans to use the proceeds to refinance its existing €735 million of 7½% senior secured notes due 2019. The additional proceeds resulting from the upsizing will be used to repay $460 million of the dollar-denominated 7½% senior secured notes due 2019.

Westmoreland bringing deal

Westmoreland Coal Co. scheduled a conference call with investors at 11 a.m. ET on Thursday to roll out its $400 million offering of seven-year senior secured first-lien notes (existing ratings Caa1/B-).

The deal is expected to price on Monday.

BMO is the left bookrunner for the debt refinancing deal. Deutsche Bank and Credit Suisse are the joint bookrunners.

Negative flows

News regarding the cash flows for dedicated high-yield funds has lately tended to be negative, a trader said on Tuesday.

For Monday’s session, the most recent for which numbers were available as Prospect News went to press on Tuesday, high-yield exchange-traded funds saw $142 million of outflows, while actively managed funds saw $220 million of outflows.

Thus far in the reporting period that ends at the Wednesday close, aggregate flows are tracking at negative $133 million, the trader added.

Overall, however, the market has had a reasonably good tone, apart from the energy sector which – amid tumbling crude oil prices – “got crushed” last week, the source remarked.

New Tenneco trades up

In the aftermarket, a trader saw the new Tenneco 5 3/8% notes due 2024 offered at 101, while a second pegged the bonds at 100½ bid, 101½ offered, versus their par issue price.

He said that he “didn’t think there was a lot of volume,” owing to the relatively small size of the $225 million issue.

At another desk, a trader located the bonds in a 100 3/8 to 100¾ bid context.

Tenneco’s existing 7¾% notes due 2018 firmed slightly to 104 3/8, a gain of 3/16 point, but only on light volume of around $2 million.

The automotive components manufacturer plans to use the new-deal proceeds to refinance the 2018 bonds.

Spectrum Brands bonds improve

Monday’s offering from Spectrum Brands was ‘a little bit better,” a trader said, quoting those new 6 1/8% notes due 2024 at 101 bid, 101½ offered, while a second trader saw them in a 101¼ to 100½ bid context.

Another said they traded between 101¼ and 101 5/8 bid.

Volume was over $11 million.

On Monday, the Madison, Wis.-based consumer products manufacturer’s quick-to-market $250 million issue had priced at par and then had traded up to around the 100 7/8 mark, on volume of over $16 million.

Energy again under pressure

Traders said that energy credits were again on the receiving end as the sector’s recent slide continued amid a renewed drop in crude oil prices. Those prices – which on Monday had bounced from their lows to rise sharply, with benchmark West Texas Intermediate crude finishing up more than 4%, its biggest one-day gain in more than two years – gave back much of that advance on Tuesday. WTI fell by $1.67, or 2.42%, to close at $67.33 per barrel.

Among the sector credits that moved lower were Sandridge Energy’s 7½% notes due 2021, which slid by 2¾ points to end at 68¼ bid; Linn Energy LLC’s 7¾% notes due 2021, which were down by 2½ points at 85½ bid; MarkWest Energy Partners LP’s 4½% notes due 2023, down 1¼ points at 96¼ bid; and Halcon Resources 8 7/8% notes due 2021, which dropped 1 point to 67¾ bid, after having swooned by 8 points during Monday’s sector selloff.

A trader said that while “some of the better-quality names, like California Resources Corp., have stabilized, even with oil down by almost $2 today, the lower quality stuff has not yet caught a bid.

“There’s a lot more chatter around who might have to be filing” if the current crude price erosion keeps up.

“You’re seeing, little by little, a re-pricing in some of the energy names,” another trader said. He saw California Resources 6% notes due 2024 among the most active credits for a third consecutive session, with about $35 million traded. The Los Angeles-based exploration and production operator’s bonds were seen by a source having actually firmed a little to around the 86½ bid level, after having fallen more than 4 points on Monday to 85½.

Claire’s Stores climbs

Apart from the energy names, a trader said that Claire’s Stores’ 8 7/8% notes due 2019 “were moving up ahead of their earnings,” which are due out Wednesday.

He saw the retailer’s bonds firm to the 87 bid level, up from Monday’s 85½ to 85¾ context.

A second trader said its 9% notes had risen to 101¼ bid, 101¾ offered from Monday’s levels at 100¾ bid, 101¼ offered, “so there’s a bid to these bonds, they’re looking better.”

Indicators turn mixed

Statistical indicators of junk market performance turned mixed on Tuesday, after having been lower across the board on Friday and again on Monday. The market gauges had been higher all around over the two sessions before that.

The KDP High Yield Daily Index lost ground for a third consecutive session, falling by 14 basis points to end at 71.19. That downturn followed Monday’s 37 bps plunge and its 18 bps fall on Friday.

Its yield rose for a third straight session, adding on 5 bps to finish at 5.67%. It had ballooned out by 13 bps on Monday, after having risen by 8 bps on Friday.

But the Markit CDX North American High Yield Series 23 index rebounded on Tuesday after two straight setbacks, gaining 3/32 point to close at 107 3/32 bid, 107 5/32 offered. On both Friday and again on Monday it had declined by 9/32 point.

However, there was no reprieve for the Merrill Lynch U.S. High Yield Master II Index, which suffered through a third successive session on the downside. It dropped by 0.228%, on top of Monday’s 0.069% retreat.

That dropped its year-to-date return to 3.084% from Monday’s 3.32%. It finished well down from its peak level for the year of 5.847%, recorded on Sept. 1.

According to the FINRA-Bloomberg Active US High Yield Bond Index, junk market volume rose to $4.415 billion on Tuesday from $3.379 billion on Monday.

© 2015 Prospect News.
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