Sinclair, First Data add-on drive by; new Sinclair notes active, higher; energy names seen off

By Paul Deckelman and Paul A. Harris

New York, March 9 – The high-yield primary arena continued to churn out new deals on Wednesday, pricing a pair of quickly shopped offerings totaling $1.25 billion.

Syndicate sources said that the big deal of the day was electronic transaction processor First Data Corp.’s sharply upsized $900 million add-on to its existing eight-year senior secured notes.

Earlier in the session, broadcaster Sinclair Television Group, Inc. came to market with $350 million of 10-year notes.

While First Data priced too late in the session for any real aftermarket action, traders said that was definitely not the case with the new Sinclair notes; they were the most actively traded issue in Junkbondland on Wednesday and firmed smartly from their issue price.

The traders also saw considerable activity in Tuesday’s 10-year notes from Level 3 Communications, Inc. Those bonds were about unchanged from Tuesday’s closing levels.

GameStop Corp.’s five-year notes were also busy but continued to trade well below Friday’s issue price after having retreated on Tuesday.

Away from new or recently priced deals, traders said that energy issues continued the retreat that began on Tuesday even though world crude oil prices, whose fall Tuesday was one of the drivers behind that pullback, were on the rebound on Wednesday.

As has been the case pretty much all week so far, the busiest name in the sector was Continental Resources, Inc., whose bonds were lower on the day.

However, a trader noted that despite the two days of pullbacks, Continental is still trading well up from the levels it held last week and in the weeks before that.

Other losers among the oil and natural gas names on Wednesday included Halcon Resources Corp., Whiting Petroleum Corp. and Chesapeake Energy Corp. Halcon announced that it has hired legal and financial advisers to help it get through the current commodities market downturn.

Metals miner and oil and gas operator Freeport-McMoRan Inc.’s bonds were mostly lower despite an increase in copper prices.

Statistical market performance measures turned mixed on Wednesday after having been lower all around on Tuesday, following eight consecutive trading days before that on the upside.

First Data upsizes tap

Two issuers raised a combined $1.25 billion in the high-yield primary market on Wednesday.

Both deals came as drive-bys.

One of the two was upsized, and by a massive amount.

Both deals priced in the middle of talk.

First Data priced an upsized $900 million add-on to its 5% senior secured notes due Jan. 15, 2024 (B1/BB) at 99.5 to yield 5.076% on Wednesday, according to a syndicate source.

The deal size was increased from $500 million.

The reoffer price came in the middle of the 99.25 to 99.75 price talk.

BofA Merrill Lynch was the left bookrunner. Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, HSBC Bank, Mizuho Securities, PNC Capital Markets, SunTrust Robinson Humphrey Inc., Wells Fargo Securities LLC, BBVA, FTN, KeyBanc Capital Markets and KKR Capital Markets were joint bookrunners.

Sinclair Television drives by

Sinclair Television Group, a wholly owned subsidiary of Sinclair Broadcast Group, Inc., priced a $350 million of issue of 10-year senior notes (B1/B+) at par to yield 5 7/8%.

The yield printed in the middle of the 5¾% to 6% yield talk.

Early in the marketing process the deal was playing to $1 billion of orders, according to a portfolio manager who believes that the deal went well and that the final book size was higher.

J.P. Morgan Securities LLC, Deutsche Bank, Wells Fargo, RBC Capital Markets and SunTrust Robinson Humphrey Inc. were the joint bookrunners.

LeasePlan Returns

Vehicle leasing company LeasePlan Corp. NV returned to the market with a €1.55 billion equivalent three-part offering of senior secured notes (B1/BB+/BB-) on Wednesday.

Pricing is expected before the end of the present week.

The offer was postponed last month at the height of volatility in the global capital markets.

As previously reported, the deal includes euro-denominated five-year notes talked to yield 7½% to 7¾% and dollar-denominated five-year notes talked to yield in the 8¼% area.

LeasePlan is also selling euro-denominated seven-year notes talked to yield 8% to 8¼%.

A healthier high-yield market could see LeasePlan come tighter, sources say.

The deal is likely already circled up, a London-based debt capital markets banker said on Wednesday.

Joint bookrunner JPMorgan will bill and deliver for the buyout deal. Goldman Sachs, Credit Suisse and ING are also joint bookrunners.

Beyond LeasePlan there is one deal on the active calendar.

TRAC Intermodal LLC and TRAC Intermodal Corp. are marketing $485 million of second-lien notes due 2021.

The deal, which is on the road, is set to price on Friday.

Guidance is 10%, but it could come wider, a portfolio manager said on Wednesday.

“It isn't done yet, but people are working on it,” the manager said, adding that $100 million of interest is believed to be coming from a single account seeking covenant changes and a coupon that is north of present guidance.

Morgan Stanley, BofA Merrill Lynch, Citigroup, Deutsche Bank, ING, MUFG and Wells Fargo are the joint bookrunners.

Beyond LeasePlan and TRAC Intermodal there is no active calendar and not much chatter about deals in the wings, sources said on Wednesday.

The market has rallied substantially, but it's hard to get anything done, the portfolio manager said.

The high-yield index yield to worst stood at 9.07% at Wednesday's close, down from 10.44% on Feb. 11, the source said, and added that there seems to be a lot of cash to put to work.

Mixed flows

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

High-yield exchange-traded funds sustained $510 million of outflows on the day.

However, asset managers saw $155 million of inflows on Tuesday.

New Sinclair bonds busiest

In the secondary sphere, traders said that the new Sinclair 5 7/8% notes due 2026 were by far and away the most actively traded high-yield paper of the day.

A trader pegged the Baltimore-based television station ownership company’s new deal at 101 9/16 bid, seeing more than $66 million changing hands, easily surpassing the volume runner-up, Continental Resources’ 5% notes due 2022, by at least $20 million.

Two separate traders saw two-sided markets in the new credit at 101 bid, 101¾ offered, well up from the bonds’ par issue price.

At another desk, a trader located the notes within a 101 3/8-to-101 5/8 bid context.

First Data little traded

While the Sinclair bonds priced early enough in the session to run up their impressive volume totals and price gain, that was not the case with the day’s other new issue, the $900 million add-on to Atlanta-based electronic transactions processor First Data’s existing 5% senior secured notes due 2024.

A trader said late in the day that he had seen the new notes offered at 101 “out of the gate” but had not seen any two-sided trades at that point.

The existing bonds meantime saw a couple of small-sized trades at or slightly above 101 bid ahead of the add-on’s pricing.

Level 3 active, unchanged

Among other recently priced deals, the traders saw the new Level 3 5¼% notes due 2026 high up on the Most Actives list, with over $44 million of volume.

But a trader said that there was “not really” anything going on with the notes despite the sizable volume; he quoted them about unchanged from Tuesday’s levels around 100¼ bid.

Another trader saw them in a 100-to-100½ bid context.

Level 3, a Broomfield, Colo.-based telecommunications network operator, priced $775 million of the notes at par in a quick-to-market transaction through its wholly owned Level 3 Financing, Inc. funding subsidiary.

The bonds priced after the offering was upsized from an originally announced $500 million.

The new bonds moved up to around 100¼ bid, with more than $101 million changing hands in initial aftermarket dealings.

GameStop stays lower

The new 6¾% notes due 2021 from GameStop were seen at, or perhaps slightly above, the levels those bonds fell to during Tuesday’s session, remaining well below their par issue price.

More than $12 million of those notes were traded on Wednesday, with one trader estimating the bonds at 98¾ bid, calling that up ¼ point on the day.

A second trader likewise saw the bonds at that level.

GameStop, a Grapevine, Texas-based electronic games retailer, priced $475 million of those notes at par on Friday in a regularly scheduled forward calendar deal that was upsized from an originally announced $400 million.

The bonds traded around, or perhaps slightly off from, that par level when they were freed for secondary market dealings on Monday, on volume of more than $21 million, but tumbled about 1½ points on Tuesday, ending at 98½ bid, with more than $28 million seen having moved around.

Energy stays under pressure

Away from the new-issue universe, traders saw oil and natural gas bonds among the day’s most active issues and said that they were mostly lower, extending the declines seen on Tuesday.

They moved down, even though oil prices – which had fallen on Tuesday after having been strongly higher on Monday – seemed to have recovered their former swagger on Wednesday.

The benchmark U.S. crude grade, West Texas Intermediate for April delivery, shot up by $1.79 per barrel in Wednesday trading on the New York Mercantile Exchange, settling at $38.29, in contrast to WTI’s $1.40 per barrel loss on Tuesday, its first such downturn after two straight gains before that.

Meanwhile, the benchmark international grade, Brent crude for May delivery, jumped by $1.42 per barrel in Wednesday dealings on the London ICE Futures Exchange, settling at $41.07, after Tuesday’s $1.19 retreat – Brent’s first loss after six straight sessions on the rise.

But the improvement in oil prices “wasn’t really reflected” in the behavior of the energy credits on Wednesday, a trader said.

Continental falls back

The busiest energy name was Continental Resources’ 5% notes due 2022, with more than $46 million having traded – tops in the junk world apart from the new Sinclair Television Group notes that priced Wednesday.

A trader saw those notes down ¾ point on the day to around the 84 bid level, on top of the more than 3½-point dive the bonds took on Tuesday.

Those losses were in sharp contrast to the almost 1½-point rise in heavy trading seen on Monday.

Another trader saw the Denver-based oil and gas exploration and production company’s paper trading between 84 and 85 bid, which he called “pretty much unchanged from yesterday.”

While acknowledging the downturn over the past two sessions, he noted that those bonds had come very far in bouncing back from the lows seen earlier in the year.

“They’re trading in the 80s this week,” he said, “while they were in the 70s last week and in the 60s for most of February.”

Going back further still, he said that “they were in the 50s in mid-January, when it looked like the world was ending, after having been in the 70s at the beginning of January.

“They climbed back into the 60s in February, and now here we are, in the 80s.”

A market source at another desk noted that some of the other bonds in the Continental Resources capital structure were also off on the session. Its 4½% notes due 2023 were down ¾ point at 81¼ bid, and its 3.8% notes due 2024 lost 5/8 point to end at 74 3/8 bid, both on around $20 million of volume.

Halcon, Whiting also off

Elsewhere in the energy patch, a trader said that “in the more rough-and-tumble names,” Halcon Resources’ 8 5/8% notes due 2020 were down by as much as 1 1/8 point to 61¼ bid, although at another desk, a trader saw those bonds having trimmed their losses a little to finish at 62 bid, down ½ point, with over $29 million having traded.

The Houston-based E&P operator announced that it has retained PJT Partners as financial adviser and Weil, Gotshal & Manges, LLP as legal adviser “to assist the company as it charts a course through this downturn.”

Elsewhere, Denver-based Whiting Petroleum “was active again,” on the downside, with its 5¾% notes due 2021 losing 2½ points to close at 59 bid, with more than $23 million traded.

“Those are definitely not feeling too well,” another trader said, pegging the bonds down 1½ points on the day at 59¾ bid and noting that they had dropped around 2 points on Tuesday.

Chesapeake Energy’s 8% notes due 2022 finished off 1¼ point at 49½ bid, a market source said, with over $16 million of the Oklahoma City-based oiler’s paper changing hands.

Freeport falters

A trader said that Freeport-McMoRan’s 3 7/8% notes due 2023 lost 1½ points, ending in a 68-to-68½ bid context, with around $20 million traded.

The Phoenix-based gold and copper mining company and oil and gas operator’s 3.55% notes due 2022 lost ½ point, closing at 70 bid, with about $12 million traded.

Indicators turn mixed

Statistical market performance measures turned mixed on Wednesday after having been lower all around on Tuesday, which followed eight consecutive trading days before that on the upside.

It was the first such mixed session since Feb. 23.

The KDP High Yield Daily index lost 16 basis points on Wednesday to end at 65.06, its second straight loss after eight consecutive gains and its fourth loss in the last 12 sessions. The index had eased by 3 bps on Tuesday.

Its yield rose by 5 bps to 6.82% after having edged upward by 1 bp on Tuesday.

Wednesday marked the yield’s second straight widening after eight straight sessions in which it narrowed and following four successive sessions before that when it had risen.

The Markit Series 25 CDX North American High Yield index improved by ¼ point on Wednesday to 100 27/32 bid, 100 7/8 offered, in contrast to its 17/32-point loss on Tuesday – its first such setback after eight sessions in a row on the upside.

But the Merrill Lynch North American High Yield Master II index stayed in the loss column on Wednesday, retreating by 0.179%, on top of Tuesday’s 0.092% loss – its first such downturn after eight wins in a row and 10 gains in the prior 11 sessions.

Wednesday’s loss dropped the index’s year-to-date return back to 1.399% from 1.581% on Tuesday. That, in turn, was off from 1.675% on Monday, which had been its fourth straight new peak level for the year.

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