Franchise pulls offering; secondary continues to rip; oil patch on the rise; Uber gains

By Abigail W. Adams

Portland, Me., Nov. 4 – The domestic high-yield primary market remained dormant on Wednesday despite the strong tone to the market.

With control of the White House and Congress still in the air at market close, potential issuers were on the sideline, a source said.

Franchise Group Inc. announced on Wednesday it was pulling its $650 million offering of five-year senior secured notes, becoming the latest in a series of issuers to withdraw offerings.

With the deal withdrawn, the forward calendar was empty heading into Thursday’s session.

While the primary market has been quiet surrounding the election, a torrent of deals is expected once some of the political uncertainty is resolved, sources said.

Meanwhile, the secondary space continued to rip despite the uncertainty.

The cash bond market opened the day up ¼ with the rally gaining momentum as the session progressed and closing the day up ¾ to 1 point, sources said.

There were several offers-wanted-in-competition lists circulating with the overall market better bid, a source said.

The oil patch remained on the rise with WTI crude oil futures surging more than 3%.

Occidental Petroleum Corp.’s senior notes jumped alongside crude oil futures with the capital structure gaining 2 to 4 points.

Uber Technologies Inc.’s senior notes also jumped 2 points on the back of voter approval for Proposition 22 in California.

Golden Nugget Inc.’s 6¾% senior notes due 2024 were also up more than 3 points in active trading with most issues in the ETF basket riding the rally.

Quiet primary

While the market tone remained strong on Wednesday, the primary market remained dormant with the political uncertainty surrounding election results stymying new issuance.

“No results are keeping guys at bay,” a source said. “I’m sure there are a lot of pent up deals ready to be unleashed, but they’re waiting to get rid of the uncertainty.”

Franchise Group officially pulled its $650 million offering of five-year senior secured notes on Wednesday, leaving the forward calendar empty.

Franchise Group had been expected to price last Friday with initial price talk in the 8¼% area.

The company became the latest to pull an offering.

Other recently pulled offerings include the PetSmart LLC and PetSmart Finance Corp. $2.65 billion two-tranche megadeal; the Sizzling Platter, LLC and Sizzling Platter Issuer Corp. $325 million offering of five-year senior secured notes; and the Ports America Holdings, LLC and Ports America Bond Co-Issuer, Inc. $630 million offering of eight-year senior secured notes.

Energy surge

The badly battered energy sector continued to lead gains in the secondary space’s three-day rally with WTI crude oil futures surging on Wednesday.

Occidental Petroleum’s senior notes remained on the rise with the capital structure up another 2 to 4 points.

The 8 7/8% senior notes due 2030 continued to recover from last week’s sell-off with the notes jumping to a 103-handle.

They were changing hands in the 103½ to 103¾ context heading into Wednesday’s close after ending the previous session at par 5/8, sources said.

Occidental’s 2.9% senior notes due 2024 gained 2¾ points to close the day at 89.

The 3½% senior notes due 2029 were up 4 points to 79¾.

The notes remained active with the higher-quality credits in the energy sector in demand, a source said.

WTI crude oil futures surged almost 4% on Wednesday to settle at 39.14, an increase of $1.48 or 3.93%.

Crude oil futures were rallying in the face of a split Congress which is seen as beneficial to oil and gas companies, Bloomberg reported.

In addition, crude oil stockpiles were less than expected.

Uber gains

Uber’s senior notes returned to focus with the ride-sharing company’s capital structure up 2 points on the back of the successful passage of its California ballot initiative.

Uber’s 8% senior notes due 2026 and its 7½% senior notes due 2027 both jumped to a 107-handle on Wednesday, a source said.

The 8% notes were trading in a 107½ to 107 5/8 context heading into the market close.

There were more than $28 million of the bonds on the tape.

The 7½% senior notes due 2027 were trading in the 107¼ to 107½ context.

Both issues were previously on a 105-handle.

The notes were making gains in active trading on Wednesday following the successful passage of Proposition 22 in California.

The ballot initiative exempts Uber and competitor Lyft from having to classify their drivers as employees as opposed to independent contractors.

California passed legislation earlier in the year requiring certain companies to classify gig workers as employees, which would entitle them to benefits.

The legislation was forcefully opposed by several tech companies, which rely on gig workers.

Uber, Lyft, DoorDash and Instacart spent upwards of $200 million on Proposition 22, CNN reported.

Golden Nugget gains

Golden Nugget’s 6¾% senior notes due 2024 made large gains in active trading on Wednesday.

The notes were up almost 3 points.

They were changing hands in the 88 5/8 to 89¼ context heading into the market close, a source said.

The notes were previously trading on an 86-handle.

The notes are in the iShares iBoxx $ High Yield Corporate Bd (HYG), a source said.

Most bonds in the ETF basket were bid up on Wednesday.

Indexes gain

Indexes were again on the rise with their winning streak extending for a third consecutive session.

The KDP High Yield Daily index jumped 45 bps to 66.7 with the yield now 5.38%.

The index rose 14 points on Tuesday and was up 5 bps on Monday.

The ICE BofAML US High Yield index skyrocketed with the index now within sight of a 2% year-to-date return after brushing up against negative returns late last week.

The index jumped 90.3 bps with year-to-date returns now 1.744%.

The index gained 43.4 bps on Tuesday and 23.9 bps on Monday.

The CDX High Yield 30 index rose 83 bps to close Wednesday at 105.23. The index was up 76 bps on Tuesday and 14 bps on Monday.

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