Back-loaded primary; Acrisure on tap; Frontier under pressure; energy names trade down

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 16 – While no new deals priced during Tuesday’s session, the July 15 week is shaping up to be back-loaded in a big way for the domestic high-yield primary market.

There is $10 billion of junk deals parked on the active calendar with most, if not all, of it expected to clear the market ahead of Friday's close.

Acrisure, LLC was the latest to join the forward calendar with a $300 million offering of seven-year senior notes (existing ratings Caa2/CCC+), which is expected to price on Thursday.

In the European market, Domestic & General restructured a heavily oversubscribed £630 million equivalent three-part offering with pricing expected on Wednesday.

Meanwhile, the secondary space was soft on Tuesday with the telecommunications and energy sectors leading the overall space lower, sources said.

Frontier Communications Corp.’s capital structure was under pressure after the company announced it would not hold a Q&A on its earnings conference call.

And several names in the oil patch were trading off alongside crude oil futures as geopolitical tensions between the U.S. and Iran eased.

Acrisure heavily reversed

Acrisure was scheduled to kick off a $300 million offering of seven-year senior notes (existing ratings Caa2/CCC+) on a Tuesday conference call.

The acquisition financing deal is heavily reversed, according to a trader.

The market has heard that 13 accounts are in with an amount of reverse inquiry that actually exceeds the size of the offer, the trader said.

Acrisure is expected to price on Thursday.

JP Morgan, Morgan Stanley, RBC and SunTrust are the joint bookrunners.

Sinclair eyed

Elsewhere, Sinclair Broadcast Group Inc.'s secured tranche, $2.55 billion of seven-year senior secured notes (Ba2), is heard to be going well with talk winding tighter, a trader said.

The latest chatter in the market has the secured tranche coming at 5 7/8%, versus earlier guidance of 6% to 6¼%, said the trader, who added that some comparable credits presently trade with 5%-handle yields.

The acquisition financing deal, via issuing entities Diamond Sports Group LLC and Diamond Sports Finance Co., also features $2.325 billion of eight-year senior unsecured notes (B2) with initial guidance of 7¼% to 7½%.

Pricing is expected on Friday.

Domestic and General

In the European market, Domestic & General restructured a £630 million equivalent three-part offering of high-yield notes that is oversubscribed across all tranches, according to a market source.

A tranche of seven-year fixed-rate notes is upsized to £300 million from £230 million. Price talk is affirmed at 6¼% to 6½%.

A €200 million tranche of floating-rate notes replaces a planned £250 million tranche.

Talk on the euro-denominated floater is Euribor plus 475 basis points to 500 bps.

The sterling-denominated floater that it replaces had been talked with a 550 bps to 575 bps spread to Libor.

The sole unsecured tranche remains unchanged in size and structure, although pricing has widened significantly.

The £150 million amount of eight-year senior unsecured notes on offer are talked in the 10% area, revised from earlier talk of 8¾% to 9%.

The deal, being managed by sole physical bookrunner Barclays, is set to price Wednesday.

Elsewhere Tuesday, Italy's Banca Monte dei Paschi di Siena SpA was set to price €300 million of non-callable 10-year subordinated tier 2 capital (expected ratings Caa2//CCC+) at 10½%, well inside of the 11% to 11½% initial price talk.

Frontier under pressure

Frontier’s capital structure was under pressure on Tuesday with the notes trading off after the company announced it would not hold a Q&A session after its earnings conference call.

Frontier’s 11% senior notes due 2025 were down 1 point to 59½ in high-volume activity, according to a market source.

The notes saw more than $21 million in volume, making it among the most actively traded issues in the secondary space.

The telecommunications company’s 10½% senior notes due 2022 were down 1¾ point to 64 with about $8 million on the tape.

While volume was light, Frontier’s 6 7/8% senior notes due 2025 were down 1½ points to 54¾.

The notes were trading off after Frontier announced that it would not be holding a Q&A when it reported earnings on Aug. 6, a market source said.

The new levels were an all-time low for the company with credit default swaps pricing in a default on Frontier debt within five years, Bloomberg reported.

Energy trades off

Several energy names were trading off on Tuesday as crude oil futures plummeted.

California Resources Corp.’s bellwether 8% senior notes due 2022 dropped more than 2 points to change hands at 71 5/8 on Tuesday.

Chesapeake Energy Corp.’s 8% senior notes due 2025 were down 2 5/8 points to close the day around 88, according to a market source.

Chesapeake’s 5¾% senior notes due 2023 were down 1¾ points to 89½. The 7% senior notes due 2024 were down 1 5/8 point to 86.

The barrel price of WTI crude oil for August delivery saw a significant drop on Tuesday as Secretary of State Mike Pompeo calmed worries over tensions between Iran and the U.S.

Crude oil futures settled at $57.62, a decrease of $1.96 or 3.29%.

While a natural gas name, Southwestern Energy Co.’s 7½% senior notes due 2026 were also trading off on Tuesday.

The notes dropped almost 1½ point in high volume activity.

They were changing hands around 91 7/8 in the late afternoon with more than $15 million in reported volume, according to a market source.

Monday inflows

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

High-yield ETFs saw $303 million of inflows on the day.

Actively managed high-yield funds saw $55 million of inflows.

For the week that will conclude with Wednesday's close the combined funds are tracking $400 million of net inflows, the source said.

Indexes mixed

Indexes were again mixed on Tuesday after a mixed start to the week.

The KDP High Yield Daily index dropped 4 basis points to close Tuesday at 71.78 with the yield now 5.43%.

The index was down 1 bp on Monday after a 10 bps drop on the week last week.

The ICE BofAML US High Yield index rose 0.8 bps with the year-to-date return now 10.414%. The index gained 8.1 bps on Monday after shaving off 3.2 bps on the week last week.

The CDX High Yield 30 index dropped 20 bps to close Tuesday at 107.25.

The index was down 8 bps on Monday after a cumulative loss of 65 bps on the week last week.

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