Dollar primary stays muted, though deals are shopped; Cheniere again busy; Intelsat gains on sweetened offer

By Paul Deckelman and Paul A. Harris

New York, May 17 – The dollar portion of the high-yield primary market remained quiet on Wednesday, with no fully junk-rated notes seen to have priced for a second consecutive session.

However, sources note that several deals are being actively marketed and could price on Thursday or Friday – from maritime construction company Great Lakes Dredge & Dock Corp., energy operator Delek Logistics Partners LP, metallurgical coke producer SunCoke Energy Partners, LP and pawn shop proprietor First Cash, Inc.

In the euro-denominated arena, German chemical manufacturer K+S AG priced a small add-on to its existing notes, while document and records management company Iron Mountain Inc. was expected to price a stand-alone eight-year deal on Thursday, the latest in a series of U.S.-based borrowers issuing euro-denominated paper.

Back among the names that have already priced, Monday’s deal from liquefied natural gas company Cheniere Corpus Christi Holdings, LLC was Junkbondland’s volume leader for a third consecutive session, easing slightly on the day.

Australian iron ore miner Fortescue Metals Group Ltd.’s new five-year notes from last week were also busily traded.

Away from new or recently priced offerings, Intelsat SA’s various bonds moved up in active dealings after the communications satellite company sweetened the terms of its pending exchange offer for a big chunk of its outstanding debt – an offer that must be completed for Intelsat to merge with sector peer OneWeb and receive a sizable investment from the latter’s corporate parent, Japan’s Softbank Group Corp.

Also in the satellite sphere, DISH DBS Corp.’s bonds gained altitude on news reports the satellite television broadcaster is in talks on a possible wireless network partnership with internet retailing giant Amazon.

Statistical market performance measures turned lower across the board on Wednesday – their first such downturn in nearly two weeks – after having been mixed on Tuesday and higher all around for two straight sessions before that.

Against a backdrop of notable volatility in the capital markets, the new volume in the high-yield primary market amounted to no more than a trickle, on Wednesday.

In the European market K+S AG priced a €225 million add-on to its 2 5/8% senior bullet notes due April 6, 2023 (expected BB+) at 102.728 to yield 2 1/8%.

Joint bookrunner Santander will bill and deliver. Barclays, LBBW and RBC were also joint bookrunners.

The Kassel, Germany-based chemical company plans to use the proceeds for general corporate purposes.

Boston-based Iron Mountain Inc. circulated initial price talk on its €300 million offering of senior notes due January 2025 (Ba3/BB-) in the 3½% area.

There is an expectation in the market that it could come tighter, a trader said.

The deal is expected to price Thursday.

Joint global coordinator Barclays will bill and deliver. Credit Agricole is also a joint global coordinator.

Elsewhere in the European primary market, Premier Foods plc is expected to conclude a roadshow for its £210 million offering of five-year senior secured floating-rate notes on Thursday, and the deal is expected to price on Friday.

BNP Paribas will bill and deliver for that debt refinancing deal.

Back-loaded week

As has become customary throughout most of the spring, a number of dollar-denominated transactions announced late last week or early this week have been roadshowing throughout the week, and appear poised to price before Friday's close.

The market awaits official talk on all of them, a trader said on Wednesday.

Great Lakes Dredge & Dock Corp. is in the market with $325 million of five-year notes (Caa1/B-) expected to price Thursday. Initial guidance is in the 7½% area.

Delek Logistics Partners is expected to price $250 million of eight-year notes (B3/B) on Thursday. Early guidance is 6¾% to 7%.

Also in the run-up to Friday's close Suncoke Energy Partners, LP is expected to sell $675 million of eight-year senior notes, which are being guided in the high 6% to low 7% yield range.

And FirstCash, Inc. is marketing $300 million of seven-year notes which are expected to price this week. Initial guidance is 5¼%.

Tuesday inflows

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

High-yield ETFs saw solid or better inflows of $298 million on the day.

Actively managed funds saw $60 million of inflows on Tuesday.

The dedicated bank loan funds, although positive on the day, uncharacteristically saw less cash come in than was true of either of the high-yield classes – actively managed funds or ETFs – the trader noted.

The bank loan funds saw $50 million of inflows on Tuesday.

New Cheniere deal stays busy

In the secondary market, the new Cheniere Corpus Christi Holdings 5 1/8% senior secured notes due 2027 were the most active credit of the session Wednesday, its third straight session topping the Most Actives list.

A market source said that more than $41 million of the notes changed hands, on top of the $31 million of volume during initial aftermarket deals following its Monday pricing and Tuesday’s volume surge of over $115 million.

“Cheniere was busy again today,” a trader said, seeing the bonds finishing at 101 bid, which he called off by 1/8 point from Tuesday’s close.

A second trader pegged the notes in a tight 100 7/8-to-101 1/8 bid range, while a third saw them finishing the day at an even 101 bid, calling that down 5/32 point.

CCH – a subsidiary of Houston-based liquefied natural gas company Cheniere Energy, Inc. – had priced its quickly shopped $1.5 billion issue at par on Monday, upsizing it along the way from an originally announced $1 billion.

The new issue was heard to have gained a point when it was finally freed for secondary dealings.

Also among the recent deals, Australian iron ore miner Fortescue Metals’ 4¾% notes due 2022 retreated by 11/16 bid, ending around 100¾ bid, with over $14 million traded.

Fortescue’s FMG Resources (August 2006) Pty Ltd. subsidiary had priced $750 million of those notes at par on May 9, along with a $750 million tranche of seven-year notes, after that quick-to-market issue had been upsized from an originally announced $1 billion.

Intelsat improves

Away from the new deals, traders saw Intelsat SA’s paper improve across its capital structure, after the Luxembourg-based communications satellite company announced improved terms on a big bond exchange deal it is doing as part of its planned merger with OneWeb and receipt of a $1.7 billion investment from OneWeb’s parent, Japanese technology company Softbank (see related story elsewhere in this issue).

Its 7¼% notes due 2020 gained ½ point to 93¼ bid, with over $20 million traded, while its 7¾% notes due 2021 and 5½% notes due 2023 each gained one full point, to 53¾ bid and 83½ bid, respectively, on volume of $18 million apiece.

Earlier in the week, the bonds had retreated on news reports that Softbank might reconsider the arrangement.

DISH gains on Amazon talk

Elsewhere talk of a possible wireless agreement between DISH DBS and Amazon sent the former’s bonds higher, with the Englewood, Colo.-based company’s 7¾% note due 2026 up ½ point at 115¾ bid, with over $11 million traded.

Indicators head south

Statistical market performance measures turned lower across the board on Wednesday – their first such retreat in nearly two weeks, since May 4 – after having been mixed on Tuesday and higher all around for two straight sessions before that.

The KDP High Yield Daily index lost 6 basis points Wednesday to end at 72.38, its first downturn after two straight gains, including Tuesday’s 9 bps rise, and one mixed session before that.

Its yield rose by 3 bps to 5.09% – its first such widening out after five straight narrowings, including Tuesday’s 3 bps tightening.

The Markit CDX Series 28 index lost ground for a second session in a row, plunging by 11/16 point to 107 bid, 107 1/32 offered, after having turned marginally lower on Tuesday.

And the Merrill Lynch North American High Yield index saw its first setback after seven consecutive advances, as it surrendered 0.113%, in contrast to Tuesday’s 0.081% improvement.

That now-ended seven-session winning streak followed two successive losses and before that, a streak of 11 gains in a row.

Wednesday’s downturn cut the index’s year-to-date return to 4.192% from Tuesday’s 4.311%, which had been its fourth straight new high point for the year.

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