Market continues to wait on Ascent Resources; Exterran, Chobani expected for Thursday; better tone seen

By Paul Deckelman and Paul A. Harris

New York, March 28 – The high-yield dollar-denominated market remained in a holding pattern on Tuesday, its third consecutive session in which no pricings of any new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized country issuers was reported to have taken place.

The upcoming $1.5 billion two-part offering from energy operator Ascent Resources Utica Holdings, LLC continued to edge closer to fruition, with the roadshow for the five- and eight-year notes having wrapped up and expected pricing levels having widened from initial guidance.

Primaryside players meantime were looking forward to the back half of the week, when deals from issuers such as Exterran Corp., another energy-sector name, and from yogurt maker Chobani, LLC are expected to price, most likely on Thursday.

Away from the new-deal realm, traders saw a greatly improved tone in the secondary market, in line with improved stocks; equities moved sharply higher on Tuesday, as financial and energy shares surged on data showing consumer confidence in the United States soaring to a more than 16-year high.

Junk market traders said that most issues were heading for the upside, with market bellwether Frontier Communications Corp.’s bonds seen firmer in particularly active dealings.

Upside movement on decent-sized volume was also seen in some of the deals that priced last week, including BWAY Holding Co.’s two-part issue and, from the week before that, First Quantum Minerals Ltd.

Healthcare issues, which had been on a tear for the past few days following the failure of the congressional effort to repeal the existing Patient Protection and Affordable Care Act, such as Community Health Systems, Inc. and Tenet Healthcare Corp. mostly came down from their recent highs.

Statistical market performance measures turned higher on Tuesday after having been lower on Monday and higher on Friday.

Ascent Resources

On an otherwise quiet Tuesday in the dollar-denominated primary, the market continued to await terms on the Ascent Resources Utica Holdings' $1.5 billion two-part offering of senior notes (B3/B-) which completed its roadshow on Monday.

The deal was still heard to be coming in tranches of five-year notes and eight-year notes, according to a trader.

However it's possible the long tranche will be abandoned, the source said.

Covenant changes have kindled more interest in the deal, the trader said, and added that pricing is believed to have widened further from levels heard on Monday. At that point guidance on the five-year notes had increased to the mid 8% area from earlier guidance of 7½% to 7¾%, sources said. Guidance on the eight-year notes widened to the mid 9% area on Monday from earlier guidance of 8% to 8¼%, sources said.

Aston Martin tightens

Elsewhere in the dollar-denominated market, the back half of the last week in March is expected to see several deals price.

The dollar-denominated tranche of the Aston Martin Capital Holdings Ltd. £530 million equivalent of five-year senior secured notes (B3/B-) is going well, a trader said.

The dollar tranche, which kicked off at $400 million minimum, was whispered at 6 7/8% to 7% on Tuesday and is playing to $650 million of orders, the source said. Earlier talk was 7%, sources said.

The deal will also include sterling-denominated notes expected to price 50 bps to 75 bps inside of the dollar notes.

Other dollar-denominated deals in the market include Exterran.'s $300 million offering of eight-year senior notes (B3/B+).

That deal, in the market via left bookrunner Wells Fargo, has been whispered in the high 7% area and is expected to price on Thursday, sources said.

Also on the road is yogurt maker Chobani.

Chobani's $530 million offering of eight-year senior notes (Caa2/CCC+) has guidance of 7% to 7¼%, down from earlier guidance in the low to mid 7% area, sources said.

That the deal is also expected to price Thursday.

Nexans €200 million bullet

In the euro-denominated primary Nexans is in the market with a €200 million offering of non-callable seven-year notes.

HSBC and SG CIB are the global coordinators. BNP Paribas and Santander are the joint bookrunners.

The Paris-based manufacturer of copper and optical fiber cable products plans to use the proceeds to refinance debt.

Elsewhere on Tuesday Paris-based equipment rental company Loxam SAS circulated early guidance in its €810 million two-part offering of high-yield notes.

The deal features €560 million of seven-year senior secured notes (preliminary BB-), whispered at 4¼% to 4¾%, and €250 million of eight-year senior subordinated notes (preliminary B), whispered 6¼% to 6¾%.

The roadshow is set to last until Wednesday, with the notes to be priced thereafter.

Monday outflows

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

High-yield ETFs sustained $23 million of outflows on Monday.

Actively managed funds saw $15 million of outflows on the day.

Dedicated bank loan funds were positive, however, the trader said, adding that the loan funds saw $95 million of inflows on Monday.

The tone in the junk market improved with stocks and oil prices on Tuesday, sources said.

Traders were seeing offers-wanted-in-competition (OWIC) lists from the ETFs on Tuesday, sources said.

A syndicate banker said that while the new issue market is unlikely to regain its feverish early March pace of issuance anytime soon, a weekly run rate of $4 billion to $6 billion is realistic.

That early March issuance onslaught, which included the record-setting $17.53 billion that priced during the March 6 week, is one of the reasons things backed up, sources say.

Add to that volatility in the stock market, softness in crude oil prices and negative political headlines.

The syndicate banker quantified the damage, saying that the junk bond index was yielding 6.06% at Tuesday's close, 49 basis points wider than its March 1 tight mark of 5.57%.

Market tone improves

In the secondary market, a trader said that Tuesday was “kind of a quiet day. The market definitely firmed,” after having been mostly easier on Monday.

High yield seemed to take its cue from equities, which improved in the wake of the better consumer confidence numbers. The Dow Jones Industrial Average posted its first gain after eight consecutive session before that on the downside.

Back in Junkbondland, the trader said, Frontier Communications – which he called “a go-go, high-trading beta name” that would be a good proxy for the overall market – was higher across its whole capital structure.

He saw the Stamford, Conn.-based telecommunications provider’s benchmark 11% notes due 2025 up ¾ point on the session, ending at 95½ bid.

Another market source saw those bonds going out around 95¼ bid, which he called a gain of ½ point, on volume of more than $27 million, topping the day’s Most Actives list.

He also saw the company’s 10½% notes due 2022 likewise up ½ point on over $27 million of volume, finishing at 99¼ bid.

Frontier’s 8½% notes due 2020 closed up 13/32 point on the day, at 103 5/8 bid, with more than $16 million having changed hands, while its 8 7/8% notes due 2020 advanced by 11/16 point, ending just under 103½ bid, on turnover of more than $13 million.

Recent deals improve

Some of the issues that came to market last week were better on Tuesday on sizable volume.

For instance, BWAY Holding’s 7¼% unsecured notes due 2025 were seen by a market source up by 5/8 point, at 99¾ bid, on volume of more than $15 million.

He saw the other half of that $2.68 billion transaction, the 5½% senior secured notes due 2024, ½ point better on the day at 100 5/8 bid, with over $12 million traded.

Both halves of that regularly scheduled forward calendar offering priced at par last Wednesday.

Going back a little further, First Quantum Minerals’ 7½% notes due 2023 moved up by more than 1 point on the day, to 100 1/8 bid, on more than $15 million traded.

That $1.1 billion tranche of paper had priced at par on March 16 as part of a $2.2 billion overall deal.

Healthcare off its highs

Healthcare-sector credits, which had firmed markedly over the previous two sessions on investor relief about no immediate regulatory changes, for now, retreated a little on Tuesday.

Tenet Healthcare’s 8 1/8% notes due 2022 lost 11/32 point, a trader said, ending at 104 1/8 bid, with over $14 million traded.

Community Health’s 8% notes due 2019 closed nearly ½ point lower, at 98¾ bid, with over $13 million of volume.

Indicators turn higher

Statistical market performance measures turned higher on Tuesday after having been lower on Monday and higher on Friday.

The KDP High Yield Daily index gained 4 basis points Tuesday to end at 71.40, after having been unchanged at 71.36 on Monday, on top of Friday’s 1 bp rise, its first gain after four straight losses.

Its yield came in by 2 bps, to 5.42%, its third consecutive tightening.

The Markit CDX Series 27 High Yield index rebounded on Tuesday from Monday’s loss, finishing up more than 5/16 point, at 106¾ bid, 106 7/8 offered, after having turned southward after two straight sessions on the upside, ending Monday at 106 15/32 bid, 106½ offered.

The Merrill Lynch High Yield index also rose on Tuesday, by 0.272%, after Monday’s 0.85% retreat, lifting its year-to-date return to 1.946% from Monday’s 1.67% close.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.