Moly-Cop, Alta Mesa, AdvancePierre price to close out $4.72 billion week; energy rise continues

By Paul Deckelman and Paul A. Harris

New York, Dec. 2 – The high-yield primary market saw a trio of new deals totaling $1.68 billion get done on Friday, topping the $1 billion of fully junk-rated and dollar-denominated paper from domestic or industrialized-nation borrowers which had come to market on Thursday.

Grinding Media Inc. priced $775 million of seven-year secured notes backing the acquisition of mining consumables manufacturer Moly-Cop, the big deal of the day.

Oil and natural gas operator Alta Mesa Holdings, LP brought in an upsized $500 million of eight-year notes.

And ready-to-eat food products company AdvancePierre Foods Holdings, Inc. served up an upsized $400 million eight-year issue.

Traders saw all three of those deals quoted higher when they hit the aftermarket.

The three deals swelled this week’s new-issuance totals to $4.72 billion in 10 tranches, according to data compiled by Prospect News – nearly four times last week’s $1.20 billion of new paper, which came in just two tranches.

Traders saw Thursday’s two-part megadeal from HudBay Minerals, Inc. continuing to trade well above its issue price.

Away from the new issues, the energy sphere remained red hot as oil and natural gas names including EP Energy LLC, California Resources Corp. and Denbury Resources Inc. continued to ride the upside momentum of world crude oil prices, which firmed for a third straight session Friday on investor expectations that planned OPEC and non-OPEC output cuts will give prices a boost.

Intelsat SA’s bonds were gyrating around on Friday – the senior paper seen several points better but the junior paper down multiple points – after the communications satellite company disclosed in a regulatory filing that it had been in talks with some of its note holders on possible exchange offers for their existing bonds – which never came to fruition.

Statistical market performance measures turned higher across the board on Friday, after having been mixed on Thursday. It was the second strong session in the last past three.

The indicators were also higher all around versus where they had finished out last week – their second consecutive weekly gain and third stronger week in the past seven weeks.

Moly-Cop tighter and tighter

A busy Friday in the primary market saw three issuers complete single-tranche dollar-denominated deals, raising a total of $1.68 billion.

All three issuers upsized their offerings.

Executions were notable, especially given that all three tranches came upsized: one deal priced inside talk, one came at the tight end of talk and one priced on top of talk.

Grinding Media priced an upsized $775 million issue of seven-year senior secured notes (B2/B) backing the acquisition of Moly-Cop at par to yield 7 3/8%.

The issue size was increased from $725 million.

The yield printed 12.5 basis points below the tight end of the 7½% to 7¾% yield talk.

A trader said that the deal obviously went well and added that every time he turned around pricing on Moly-Cop was tighter.

Morgan Stanley, Jefferies, Deutsche Bank and UBS were the joint bookrunners.

Alta Mesa upsized and tight

Alta Mesa Holdings priced an upsized $500 million issue of eight-year senior notes (Caa1/B-) at par to yield 7 7/8%.

The amount was increased from $450 million.

The yield printed at the tight end of yield talk that had been set in the 8% area.

Wells Fargo was the left bookrunner for the debt refinancing deal. Capital One, Natixis, ING, Citigroup, Morgan Stanley and TD were the joint bookrunners.

AdvancePierre upsizes

AdvancePierre Foods priced an upsized $400 million issue of eight-year senior notes (B3/B-) at par to yield 5½%.

The issue size was raised from $350 million.

The yield printed on top of yield talk; initial guidance was in the high 5% area.

Terms went out before Friday lunchtime.

Late in the morning the new notes were at 101 bid, a trader said.

Barclays was the lead left bookrunner for the debt refinancing deal. Credit Suisse, Deutsche Bank, Morgan Stanley and Wells Fargo.

Thomas Cook upsized and tight

The Friday session also saw a pair of euro-denominated deals clear the market.

Thomas Cook Group plc priced an upsized €750 million issue of senior notes due June 15, 2022 (B1/B/B+) at par to yield 6¼%.

The issue was increased from an initial €300 million minimum, then from €500 million.

The yield printed at the tight end of the 6¼% to 6½% yield talk.

Global coordinator BofA Merrill Lynch will bill and deliver for the debt refinancing deal. DNB and Lloyds were also global coordinators.

Barclays, BNP Paribas, Citigroup, CM-CIC, Credit Suisse, KBC, Morgan Stanley, SG CIB, Royal Bank of Scotland and UniCredit were joint bookrunners.

Catalent prices atop talk

Catalent, Inc. priced €380 million of senior notes due 2024 (B3/BB-) at par to yield 4¾%.

The yield printed on top of yield talk.

Morgan Stanley, J.P. Morgan, RBC and BofA Merrill Lynch managed the sale.

The Somerset, N.J.-based provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products plans to use the proceeds to fund its acquisition of Accucaps Industries Ltd., as well as to pay down bank debt and to provide cash on the balance sheet for general corporate purposes.

Nabors sells split-rated deal

In the crossover market, Nabors Industries, Inc. priced an upsized $600 million issue of non-callable six-year senior notes due 2023 (Ba2/BBB-/BBB-) at par to yield 5½%.

The issue size was increased from $500 million.

The $600 million issue was launched earlier in the session at 5½%.

Morgan Stanley was the sole bookrunner.

GTT starts Monday

Looking to the first full week of December, GTT Communications Inc. plans to start a roadshow on Monday for a $300 million offering of eight-year senior notes (Caa1/B-).

The deal is expected to price late in the week ahead.

Credit Suisse, KeyBanc and SunTrust are the joint bookrunners for the acquisition financing.

GTT climbs aboard a calendar that will begin the Dec. 5 week on the thin side, with just two other dollar-denominated deals in the market.

Ritchie Bros. Auctioneers Inc. is roadshowing a $500 million offering of eight-year senior notes. Initial guidance is in the high 5% area.

And Avison Young (Canada) Inc. is selling $130 million of senior secured notes due 2021 (expected ratings B2 or B3/B+).

Tervita starts roadshow

In the Canadian dollar-denominated market, Tervita Corp. began a roadshow on Friday for a C$475 million equivalent offering of dollar-denominated senior secured notes.

The company seeks to raise about $350 million, a trader said.

Early guidance is in the 8% area.

The deal is expected to price in the late part of the week ahead.

JP Morgan, Barclays and Deutsche Bank are managing the sale.

Improvement in energy prices could spark an increase in Canadian dollar-denominated issuance, a debt capital markets banker said on Friday, adding the Canadian economy’s significant exposure to energy served to constrict issuance during the protracted period of depressed energy prices which began in the middle of 2015.

Loans in, bonds out

One force serving to limit dollar-denominated junk bond issuance is the phenomenal liquidity which the bank loan market is presently enjoying, sources say.

Amid expectations that rates are poised to move higher, investors who buy debt securities are migrating toward floating-rate debt, they add.

This migration of capital toward floating-rate bank debt was borne out by Thursday’s fund flow numbers, a trader said.

High-yield ETFs sustained a substantial $469 million of outflows on the day.

Actively managed funds saw $80 million of outflows on Thursday.

However dedicated bank loan funds saw solid-or-better inflows of $205 million on Thursday, the trader added.

Issuance pace picks up

Friday’s troika of new junk bond deals raised to $4.72 billion the amount of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers which had priced in 10 tranches during the week, according to data compiled by Prospect News.

That was well up from just $1.20 billion in two tranches that had gotten done last week, ended Nov. 25, which was a day shorter than usual, with the market closed on Thursday, Nov. 24 in observance of the Thanksgiving Day holiday in the United States.

This week’s total was still down from the $5.20 billion which had priced in nine tranches the week before, ended Nov. 18.

This week’s primary activity pushed the year-to-date issuance total up to $209.47 billion in 326 tranches.

That was running 18.9% behind the new-deal pace seen at this time last year, when $258.24 billion had priced in 403 tranches, the Prospect News data indicated.

That was somewhat narrower than the 19.8% gap between this year’s and last year’s issuance which had been seen last week.

Days’ deals quoted better

Traders said that all three of the day’s new deals seemed firmer in initial aftermarket activity.

A trader quoted the new Grinding Media 7 3/8% senior secured notes in a 102¼ to 102¾ bid context.

A second trader said he had seen “one print” in the new issue at 101 7/8 bid, up from its par issue price.

But he said that was all that he had seen, suggesting that trading in that offering would be “probably a Monday kind of thing.”

The proceeds from the deal will be used to support American Industrial Partner’s acquisition of Moly-Cop, a Kansas City, Mo.-based producer of steel balls used in mining, from Arrium Ltd.

Houston-based energy exploration and production company Alta Mesa’s new 7 7/8% notes were quoted by a trader late in the day at 102¼ bid, well up from their par issue price.

And AdvancePierre Foods’ 5½% notes were trading between 100¾ and 101¼ bid, a trader said.

A second trader saw those notes in a 100 3/8 to 101 1/8 bid context.

The Cincinnati-based manufacturer of ready-to-eat sandwiches, entrees and snacks had priced its offering at par.

HudBay holds gains

Thursday’s two-part issue from Hudbay Minerals continued to trade in a 102½ to 103 bid range, a trader said.

That was about where the Toronto-based mining company’s two tranches of bonds – its $400 million of 7¼% notes due January 2023 and its $600 million of 7 5/8% notes due January 2025 – had settled in late Thursday, after the deal had priced earlier in the day at par.

A trader said that there was “not a tremendous amount of trading” in it despite its billion-dollar size.

He theorized that the deal “was well spoken-for – it went to a few guys” who are just hanging onto it, leading to a scarcity of the paper in Friday’s secondary market.

Energy gains continue

Energy names were once again mostly on the rise Friday as crude oil prices firmed for a third consecutive session on the prospect that planned output curbs by members of OPEC and even by large non-OPEC producers such as Russia would help keep a floor under those oil prices.

Houston-based oil and natural gas exploration and production operator EP Energy’s 6 3/8% notes due 2023 were up 6¼ points on the day Friday to 78¼ bid, although a trader said that the move had only come “on a hand full of trades.”

He said that its 9 3/8% notes due 2020 were 3½ point gainers on the day at 90¾ bid “on heavy volume” while its 7¾% notes due 2022 ended at 78 bid, another market source said – an 8 point jump on the session.

EP’s 8% notes due 2024, which had priced about two weeks ago at par, continued to firm smartly in the secondary, another trader said, seeing them go out at 105¾ bid, 106¼ offered – a gain of 1¼ points on the day.

California Resources’ 8% notes due 2022 gained 1¾ points on the day to close at 85 bid, a trader said, after having been “up big yesterday [Thursday] and the day before [Wednesday],” when the Los Angeles-based E&P company’s paper had shot up by 3 1/8 points and by 4¾ points, respectively.

Denbury Resources’ 5½% notes due 2022 were up a deuce on the day at 87 bid.

SM Energy’s 6¾% notes due 2026 notes were up 1¼ points to 104¼ bid.

The sector’s bonds were up as crude prices firmed for a third straight session on the OPEC agreement news.

The key U.S. crude grade, West Texas Intermediate for January delivery, was up 62 cents per barrel on the New York Mercantile Exchange, settling at $51.68 bid, after gaining $1.62 per barrel on Thursday and $4.21 per barrel on Wednesday.

Similar price gains were seen in the benchmark European grade, Brent crude for February delivery, trading on the London ICE Futures Exchange.

Intelsat active after filing

A trader said that he had seen “a lot of Intelsat activity,” after the Luxembourg-based communications satellite operator disclosed in a 6-K filing with the Securities and Exchange Commission that it had engaged in discussions with the holders of certain of its notes regarding possible exchange offers for those notes.

Specifically, it held discussions with the holders of its Intelsat (Luxembourg) SA 6¾% senior notes due 2018, its 7¾% senior notes due 2021 and its 8 1/8% senior notes due 2023.

It offered to exchange $350 in new notes and $600 in cash per $1,000 principal amount of the existing 2018 notes and $500 in new notes and $30 in cash per $1,000 principal amount of the existing 2021 notes

The company said in its filing that no agreements with respect to any transactions for those notes were reached, “but discussions are continuing with certain of the holders at this time. We continually evaluate ways to simplify our capital structure and opportunistically extend our maturities.”

The trader said that the bonds were “precipitously lower” versus recent levels.

He saw the 8 1/8% notes due 2023 were down 4 points “to – yeesh – 31.”

He observed that “it looked like the sub[ordinated] stuff was lower, but the other stuff was higher.”

He said the 6¾% notes due 2018, for instance, were up 3 points at 78 5/8 bid, while the 7¾% notes due 2021 were down 2¼ points to 32¾ bid, “all of them on heavy volume.”

Among the notes not involved in the discussions revealed in the filing, he said that the company’s Intelsat Jackson Holdings SA 7¼% notes due 2019 were up 1½ points to around 81½ bid, although he said “they were off their lows from [Thursday].”

A trader at another desk also saw the 7¼% notes better on the day, pegging them up 1 point at 82 bid, while the 6¾% notes, he said, “pushed up” to around the 79 mark, a nearly 3½ point improvement on the day.

But he also saw the 8 1/8% notes due 2023 sliding more than 4 points to around the 31 level.

Indicators up on day, week

Statistical market performance measures turned higher across the board on Friday, after having been mixed on Thursday. It was the second strong session in the last past three.

The indicators were also higher all around versus where they had finished out last week – their second consecutive weekly gain and third stronger week in the past seven weeks.

The KDP High Yield Index was up by 9 basis points on Friday, ending at 70.60 –its third straight gain and seventh advance in the last eight sessions, including a recent streak of five consecutive gains. On Thursday, it had jumped by 16 bps.

Its yield came in by 3 bps to 5.72% after also tightening by 3 bps on Thursday. Friday marked its sixth straight narrowing.

Friday’s levels compared favorably with the 70.15 index reading and 5.84% yield seen at the close of 104¾ trading last Friday.

The Markit Series 27 CDX Index firmed by around 5/32 point on Friday, ending at 104¾ bid, 104 25/32 offered, an improvement from Thursday’s 104 19/32 bid, 104 5/8 offered. It was also an improvement from last Friday’s close at 104 9/16 bid, 104 11/16 offered.

The Merrill Lynch High Yield Index saw its third straight weekly gain on Friday and ninth such rise in the last 10 sessions.

It improved by 0.066% in contrast to Wednesday’s 0.010% advance.

The latest gain raised its year-to-date return to 15.309% from Thursday’s 15.233%.

Those levels remain well below the index’s peak level for this year of 16.768%, established on Oct. 25.

For the week, the index rose by 0.315%, its second straight weekly gain. Last week, it rose by 0.584%.

© 2015 Prospect News.
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