Primary quiet to open pre-holiday week, Avison Young deal still possible; Noble keeps losing ground

By Paul Deckelman and Paul A. Harris

New York, Dec.19 – The high yield primary market stayed quiet on Monday, with no new U.S. dollar-denominated and fully junk-rated deals from domestic or industrialized-country borrowers heard to have priced during the session, the same as Friday.

With the end-of-year holidays fast approaching, the consensus in Junkbondland seems to be that new-issue activity for the year is for all intents and purposes over, with a rapidly closing window of opportunity for any opportunistically timed drive-by offerings that issuers may still be planning.

Syndicate sources said that one deal remains on the forward calendar for possible pricing this week – a $130 million offering of five-year secured notes from Canadian real estate company Avison Young (Canada) Inc.

Traders meanwhile saw some activity in some of the recently priced issues that came to market last week, including Noble Holding International Ltd.’s new 2024 bonds; the issue has struggled from the get-go in the aftermarket since pricing at a discount this past Wednesday and continues to retreat.

They also saw a fair amount of trading in such other recent entries as Tesoro Corp., Diamondback Energy, Inc. and Gulfport EnergyCorp.

Statistical market performance measures were mixed for a third consecutive session on Monday; they had turned mixed on Thursday and then stayed that way on Friday and again on Monday. Before that, they had been lower on Wednesday – their first negative session this month – and higher across the board last Tuesday. Monday was their fourth mixed performance in the last six trading days.

Quiet pre-holiday primary

The primary market failed to generate any news on Monday, and may be finished for the year, sources said.

At least one deal remains in the market and expected to price before Friday's close, however.

Avison Young (Canada) Inc., a company that roadshowed earlier in the month, is in the market with a $130 million offering of senior secured notes due 2021 (B3/B+) via sole bookrunner William Blair.

A trader was watching for the deal to price on Monday, but no terms were available at press time.

The deal had originally been talked with a 9½% coupon at 98 to 99 with all-in yield of 9¾% to 10%, a market source said last week.

There was also talk during the week that the prospective issuer was mulling the structural tweaks, sources say.

Mixed flows

The daily cash flows of the dedicated high yield bond funds were mixed on Friday, although nearly flat, a trader said.

High yield ETFs sustained $46 million of outflows on the day.

Actively managed funds saw $15 million of inflows on Friday.

However the daily cash flows of the dedicated bank loan funds remain robust.

The loan funds saw $385 million of inflows on Friday, as investor maneuver to put cash into floating-rate assets against a backdrop of rising rates.

Market quiets down

In the secondary arena, a trader observed that “we might have seen what we were going to see for the year,” in terms of new paper coming to market.

“The pipeline looks pretty quiet and unlikely to come back alive till the new year.”

Noble deal slide continues

He described trading as “kind of quiet.”

“It was a pretty muted day.”

One of the busier bonds seen trading around was Noble Holding International’s 7¾% notes due in January of 2024.

That $1 billion issue priced last Wednesday at 98.01 as a regularly scheduled forward calendar offering, to yield 8 1/8%, after the Cayman Island-based energy drilling company’s deal was doubled in size from an originally shopped $500 million.

But those bonds have struggled in the aftermarket almost from the time they came clattering down the chute, and Monday was no different.

A trader said that the issue lost another 13/16 point on the session to close at 96½ bid.

Volume of more than $18 million put Noble high up on the day’s Most Actives list.

A market source at another desk meantime saw the company’s existing 5¼% long bonds due 2042 down 1 point on the day at 67½ bid.

Other new deals hold gains

One of the traders said that activity in recently priced new offerings remained a mainstay of the market, and unlike the struggling Noble Holding issue, those bonds pretty much stayed at or above their recent levels a little north of their respective issue prices.

A trader said that both halves of the Tesoro Corp. deal “were pretty active.”

He saw the company’s 4¾% notes due 2023 and its 5 1/8% notes due 2026 hanging around the 100½ bid context at which they had finished on Friday.

Another market source quoted the 5 1/8% notes up 3/16 point at 100 9/16 bid, with over $12 million traded.

He did not have a reading on the 4¾% paper.

The San Antonio, Texas-based petroleum refiner and end-products marketer priced $850 million of the 4¾% notes, downsized from $1 billion originally, and $750 million of the 5 1/8% notes, upsized from $600 million originally, on Thursday.

Both tranches of that quickly shopped offering came to market at par.

One of the traders said that “FANG” – i.e., Diamondback Energy’s 5 3/8% notes due in May of 2025 – “was pretty active,” seeing the notes about unchanged at 100¾ bid.

Another shop also quoted the bonds steady at 100¾ bid, with about $10 million having traded.

The Midland, Texas-based oil and natural gas exploration and refining company had priced its $500 million offering on Thursday at 98.168 to yield 5½%, after the deal was doubled in size from an originally planned $250 million.

Gulfport Energy’s 6 3/8% notes due in May of 2025 were seen having gained ¼ point to end Monday at 101¼ bid, a market source said, on volume of over $10 million.

The Oklahoma City-based oiler had had priced its $600 million quick-to-market issue at par on Thursday.

Statistical market performance measures were mixed for a third consecutive session on Monday; they had turned mixed on Thursday, and then stayed that way on Friday and again on Monday. Before that, they had been lower on Wednesday – their first negative session this month – and higher across the board last Tuesday. Monday was their fourth mixed performance in the last six trading days.

The KDP High Yield index lost 3 basis points on Monday to end at 71.25, after having dropped by 7 bps on Friday and having swooned by 23 bps on Thursday. Monday’s loss was its fourth straight and fifth in the last 15 sessions, which also included a 10-session winning streak.

Its yield was unchanged at 5.51% after having risen twice before that, including a 3 bps widening on Friday.

However, the Markit Series 27 CDX index continued to improve, posting its third consecutive gain. It was up by 7/32 point to close at 106 3/32 bid, 106 5/32 offered, after having edged up by 1/32 point on Friday.

The Merrill Lynch High Yield index broke a three- session slump on Monday, rising by 0.105, versus Friday’s 0.036% setback.

Monday’s advance lifted its year-to-date return to 16.763 from Friday’s finish at 16.541%.

Those levels remain down from its 2016 peak level of 17.152%, set last Tuesday.

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