Comstock prices; Bruin carried over; secondary trading light; IHS Markit eyed; Teva active

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 20 – The domestic high-yield primary market saw one deal price with a second deal being pushed into the July 23 week.

While there was speculation that Comstock Resources, Inc. might also carry over to the week ahead, the Frisco, Texas-based independent energy company priced an $850 million issue of 9¾% eight-year senior notes (Caa1/B/B) at 95.988 to yield 10½% on Friday.

However, Bruin E&P Partners LLC delayed pricing its $600 million offering of eight-year senior notes (B3/B+) until Monday.

Other than Bruin E&P, the active forward calendar remains empty for the week ahead. However, there are whispers BMC Software could bring its $1.825 billion offering in the coming week.

Meanwhile, trading volume was extremely light in the secondary space on Friday, sources said.

While no longer a volume leader, Altice France SA’s 8 1/8% senior notes due Feb. 1, 2027 (B1/B) remained active and again saw slight gains in secondary trading.

However, the focus of the secondary space was on IHS Markit Ltd.’s newly priced two-tranche split-rated notes, which dominated trading activity.

The notes were seen hovering around their issue price in high volume trading.

Teva Pharmaceutical Industries Ltd.’s 3.15% senior notes due 2026 were also active and making slight gains in the secondary after news that sales of Teva’s multiple sclerosis drug Copaxone saw a 30.9% increase.

Comstock prices $850 million

Comstock Resources priced its $850 million issue of 9¾% eight-year senior notes (Caa1/B/B) at 95.988 to yield 10½%.

The yield printed on top of yield talk which factored in an original issue discount.

Pricing moved well beyond initial guidance in the 9% area as bondholders, knowing the company needed to get the deal done to refinance near-term maturities, were not feeling compelled to roll into the new bonds at just any price. Ultimately they demanded a greater concession, sources said.

BofA Merrill Lynch was the left bookrunner.

Bruin E&P delayed

Bruin E&P Partners delayed pricing its $600 million offering of eight-year senior notes (B3/B+) until Monday.

The deal had been expected to price on Friday.

Price talk remains 8¼% to 8½%, well wide of the 7½% to 7¾% initial price talk.

There are also covenant changes, sources say.

J.P. Morgan is the lead.

The Houston-based energy exploration and production company plans to use the proceeds to repay debt under its term loan and revolver as well as to fund a dividend to its sponsor, ArcLight Capital Partners.

The week ahead

The primary market appears to be in the grip of summer doldrums, well ahead of the traditionally quiet Dog Days of August, a sellside source observed on Friday.

Syndicate bankers canvassed during Friday’s session for tips on deals for the July 23 week turned out empty pockets.

Apart from Bruin E&P, one deal is possibly business for the week ahead and it is a substantial one.

BMC Software could bring $1,825,000,000 of senior notes (Caa2) via issuing entity Banff Merger Sub Inc. as part of the financing for the buyout of the company by KKR, investors say.

Credit Suisse is expected to lead.

The deal had been expected shortly after the July 4 holiday but never appeared, according to one investor who added that price thoughts at that time were 7¾% to 8%.

Week sees $2.97 billion

With Comstock added to the total, the week saw $2.97 billion of new issuance in three deals, the bulk of that coming from Altice France SA’s $1.75 billion tranche of 8 1/8% notes due 2027.

The volume was an improvement on the previous week, which had $2.44 billion of new deals come to market. Due to the July 4 holiday, the week before that saw no issuance at all while the preceding June 24 week notched up $7.22 billion of deals.

However this week’s total is more in line with the recent trend.

Year-to-date volume now totals $116.91 billion, well behind the $153.09 billion at the same point in 2017 although July so far is actually running ahead of the 2017 pace at $5.41 billion versus $4.39 billion.

Altice quiets

After dominating the secondary space since pricing, trading activity surrounding Altice’s 8 1/8% senior notes due 2027 tempered on Friday. However, the notes continued to see slight gains.

The paper was quoted up about ½ point at 101½ bid, 101¾ offered on Friday, according to a market source.

It was trading up about 1/8 point to 101 5/8 with about $13 million of bonds on the tape by mid-afternoon.

Altice priced an upsized $1.75 billion tranche of the 8 1/8% notes at par on Tuesday as part of a dual-currency offering.

The notes have dominated secondary activity since breaking for trade.

About $92 million of the bonds were on the tape by late afternoon Wednesday and $82 million of the bonds changed hands by late afternoon Thursday.

IHS Markit in focus

With attention drifting away from Altice’s new paper, focus shifted to IHS Markit’s newly priced split-rated notes (Ba1/BBB-/BBB).

IHS Markit priced $500 million of 4.125% five-year notes at 99.707 to yield 4.19%, or a spread of Treasuries plus 145 basis points on Thursday.

The company also priced $750 million of 4.75% 10-year notes at 99.628 to yield 4.797%, or a spread of Treasuries plus 195 bps.

The five-B bonds were of interest to high-yield players, a market source said.

They were seen hovering around their issue price in high-volume trading in the secondary space.

The 4.125% senior notes due 2023 were coming down from their previous levels but still slightly above their issue price Friday afternoon.

They were seen trading at 99.824 with about $90 million of the bonds on the tape, a market source said.

The notes closed Thursday just under par and traded as high as par early in Friday’s session before losing some footing.

IHS Markit’s 4.75% notes also lost some footing in high-volume trading on Friday.

The notes traded as high as par and as low as 99.581 on Friday with about $52 million of the bonds on the tape by late afternoon, a market source said.

The notes were trading north of par on Thursday.

Teva active

Teva’s 3.15% senior notes due 2026 were among the volume leaders on Friday with about $17 million of the bonds on the tape.

The notes were seen up about ½ point to trade at 83 3/8.

The notes were making gains after news broke that the company’s multiple sclerosis product Copaxone saw a 30.9% increase in retail sales in the week ending July 13, according to a market source.

Indexes gains

Three benchmarks for the high-yield secondary market rounded out the week with gains after a mixed day on Thursday.

The KDP High Yield index was up 1 basis point to close Friday at 70.40 with the yield now 5.87%. The index has zigzagged between 1 bps gains and 1 bps losses throughout the week with the index down 1 bps on Thursday, up 1 bps on Wednesday, up 1 bps on Tuesday, and down 1 bps on Monday.

Overall, the KDP High Yield index saw a 2 bps gain on the week.

The Merrill Lynch High Yield index again saw gains on Friday further solidifying its place in the black. The index was up 3.5 bps on Friday with the year-to-date return now 0.686%.

The index was up 2.4 bps on Thursday and 4.6 bps on Wednesday.

Friday marked the eleventh consecutive trading day of gains for the index, which crossed into the black on July 6.

After a large drop on Thursday, the CDX High Yield 30 index was up 2 bps on Friday to close the day at 106.65. The index was down 17 bps on Thursday wiping out its 13.8 bps gain from Wednesday.

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