Iron ore, oil credits up on price gains; primary quiet, though TRAC Intermodal hits road; GameStop busy

By Paul Deckelman and Paul A. Harris

New York, March 7 – Against the backdrop of a mostly quiet high yield primary market, Junkbondland saw sizable activity on Monday in energy names and iron-ore mining companies.

The latter included such credits as Australia’s FMG Resources and domestic competitor Cliffs Natural Resources Inc. Their bonds firmed smartly in very active dealings, as world iron ore prices jumped nearly $20 per ton Monday after the Chinese government said over the weekend that it will emphasize growth over economic restructuring this year – sending a signal that it will likely be buying more steel, made from iron ore.

The Chinese message also helped world crude oil markets continue their recent substantial move higher, which in turn gave a boost to such oil and natural gas credits as Continental Resources, Inc., Chesapeake Energy Corp. and Whiting Petroleum Corp.

However, one recently high-flying natural resources name – gold and copper miner and energy producer Freeport-McMoRan Inc. – was in retreat Monday across its capital structure.

In the new-deal market, there were no pricings and was only one real piece of news: TRAC Intermodal LLC, which leases big-rig truck chassis to freight shipping companies, was said to be preparing to market $485 million of second-lien notes to investors via a roadshow beginning Tuesday, with pricing expected by Friday.

Among recently priced issues, this past Friday’s offering of five-year notes from electronic games retailer GameStop Corp. was actively traded Monday, but market sources saw little movement from their issue price.

Another transaction from last week – insurance software provider Solera LLC’s eight-year megadeal – continued its week-long firming trend from the bonds’ original heavily discounted issue price.

Statistical market performance measures were higher across the board for an eighth consecutive session on Monday and for a ninth session in the last 11 trading days.

GameStop notes little changed

In the secondary market, traders saw fairly active dealings – but not much price movement – in the new GameStop 6¾% senior notes due 2021.

A trader said that the notes stayed right around their par issue price, observing that “it didn’t really get any legs to it.”

A second trader quoted the bonds around 99½ to par, “or maybe 99¾ to 100¼.

“There were more sellers than buyers of those things,” he added.

At another desk, a market source pegged the deal at 99¾ bid, down ¼ point on the day, on volume of over $21 million, putting the credit high up on the day’s Most Actives list.

GameStop, a Grapevine, Texas-based video game, consumer electronics and wireless services retailer, priced $475 million of those notes in a regularly scheduled forward calendar offering on Friday, after the issue was upsized by $75 million from the $400 million originally announced on Wednesday.

Solera gains continue

Elsewhere among the recently priced names, Solera LLC’s 10½% notes due 2024 were seen continuing the firming trend in evidence ever since that issue priced last Monday at a steep discount to par.

A trader saw the bonds at 99½ bid, which he called up by ½ point on the day.

A second trader also saw the bonds heading home at 99½ with a ½-point gain, on volume of more than $20 million.

Solera, a Westlake, Texas-based provider of automobile insurance claims software, along with its wholly owned Solera Finance Inc. subsidiary, had priced $1.73 billion of those notes last Monday at 95 to yield 11.47%.

The regularly scheduled forward calendar offering had actually finished its roadshow at the beginning of the previous week, when traders thought the deal was going to get done.

But it was delayed as investors pushed back, forcing a number of key changes.

First, the offering was reduced in size from an original $2.03 billion, with $300 million shifted to a term loan financing.

The deal was originally envisioned as a two-part offering of eight-year dollar- and euro-denominated senior notes, split after the initial downsizing into $1.28 billion of the dollar bonds and $450 million equivalent of the euro paper, but the latter tranche was later dropped and the entire amount was done in dollars, producing the $1.73 billion size.

The issue came wider than the initial price talk, and several covenant changes were made as well.

After pricing late in the day on Monday, the bonds began moving up on Tuesday, and that firming trend continued all of last week and on into this week.

The bonds had been seen trading Friday around the 98½ to 99 bid area.

HCA holds steady

A trader saw the new HCA Holdings Inc. 5¼% senior secured notes due in June of 2026 “around a 102ish level” on Monday, essentially little changed from where he had seen those notes trading late Friday.

While a second trader quoted the bonds as low as 101¼ bid, 102¼ offered at one point during the session, by the end of the day, they were back up to around 102.

Another trader saw them finishing at that level, calling them off by perhaps 1/8 point on the day, on volume of around $9 million.

The company, a Nashville-based hospital operator, priced $1.5 billion of the notes in a quick-to-market transaction on Tuesday via its wholly owned HCA Inc. subsidiary.

The issue was upsized from an originally announced $1 billion.

The notes initially firmed modestly in aftermarket dealing following their pricing, then jumped by more than 1 full point to around the 102 level on Wednesday, when over $400 million of the new paper changed hands.

They continued to hold around that 102 level for the rest of last week, on continued active volume.

Iron ore names improve

Away from the recently priced issues, a trader said that “the story of the day was iron ore,” with credits such as FMG Resources and Cliffs Natural Resources benefitting from a giant-sized jump in that commodity metal’s price.

He said that FMG’s paper “was up by as much as 5 points, depending on the issue.”

A second trader quoted the Australian iron-ore company’s 9¾% notes due 2022 up by between 4½ and 5 points, seeing them going out at 104¾ bid.

Yet another trader a little later called the bonds up 5¾ points on the day at 105¾ bid, with over $28 million traded.

Its 6 7/8% notes due 2022 did even better, finishing around 83 bid, a gain of more than 6 points on the session, though on considerably less volume, with only around $4 million traded.

Cleveland-based Cliffs Natural Resources’ 8¼ notes due 2020 rose by 3 3/8 points on the day, a trader said, finishing at 81 3/8 bid, on volume of over $12 million.

The company’s 5.95% notes due 2018 jumped by some 5½ points on the day, to 40½ bid, on volume of around $7 million.

The sector’s bonds got a boost as the benchmark price for iron ore hit a nine-month high of $62.60 a metric ton Monday on expectations of renewed Chinese buying – the biggest one-day percentage increase since 2009.

Freeport bonds slip

The strength in the iron-ore sector did not carry over to gold and copper miner Freeport-McMoRan, whose bonds had firmed solidly throughout most of last week.

A trader said that the Phoenix-based company’s capital structure “was down anywhere from 2 to 4 points or so,” seeing its busiest issue, the 3 7/8% notes due 2023, off by 3½ points to finish at 72 bid.

On Friday, those bonds had zoomed by more than 5 points.

More than $36 million of the notes changed hands in Monday’s downside move.

A trader at another desk suggested that profit-taking after last week’s big gains might be the driver behind Monday’s retreat.

Oil names move up

There meanwhile was no retreat in sight for the oil and gas issues on Monday, spurred on by continued gains in world crude oil prices.

Denver-based Continental Resources Corp.’s 5% notes due 2022 were probably the busiest purely junk issue, with more than $51 million moving around, a trader said, seeing the notes at 88 3/8 bid, up 1 3/8 bid, on top of their 3¼-point rise on Friday.

Chesapeake Energy’s 8% notes due 2022 gained 2¼ points, ending at 54 bid, with over $22 million of the Oklahoma City-based exploration and production company’s issue changing hands.

Denver-based Whiting Petroleum’s 6¼% notes due 2023 was perhaps the biggest sector gainer on the day, closing up – 5½ points at 62½ bid, a trader said, on volume of over $13 million.

In the oil market, West Texas Intermediate for April delivery soared by $1.98 on Monday to end at $37.90 per barrel, its second straight gain and third rise in the last four sessions.

Brent crude for May delivery posted its sixth straight gain and eighth advance in the last nines sessions, zooming by $2.12 to settle at $40.84 per barrel.

Indicators continue rise

Statistical market performance measures were higher across the board for an eighth consecutive session on Monday and for a ninth session in the last 11 trading days.

The KDP High Yield Daily Index rose by 18 basis points on Monday, ending at 65.25, its eighth straight gain and ninth in the last 11 sessions. On both Thursday and again on Friday, it had jumped by 26 bps.

Its yield came in by 3 bps, ending at 6.76% – its eighth successive tightening, which followed four straight sessions before that in which the yield had widened out. It had tightened by 5 bps on Friday.

The Markit Series 25 CDX North American High Yield Index was up by 5/32 point on Monday to finish at 101 1/8 bid, 101 3/16 offered. Monday marked its eighth consecutive gain and ninth in the last 11 sessions. It had also improved by 17/32 point on Friday.

And the Merrill Lynch North American High Yield Master II Index notched its eighth win in a row on Monday, advancing by 0.322%. It was the index’s 10th gain in the last 11 sessions, as it had also advanced by 0.697% on Friday.

Monday’s upturn pushed the index’s year-to-date return up to 1.675% – its fourth new peak level for the year in a row, up from the previous high point of 1.319% set on Thursday. Last week, the index – which had started the year on the downside – finally showed a positive cumulative return for the first time all year.

© 2015 Prospect News.
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