Berry, Rockpoint cap $4.6 billion week, new Rockpoint rises; market easier as rates rise

By Paul Deckelman and Paul A. Harris

New York, Feb. 2– The high-yield primary market saw a pair of $400 million offerings out of the energy sector on Friday – regularly scheduled forward calendar issues from oil and natural gas exploration and production company Berry Petroleum Co., LLC and Canadian natural gas storage company Rockpoint Gas Storage Canada Ltd.

The two deals closed out a week which saw new issuance slip to $4.59 billion in nine tranches, continuing a trend of slower issuance seen over the past several weeks, according to data compiled by Prospect News. The pace of new issuance was about even with that seen a year ago, which badly lagged this year’s pace in the opening weeks of 2018.

In the secondary realm, traders said that new and recently priced issues dominated the Most Actives list, led by the new Rockpoint Gas deal, the busiest credit, as the notes firmed smartly from their deeply discounted issue price.

The new Berry Petroleum bonds were also seen better, though on much lighter volume.

There was considerable activity in both of Thursday’s junk-rated offerings, from meatpacker JBS USA Lux SA and natural gas company Indigo Natural Resources LLC as well as in the split-rated offering which had priced on Thursday from energy services company Oceaneering International, Inc.

All were seen off from their Thursday levels – in line with a generally easier high-yield market, which fell in line with downturns in the stock and Treasuries markets linked to expectations of higher interest rates amid the surging U.S. economy.

Accordingly, statistical market performance measures remained down across the board for a second straight session on Friday. It was the fourth weak performance in the last five trading days.

Not surprisingly, the market measures also ended the week down universally from where they had been last Friday, Jan. 26.

Berry Petroleum upsizes

In Friday’s primary market Berry Petroleum priced an upsized $400 million issue of eight-year senior notes (B3/B+) at par to yield 7%.

The deal was increased from $350 million.

The yield printed at the wide end of the 6¾% to 7% yield talk and wide of the 6½% to 6¾% early guidance.

Goldman Sachs was the left bookrunner for the debt refinancing deal. Wells Fargo, BMO, Morgan Stanley, UBS and KeyBanc were the joint bookrunners.

Rockpoint prices tight

Against the backdrop of notable capital markets turbulence, Rockpoint Gas Storage got solid execution on its oversubscribed $400 million issue of 7% senior secured notes due March 31, 2023 (S&P: BB-/Fitch: B), sources said.

The deal priced at 97.378 to yield 7 5/8%.

Stacking the terms against price talk, the coupon printed at the tight end of 7% to 7¼% coupon talk, the reoffer price came rich to price talk of 97 and the yield printed 12.5 basis points beneath the low end of the 7¾% to 8% yield talk.

The buzz in the market had the $400 million debt refinancing deal playing to a book containing $3 billion of orders.

Joint bookrunner RBC will bill and deliver. BMO and CIBC were also joint bookrunners.

Meanwhile there was no news on a pair of deals that roadshowed through the Jan. 29 week and were on the calendar as possible Friday business.

They include JW Aluminum Holding Corp.’s $300 million offering of eight-year senior secured notes (B3/B-). Early guidance was in the 8% area, however some canvassing took place as high as 9½%, according to a market source.

Also EnVen Energy Corp. has been marketing $325 million of five-year senior secured second lien notes (Caa1/BB-). Initial guidance is 9½% to 10%.

In addition to those two, TransMontaigne is marketing a $300 million offering of eight-year senior notes (B2/BB-/BB) on a roadshow set to run into the early to middle part of the Feb. 5 week.

Early whisper is in the 6% area, a trader said on Friday.

Joint bookrunner RBC will bill and deliver. BofA Merrill Lynch, Citigroup, Credit Suisse, MUFG and Wells Fargo are also joint bookrunners.

KME at a discount

In the euro-denominated market, Italian copper supplier KME AG priced a €300 million issue of 6¾% five-year senior secured notes (B3//B-) at 98.953 to yield 7%.

The yield printed in the middle of yield talk set in the 7% area.

Joint global coordinator Goldman Sachs International will bill and deliver. BNP Paribas and Deutsche Bank were also joint global coordinators. Banca Akros SpA and Gruppo Banco BPM were joint bookrunners.

The Milan-based company plans to use the proceeds to repay debt under its borrowing base facility, to pay off Intek Group loans and for general corporate purposes.

Algeco Scotsman sets talk

The market continued to buzz about the Algeco Scotsman €1,415,000,000 equivalent four-part offering of high-yield notes on Friday as price talk surfaced.

Algeco Scotsman Global Finance plc is selling €1.12 billion equivalent of five-year senior secured notes (B2/B-/B+) in three tranches which are talked as follows:

• The euro-denominated fixed-rate notes are talked at 6½% to 6¾%, wide of early guidance announced in the 6% area;

• The dollar-denominated fixed-rate notes are talked in the 8% area; initial guidance on the dollar-denominated secured notes had them coming 150 to 200 basis points behind the euro-denominated secured notes; and

• The euro-denominated floating-rate notes are talked at Euribor plus 600 to 625 bps, wider than initial guidance that was set in the Euribor plus 600 bps area.

Algeco Scotsman Global Finance 2 plc is selling €295 million equivalent of dollar-denominated 5.5-year senior unsecured fixed-rate notes (Caa1/CCC/CCC+) talked to yield in the 10% area, in line with early guidance.

In a restructuring of the debt refinancing deal, a proposed euro-denominated tranche of unsecured notes was withdrawn from the market.

Tranche sizes remain to be announced.

Books close Monday.

Weekly pace slackens off

Friday’s two new high-yield bond deals brought the amount of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers which had priced during the week up to $4.59 billion in seven tranches, according to data compiled by Prospect News.

The week’s activity was down from the $5.18 billion of new junk bonds which priced in eight tranches the week before, ended Jan. 19.

This week’s issuance also lagged the $8.31 billion which had gotten done in 14 tranches the week before that, ended Jan. 19.

That brisk activity occurred even though the week was one trading day shorter than usual, with fixed-income markets in the United States closed on Jan. 15 in observance of the Martin Luther King Day holiday.

At the close of Friday’s session, year-to-date issuance had grown to $25.38 billion in 42 tranches – which actually slightly lagged the primary pace seen at this time a year ago, when volume through Feb. 2 had totaled $225.96 billion in 46 tranches.

The gap between the two years had been substantial earlier in 2018 but has closed notably over the past two weeks – two weeks ago, the 2018 issuance had been running around 29% ahead of a year earlier, and there was still a 2.5% difference seen last week. But the gap has since closed due to a combination of the aforementioned slowing in this year’s new-issuance pace, along with a pick-up in issuance which occurred during the corresponding two-week period in 2017.

For all of 2017, junk market issuance came to $281.57 billion in 524 tranches, running 24.1% ahead of the $226.78 billion which had priced in 359 tranches in 2016, the Prospect News data indicated.

Rockpoint on a roll

Among the day’s new issues, secondary market traders saw both strong upside movement as well as active volume in the heavily oversubscribed Rockpoint Gas Storage 7% senior secured first-lien notes due 2023.

A market source said that some $86 million of the Calgary, Alta.-based natural gas storage facilities operator’s new issue had changed hands, topping the junk market’s Most Actives list on Friday.

He saw the bonds trading anywhere between 98¼ bid and par, with most transactions going off in a 99 to par bid range.

He noted that “they priced at a discount” – 97.368, to be precise – “and then moved up.”

At another desk the notes were seen finishing at 99 3/8 bid.

And yet a third source located them between 99 and 99½ bid going home.

Berry is modestly better

A trader said that Friday’s other new issue – Bakersfield, Calif.-based oil and natural gas E&P company Berry Petroleum’s 7% notes due 2026 – had moved up to between 100 3/8 and 100 7/8 bid after pricing at par, although he said that compared with the Rockpoint deal, “it was very light trading.”

One of the other traders estimated volume at around $15 million, with bonds seen in the aftermarket between 100 1/8 and 101 bid, although he said that “a lot of the prints” were with a narrower 100¼ to 100½ bid range.

At another desk, the new notes were quoted a little better than that, finishing between 100½ and 101 bid.

Thursday deals active, easier

The traders meantime saw fairly active dealings – though at somewhat lower levels – in the new issues which had come to market during Thursday’s session.

One saw $51 million of the new JBS 6¾% notes due 2028 having traded.

He said the paper was circulating around at levels between about 98 11/16 and 100¼ bid, although he saw the final trades of the day going off between 98¾ and 99¼ bid.

A second trader saw the JBS notes mostly between 99 and 99½ bid.

The Greeley, Colo.-based meatpacking giant had priced its quick-to-market $900 million issue at par after the deal was upsized from an originally announced $700 million.

More than $17 million had traded up to around 100 3/8 bid in initial late aftermarket dealings Thursday, only to fall back to their current levels in heavier trading on Friday.

The new Indigo Natural Resources 6 7/8% notes due 2026 were quoted by one trader between 100½ and 101 bid on Friday, with a second seeing them between 100 5/8 and 101½ bid, though with the final prints between 100 5/8 and 101 bid.

Turnover was more than $31 million.

The Houston-based natural gas and natural gas liquids E&P operator has priced its regularly scheduled $650 million offering at par on Thursday and the new bonds had firmed smartly to a 101½ to 101 5/8 bid level.

“They were lower today,” one of the market sources said Friday, “but still holding most of their initial gains.”

Oceaneering International’s 6% notes due 2028 were seen trading in a par to 100¼ bid context, although another market source saw them finishing slightly below par, with around $24 million traded.

The Houston-based provider of services to the maritime energy industry had priced $300 million of its split-rated (Ba1/BBB) notes at par Thursday in a regularly scheduled deal, and they had traded around that issue price initially.

Market seen easier

All told, a trader said Friday that “of course, the stock market got slammed” and Treasury yields rose following the release of strong January jobs data, which the markets took as a signal that the Federal Reserve will likely be raising interest rates.

In Junkbondland, he said, “we did see some selling in high yield across the curve, mostly out of ETF-type accounts.”

He said: “We saw a few guys, more traditional accounts, trying to raise a little bit of cash – but nothing crazy. I don’t think anyone was looking to hit down bids, per se.”

He added: “Guys were saying that ‘we’ve seen this before – there’s plenty of cash around, I don’t see any redemptions, so I can sit on my cash and play the calendar and see how things shake out.’

“That was the impression that we got from the buyside guys – short duration, yield-to-call players looking to trade, mostly unaffected by the swings of the market.”

Indicators lower on day, week

Statistical market performance measures remained down across the board for a second straight session on Friday. They had turned lower on Thursday after being mixed on Wednesday. It was the fourth weak performance in the last five trading days as the indicators had also been down all around on Monday and again on Tuesday.

Those market measures also ended the week down universally from where they had been last Friday, Jan. 26, their first weekly loss after one weekly gain and their third lower week out of the last four.

The KDP High Yield Daily Index swooned by 17 basis points Friday to close at 71.35, its sixth straight loss. The index had ended down 5 bps on both Wednesday and again on Thursday.

Its yield ballooned out by 8 bps to 5.48%, its fifth consecutive widening out. It had risen by 1 bp on both Wednesday and Thursday.

Those levels compared unfavorably with the 71.97 index reading and 5.24% yield recorded last Friday.

The Markit CDX Series 29 index nosedived by more than 5/8 points on Friday, closing at 107 7/16 bid, 107½ offered, its second loss in a row. On Thursday, it had closed down ¼ point at 108 3/32 bid, 108 5/32 offered, versus Wednesday’s having edged marginally higher. Friday was the index’s fourth lower close in the last five trading days.

The index was down from a week earlier, when it had ended on Friday at 108 25/32 bid, 108 27/32 offered.

And the Merrill Lynch High Yield Index also finished on the downside for a second straight session, sliding by 0.344% on top of Thursday’s 0.114% loss, versus Wednesday’s gain of 0.123%. Before that, it had also fallen back on Monday and again on Tuesday, the index’s first losses after five straight gains before that.

Friday’s sizable loss dropped the index’s year-to-date return to 0.181% from 0.526% on Thursday. It was also further down from last Friday’s 0.936% finish, which had been the third consecutive new peak year-to-date level.

For the week, the index plunged by 0.749% after gaining 0.32% the week before. It was the third losing week in the last four. For the full year so far, the index has been up in two weeks, and down in the other three.

© 2015 Prospect News.
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