Genesis Energy prices; Clean Harbors, Transocean, DISH outperform on rocky day in HY market

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 18 – On the heels of a torrid Tuesday in the primary market the high-yield new issue bourse backed off on Wednesday with a single upsized drive-by deal pricing.

In a heavily oversubscribed offering, Genesis Energy, LP and Genesis Energy Finance Corp. sold an upsized $500 million 7.25-year senior note (B2/B).

Meanwhile, it was an active day in the secondary space as the market digested $5.3 billion in new supply on a volatile day for markets.

The secondary space opened the day strong with the market lifted by a producer price index report that came in softer than anticipated.

However, continued hawkish comments from Federal Reserve officials and recession fears rekindled by a surprise decrease in retail spending and a deeply inverted yield curve drove the market lower.

The cash bond market held up well compared to the selling pressure in equities, a source said.

While the market was soft at the close, focus was on new paper with the deals to price during Tuesday’s session performing well despite some weakness in the broader market.

The new paper closed well off their morning highs but were able to hold on to some premium in the market downturn, a source said.

Transocean Inc.’s new 8¾% senior secured notes due 2030 (B2/B-), Bombardier Inc.’s 7½% senior notes due 2029 (B3/B-) and Clean Harbors, Inc.’s 6 3/8% senior notes due 2031 (Ba3/BB+) outperformed with the notes 1 to 2 points above their issue prices.

DISH Network Corp.’s 11¾% senior secured notes due 2027 (Ba3/B+) reclaimed their previous heights after Tuesday’s add-on drove the notes lower.

Sealed Air Corp.’s 6 1/8% senior notes due 2028 (Ba2/BB+) and Crestwood Midstream Partners LP and Crestwood Midstream Finance Corp.’s 7 3/8% senior secured notes due 2031 (Ba3/BB) also held some premium although the notes remained on a par-handle.

Wednesday’s primary

Genesis Energy sold an upsized $500 million (from $400 million) of 7.25-year senior notes (B2/B) at par to yield 8 7/8%, in the middle of yield talk in the 8 7/8% area.

The deal, which was heard to have been playing to $2 billion of orders at midday, broke to par ½ bid, 101½ offered, a sellside source said.

Two deals remain on the active new issue calendar – Nine Energy Service, Inc.’s $300 million offering of senior secured notes and Rayonier A.M. Products Inc.’s $325 million offering of senior secured notes due 2028.

Nine Energy started a roadshow on Tuesday for a net amount of $300 million which it plans to raise by means of selling 300,000 units comprised of senior secured notes due Feb. 1, 2028 (Caa2/CCC) with attached penny warrants for five shares of the company's common stock.

The five-year notes are in the market with initial guidance setting a 13% coupon, discounted to approximately 93.14, for an all-in yield of 15%, sources say.

The deal is generating a lot of chatter in the market because people are factoring in the share warrants in addition to an already steep discount, and the deal looks cheap, according to a bond trader who focuses on distressed situations.

However thus far there is not a lot of color from the dealer, the trader added.

High-yield investors are wondering aloud what perennial league table leader J.P. Morgan Securities LLC is doing running the books on such a small deal, the trader said, adding that there is speculation that there may be M&A activity down the line, which has attracted the bank's interest.

Also Rayonier A.M. Products is conducting a roadshow for a $325 million offering of senior secured notes due 2028, with proceeds to refinance debt.

Initial guidance has the notes coming to yield in the high-9% to 10% area.

The roadshow is set to run through Thursday.

Books have been slow to build, according to a sellside source who added that the deal was heard to have garnered $100 million of interest, as of early Wednesday morning.

Management is heard to be scheduling more one-on-one meetings with investors, the source added.

Transocean in demand

Transocean’s most recently priced 8¾% senior secured notes due 2030 continued to play to strong demand with the notes jumping in secondary market activity.

The 8¾% notes traded as high as 102½ amid early market strength; however, they gave back some gains to close Wednesday’s session wrapped around 101½.

In its second swipe at the high-yield market in as many weeks, Transocean priced $1.175 billion of the 8¾% notes at par in a Tuesday drive-by, according to market sources.

The yield came at the tight end of the 8¾% to 9% yield talk.

The notes priced in line with the B index and were trading with a higher yield than Transocean’s 8 3/8% senior secured notes due 2028, sources said.

The 8 3/8% senior notes were trading in the 102 to 102¼ context heading into Wednesday’s close with the yield 7¾%.

The notes have been largely stuck in the 101¾ to 102¼ range since the $525 million issue of amortizing notes, which priced at par on Jan. 9, broke for trade.

While Transocean is a credit with a hairy history, its refinancing deals have played to strong demand with the notes secured and the energy sector remaining well bid, a source said.

Bombardier strong

Bombardier’s 7½% senior notes due 2029 also saw a strong start to secondary trading with the notes hitting a 101-handle early in the session before selling took hold.

The notes traded as high as 101½ at their peak but closed the day in the par ¾ to 101¼ context, sources said.

Bombardier priced an upsized $750 million, from $500 million, issue of the 7½% notes at par in a Tuesday drive-by.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

Clean Harbors outperforms

Clean Harbors’ 6 3/8% senior notes due 2031 outperformed in the secondary market with the notes breaking above a 101-handle despite the day’s heaviness.

The notes closed Wednesday at 101¾ bid, 102 offered.

“There was good demand for that one,” a source said. “It traded better than some of the others.”

Clean Harbors priced a $500 million issue of the 6 3/8% notes at par in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 6½% area.

The environmental and industrial service provider is a niche company and with the deal small, allocations were most likely tight, which drove up the price in the secondary, a source said.

DISH’s add-on

DISH’s 11¾% senior secured notes due 2027 reclaimed their former heights on Wednesday after the company’s massively upsized add-on drove the notes lower on Tuesday.

The notes ripped up to a 104-handle early in the session, although they gave back some of their gains to close the day in the 103 3/8 to 103 5/8 context.

The notes closed last Friday in the 103 3/8 to 103 5/8 context, but news of the add-on sparked selling in the issue on Tuesday.

DISH priced a $1.5 billion add-on to the 11¾% notes at 102 to yield 11.079% in a Tuesday drive-by.

The add-on was massively upsized with the initial size announced at $500 million.

Pricing came at the rich end of the 101.5 to 102 price talk.

The upsize increased the total size of the issue to $3.5 billion.

The 11¾% notes initially priced at 98.171 to yield 12¼% in November 2022.

Par handle

Sealed Air’s new 6 1/8% senior notes due 2028 and Crestwood Midstream’s 7 3/8% senior secured notes due 2031 put in the weakest aftermarket performances on Wednesday although the notes were able to hold some premium.

Sealed Air’s 6 1/8% senior notes due 2028 were marked at par ¼ bid, par ¾ offered heading into the close.

The notes printed tight to the BB index which was most likely hampering their secondary market performance, a source said.

Sealed Air priced a $775 million issue of the 6 1/8% notes at par in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 6¼% area.

Crestwood Midstream’s 7 3/8% senior secured notes due 2031 were weak out of the gate but were lifted by the strength in the market early in the session.

However, when the market deflated, so did the notes, which closed Wednesday in the par to par ¼ context, a source said.

Crestwood Midstream priced an upsized $600 million, from $500 million, issue of the 7 3/8% notes at par in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 7½% area.

Fund flows

The dedicated high-yield bond funds sustained $193 million of net daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $177 million of outflows on the day.

Actively managed high-yield funds sustained $16 million of outflows on Tuesday, the source said.

Indexes

The KDP High Yield Daily index gained 19 points to close Wednesday at 53.62 with the yield now 6.77%. The index shaved off 1 point on Tuesday.

The ICE BofAML US High Yield index rose 36.8 bps with the year-to-date return now 4.344%.

The index gained 7.1 bps on Tuesday.

The CDX High Yield 30 index fell 44 bps to close Wednesday at 102.2.

The index was down 36 bps on Tuesday.

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