Murphy Oil, APX deals price to close out $9 billion week, new Muprhy jumps; Concordia, Ocean Rig fall

By Paul Deckelman and Paul A. Harris

New York, Aug. 12 – The high yield primary market closed out its busiest week since mid-June on Friday with a pair of pricing transactions that generated $654 million of new dollar-denominated and junk-rated paper.

Energy exploration and production company Murphy Oil Corp. did an upsized $550 million of eight-year notes in a regularly scheduled forward calendar offering.

Secondary market traders said that the new Murphy Oil bonds firmed smartly when they hit the aftermarket, and racked up the heaviest volume of any credit in Junkbondland.

The primaryside also saw security alarm company Vivint, Inc., through its holding company, APX Group, Inc., price a $10 million add-on to its existing 2022 secured notes.

The two deals brought the week’s total of new dollar-denominated junk bonds up to some $9.1 billion, topping last week’s more than $7 billion of new issuance.

Among recently priced new issues, traders saw active dealings in Thursday’s offering from XPO Logistics, Inc., with the notes off slightly on the day from the hefty gains they had notched in their initial aftermarket action.

Away from the new issues, traders saw oil and gas credits like Chesapeake Energy Corp. mostly better, helped by a second straight session of surging world crude oil prices. Deep-water drilling contractor Transocean Ltd. bonds were firmer in active dealings.

However, Transocean sector peer Ocean Rig UDW Inc.’s bonds fell after the company warned that current market conditions could force it into a bankruptcy filing.

Another downsider was Canadian drug manufacturer Concordia International Corp., whose paper retreated as the company issued downwardly revised revenue and earnings guidance.

Statistical market performance measures were mixed for a third straight session on Friday, their seventh such mixed performance in the last 11 trading days.

For the week, those indicators were meantime higher versus where they had finished last Friday- their second straight higher week in a row.

Murphy Oil upsizes

Two issuers took away a combined total of $654 million on Friday, each one bringing a single-tranche deal.

Both offers were in the market at least overnight.

One of the two upsized.

Murphy Oil Corp. priced an upsized $550 million issue of eight-year senior notes (B1/BBB-/BB+) at par to yield 6 7/8% on Friday, according to market sources.

The issue size was increased from $500 million.

The yield came at the tight end of the 6 7/8% to 7% revised yield talk, according to a trader who added that earlier talk was in the 7% area.

J.P. Morgan, BofA Merrill Lynch, BNP Paribas, DNB, Scotia, MUFG and Wells Fargo were the joint bookrunners.

The El Dorado, Ark.-based independent oil and natural gas exploration and production company plans to use the proceeds for general corporate purposes, which may include the repayment, repurchase or redemption of the its 2½% notes due 2017.

APX taps 7 7/8% notes

APX Group, Inc., the holding company of Vivint, Inc., priced a $100 million tack-on to its 7 7/8% senior secured notes due Dec. 1, 2022 (B1/B) at 104.00 to yield 6.78%.

The reoffer price came in the middle of the 103.75 to 104.25 price talk.

Credit Suisse, BofA Merrill Lynch, Deutsche Bank, Citigroup, Goldman Sachs, Macquarie, HSBC, Mizuho, Morgan Stanley, Guggenheim, Citizens and Imperial were the joint bookrunners for the general corporate purposes deal.

Dog Days

The new issue market is apt to find itself becalmed in the traditionally quiet Dog Days of August, in the week ahead, sources said on Friday.

A lot of market participants were about to depart on their mandatory two-week vacations, a trader said.

The week ahead will get underway with two deals on the active forward calendar.

Diamond Resorts International, Inc. is selling an upsized $1 billion amount of notes in two tranches: $400 million seven-year secured notes (expected ratings B1/B+) and $600 million eight-year unsecured notes (Caa1/CCC+).

The $600 million unsecured tranche roadshowed earlier in the month and was delayed when the company elected to make an earnings restatement.

The $400 million secured tranche was announced after the relaunch of the unsecured notes; the company concurrently downsized its term loan by $400 million.

The RBC-led deal is expected early in the week.

And Big Tex Trailers is expected to price a $670 million offering of seven-year senior secured notes on Tuesday.

The Goldman Sachs/Barclays deal is being guided in the 10% area, a trader said.

A sizable healthcare deal has been expected and could show up in the week ahead, the trader said, adding that the identities of the issuer and the dealer have yet to be revealed, however Kinetic Concepts Inc. has bonds to refinance.

Thursday inflows

The daily cash flows of the dedicated high yield bond funds were modestly positive on Thursday, the most recent session for which data was available at press time, according to a market source.

High yield ETFs saw $76 million of inflows on the day.

Actively managed high yield funds saw $50 million of daily inflows on Thursday.

The news follows a weekly report from Lipper US Fund Flows that the dedicated junk bond funds saw $1.66 billion of inflows during the week to Wednesday's close. Of that amount, $1.26 billion went to ETFs, the source said on Friday.

Busiest week since June

Friday’ two pricings totaling $654 million of proceeds raised the week’s new-issuance total to $9.123 billion in 13 tranches, according to data compiled by Prospect News.

That was up from the $7.239 billion that priced last week, ended Aug. 5, in 12 tranches.

It was the most new dollar-denominated and fully junk-rated paper from domestic or industrialized-country issuers since the week ended June 10, when the junk market saw $14.005 billion price in 16 tranches – the heaviest new-issue week so far this year, the data indicated.

This week’s new-issue activity meantime brought the year-to-date total up to $145.371 billion having come to market in 211 tranches.

That was running some 28.4% behind the new-deal pace seen at this time last year, when $203.072 billion had priced in 328 tranches by this point on the calendar, the Prospect News data indicated.

Last week, this year’s new-issuance pace had trailed 2015 by 31.3% year-over-year.

New Murphy notes gain

When the new Murphy Oil 6 7/8% notes due 2024 were freed for aftermarket activity, traders saw the paper having popped solidly.

“They were up quite a bit,” one trader said, seeing the bonds last traded at 102 to 102½ bid.

“There was a lot of demand on the break.”

A second trader pegged the new bonds at 102¼ bid.

He saw more than $72 of the notes having changed hands, making the issue easily the busiest among the purely junk issues.

APX activity restrained

One of the traders at the same time said that he “really did not see” any activity going on in the new APX Group 7 7/8% notes due 2022.

He noted the relatively small size – $100 million – of the Provo, Utah-based home security alarm service provider’s add-on deal.

He said he had heard it quoted around the 104 issue price.

A trader at a different shop quoted the bonds trading between 104½ and 105½.

XPO stays busy

Thursday’s new deal from Greenwich, Conn.-based supply chain services provider XPO Logistics Inc. “continued to trade pretty well” on Friday, one of the traders said, locating the notes around 101¼ to 101½ bid.

A second trader saw the bonds at 101½ bid, on volume of more than $30 million, although he said that was actually down ¼ point from where he had seen the bonds trading after their pricing.

That quick-to-market $535 million deal had priced at par.

When the bonds began trading on Thursday, they initially firmed to a 101¼ to 102¼ bid range.

Energy names better

A trader said that new issuance “was responsible for a majority of the flows” in Friday’s market, although that was not saying much; the overall junk bond market was quiet, which traders variously ascribed to the usual summer Friday doldrums, the extreme heat conditions in New York and other business centers and the distraction provided by the televised Summer Olympic games.

One trader said the overall market “had a good tone.”

“Oil being up helped,” he added.

World crude oil prices surged for a second consecutive session after having posted losses for the two sessions before that.

September-contract West Texas Intermediate crude – the benchmark U.S. crude grade – shot up by an even $1 per barrel on Friday at the New York Mercantile Exchange, settling at $44.49, while October-delivery Brent crude, the main international benchmark grade, firmed by 93 cents per barrel, ending at $46.87.

On Thursday, those crude grades had soared by $1.78 and $1.99 per barrel, respectively

Given a boost by the firmer crude prices were such issues as Chesapeake Energy’s 3.93% notes due 2019, which rose by 7/8 point on the day, to 88 5/8 bid, on volume of more than $15 million.

It 5¾% notes due 2023 were the big winners on the day, up 2 1/8 points at 74 bid, with about $7 million having changed hands.

Other oil-patch gainers on the day included Oasis Petroleum’s 6 7/8% notes due 2023, up 2¼ points at 94¼ bid; MEG Energy’s 7% notes due 2024 up 2 points at 84 bid, and Tullow Oil’s 6% notes due 2020, also up a deuce on the day to close at 84½ bid.

Global energy drilling contractor Transocean’s bonds were seen improved with the overall better market tone and the pickup of the energy market.

Its 9% notes due 2023 finished at 98 ¼ bid, up 1 1/8 point, with more than $14 million traded.

Ocean Rig bonds slide

Transocean sector peer Ocean Rig UDW’s bonds fell sharply on Friday, after the Houston-based seaborne drilling contractor warned that currently difficult market conditions could force it to eventually seek bankruptcy protection.

That hammered its paper down by as much as 15 points in morning dealings, to around a 25 bid, 28 offered region.

Later on in the day, another trader said that the company’s 6½% notes due 2017 were ending at an even 30 bid, down 13¾ points on the session.

Ocean Rig’s Nasdaq-traded shares plummeted by $1.33, or 61.57%, to end at 83 cents. Volume of 24.8 million shares was 10 times the usual turnover.

Concordia gets clobbered

Away from the energy realm, traders saw considerable downside activity in Concordia International Corp.’s bonds, after the Oakville, Ont.-based pharmaceutical manufacturer reported quarterly results that included reduced guidance.

Its 9½% notes due 2022 plunged by 8¾ points to 83¾ bid, a trader said, on volume of more than $10 million.

Its 7% notes due 2023 were likewise lower at 76¾ bid, with more than $18 million traded.

The company’s Nasdaq-traded shares meantime plunged by $6.33, or 33.69%, ending at $10.03. Volume of 10.9 million was over 19 times the norm.

Indictors stay mixed

Statistical market performance measures were mixed for a third straight session on Friday, and for the seventh time in the last 11 sessions. They had first turned mixed on Wednesday after having been higher across the board for four straight sessions before that.

The indicators were higher versus where they had finished out last Friday, their second straight weekly gain and their sixth in the last seven weeks.

The KDP High Yield index rose by 8 basis points, to 69.88, after having eased by 1 bp on Thursday. It was the index’s sixth gain in the last seven sessions.

Its yield came in by 4 bps, to 5.43%, after having risen by 1 bp on Thursday. Friday was its sixth narrowing in the last seven sessions.

Those levels compared favorably with the 69.50 index reading and 5.56% yield seen last Friday.

The Markit Series 26 CDX index, though, lost 3/32 point on Friday, closing at 104 21/32 bid, versus its 3/16 point gain on Thursday.

For the week, though, the index was up from the previous Friday’s 104 17/32 bid, 104 9/16 offered close.

The Merrill Lynch High Yield index was meanwhile up for an eighth successive session on Friday, firming by 0.093%, on top of the 0.039% gain seen on Thursday.

The streak-prone index’s gains of the last eight sessions follow a six-session slump before that.

Friday’s advance brought the index’s year-to-date return up to 13.589% its sixth straight new peak level for the year, versus Thursday’s 13.483%, the former peak level.

For the week, the index was up by 0.815%, its second straight weekly gain and seventh such gain in the last eight weeks. Last week, it had risen by 0.546%.

© 2015 Prospect News.
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