Archrock Partners prices; Cox Media, Calpine improve; Envision jumps; Transocean gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 16 – While the domestic high-yield primary market was relatively quiet on Monday, issuers continued to tap the market.

Archrock Partners, LP and Archrock Partners Finance Corp. priced an upsized $500 million issue of senior notes due April 1, 2028 (B2/B+).

And Alliance Data Systems Corp. announced a $600 million offering of five-year senior notes with pricing expected on Tuesday.

Meanwhile, the secondary space saw a strong start to the week with equities again closing at record highs and crude oil futures climbing further above $60 a barrel.

However, volume was light with end-of-the-year illiquidity beginning to take hold of the secondary space, sources said.

Cox Media Group’s new 8 7/8% senior notes due 2027 (Caa1/CCC+) continued their upward momentum on Monday with the notes climbing to a 104 handle.

Calpine Corp.’s recently priced 4½% senior notes due 2029 (Ba2/BB) remained active in the secondary space with the notes slightly improved.

Envision Healthcare Corp.’s 8¾% senior notes due 2026 jumped on news pending legislation regarding surprise medical billing would be delayed.

Transocean Ltd.’s 6.8% senior notes due 2038 (Caa2/CCC+) also gained in above average trading activity on Monday, despite more sellers than buyers in the market.

Archrock Partners upsizes

The Dec. 16 week got underway with a relatively quiet session in the new issue market.

Archrock Partners priced an upsized $500 million issue of senior notes due April 1, 2028 (B2/B+) at par to yield 6¼% in a drive-by.

The issue size increased from $400 million.

The yield printed in the middle of yield talk in the 6¼% area and tight to early guidance in the low-to-mid 6% area.

The 2019 high-yield primary market has at least a little way left to run.

Alliance Data Systems announced plans to price a $600 million offering of five-year senior notes on Tuesday.

Initial guidance has the deal coming to yield in the 5% area.

As to how late in the year new issue activity might continue, sources declined to speculate on Monday, saying only that the backdrop for bringing a high-yield bond deal could hardly be better than it is, at present.

Liquidity will continue to thin as the week goes on, a trader said, and added that it would be almost impossible to price a deal after the end of the Dec. 16 week.

Improved

Cox Media’s new 8 7/8% senior notes due 2027 continued to improve in active trading on Monday.

The notes rose to a 104 handle, closing the day at 104 3/8, according to a market source.

The bonds saw more than $12 million in reported volume.

Despite investor pushback during the subscription process, the 8 7/8% notes skyrocketed in the secondary and closed last Friday at 103 5/8.

The performance was attributed to the notes’ hefty coupon.

Cox Media priced a $1.02 billion issue of the 8 7/8% notes at par on Dec. 12. However, the deal underwent covenant changes and widened pricing before it was able to clear the primary market.

Calpine’s 4½% senior notes due 2029 also made slight gains in secondary trading. The notes rose ¾ point to close Monday at 101¼, according to a market source.

The notes saw more than $18 million in reported volume during Monday’s session.

The 4½% notes have been largely range bound since pricing at par on Dec. 10 with the notes primarily trading in the par ½ to par ¾ context.

Envision jumps

Envision Healthcare’s 8¾% senior notes due 2026 jumped in active trading on Monday after news broke that legislation regarding surprise medical billing would be delayed.

The 8¾% senior notes rose 7 points to close Monday at 64¼, according to a market source. The bonds saw more than $9 million in reported volume.

The increase was the largest single-day increase the bonds have seen since the $1.23 billion issue priced at par in September 2018, according to a market source.

The healthcare company and physician group was boosted by news that congress would not take action on legislation to curb surprise medical bills.

The legislation is geared towards protecting consumers from surprise medical bills that occur when patients are seen by an out-of-network doctor even if they are treated at medical facilities in their health plan’s network.

The House Ways and Means Committee recently proposed a more “provider-friendly” version of the legislation than was previously agreed to, which may prevent the bill from passing in 2019, Bloomberg reported.

The legislation previously had strong bi-partisan support and was expected to be signed into law before the end of the year.

Transocean gains

Transocean’s 6.8% senior notes due 2038 gained in above average trading activity on Monday despite more sellers than buyers in the market.

The 6.8% notes rose 2¾ point to 72 with more than $20 million in reported volume by the late afternoon, according to a market source.

While the notes were posting gains in the activity, there were more sellers than buyers in the market, a source said.

In addition to the increase in the 6.8% notes, Transocean’s five-year senior CDS tightened 4 bps.

The drilling rig operator is among the CCC energy credits that will be closely watched in the year to come.

The hunt for yield is expected to turn to the CCC space in 2020 with investors attempting to tap into fundamentally strong companies that are trading cheaply due to the trend in the space, sources said.

While the energy sector has underperformed for much of the year, it is showing signs of a rebound with oil futures on the rise.

Crude oil futures settled above $60 a barrel for the first time since September last Friday. They continued to climb on Monday, settling at $60.21, an increase of 14 cents, or 0.23%.

$581 million Friday inflows

The dedicated high-yield bond funds saw $581 million of daily net inflows on Friday, according to a market source.

High-yield ETFs saw $446 million of inflows on the day.

Actively managed high-yield funds saw $135 million of inflows on Friday, the source said.

With just two of the present reporting week's five sessions in the tally, the dedicated high-yield bond funds are tracking $800 million of inflows for the week that will conclude with Wednesday's close, the market source added.

Indexes

Indexes started the week on firm footing after all posted cumulative gains the previous week.

The KDP High Yield Daily index rose 9 points to close Monday at 71.44 with the yield now 4.97%.

The index saw a cumulative gain of 39 bps on the week last week.

The ICE BofAML US High Yield index climbed another 23.1 bps with year-to-date returns now 13.681%.

The index saw a cumulative gain of 92.1 bps on the week last week.

The CDX High Yield 30 index gained 30 bps to close Monday at 109.26.

The index saw a cumulative gain of 116 bps on the week last week.

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