Holly Energy, SBA Communications price; Albertsons, VICI Properties on deck; EQT, Range Resources sink

By Abigail W. Adams

Portland, Me., Jan. 21 – The domestic high-yield primary market resumed its active pace Tuesday following the extended holiday weekend with two deals pricing and several more joining the forward calendar.

Holly Energy Partners LP and Holly Energy Finance Corp. priced $500 million of eight-year senior notes (expected Ba2/BB+), and SBA Communications Corp. priced an upsized $1 billion of seven-year senior notes (B1/BB-) in quick-to-market Tuesday trades.

In addition to Tuesday’s drive-by action, the forward calendar grew with VICI Properties LP and VICI Note Co. Inc.’s $2.5 billion three-tranche offering and Albertsons Cos. Inc.’s $2.35 billion three-part offering set to price on Wednesday.

The deals to price during Tuesday’s session fared well after breaking for trade. However, the secondary space was, in general, soft with equities down due to concern over the quick-spreading coronavirus in China and crude oil futures taking a hit due to concerns about oversupply.

Energy, in particular, was under pressure with several recent deals in the space coming in.

EQT Corp.’s split-rated dual-tranche offering (Ba1/BBB-/BBB-) sank further underwater on Tuesday with the notes now several points below their issue price.

Range Resources Corp.’s 9¼% senior notes due 2026 (B1), Transocean Ltd.’s 8% senior notes due 2027 (Caa1/B-) and Laredo Petroleum, Inc.’s 9½% senior notes due 2025 and 10 1/8% senior notes due 2028 (B3/B+) were also trading firmly below their issue price.

Holly Energy prices

Holly Energy priced a $500 million issue of eight-year senior notes (B1/BB) at par to yield 5% in a Tuesday drive-by.

Pricing came at the tight end of the 5% to 5 1/8% yield talk.

While the energy space was under pressure on Tuesday, the new 5% notes were performing well after breaking for trade, a source said.

The 5% notes were marked at 101 bid, 101½ offered heading into the market close.

SBA upsizes

SBA Communications priced an upsized $1 billion issue of seven-year senior notes (B1/BB-) at par to yield 3 7/8% in a quick-to-market Tuesday trade, according to a syndicate source.

The issue size increased from $750 million.

The yield printed at the tight end of yield talk in the 4% area.

While the pricing was tight, the 3 7/8% notes were still trading at a premium in the secondary space, a market source said.

The notes were marked at par 1/8 bid, par ½ offered after breaking for trade.

The forward calendar

The forward calendar also continued to grow on Tuesday with two megadeals on deck.

VICI Properties plans to price $2.5 billion in three tranches on Wednesday.

The deal consists of a five-year tranche with talk for a yield in the 3 5/8% area, a seven-year tranche with talk for a yield in the 3 7/8% area, and a 10.5-year tranche with talk for a yield in the 4¼% area, sources said.

Tranche sizes are to be determined.

Albertsons is also on deck with a $2.35 billion three-tranche offering. The deal was initially expected to price on Tuesday but timing was pushed to Wednesday’s session.

The deal consists of a $750 million three-year tranche, a $1 billion 10-year tranche and a $600 million add-on to its 4 5/8% notes due 2027.

The 4 5/8% notes were coming in following news of the add-on, a market source said.

The bonds were off about ½ point and stood poised to close the day at 101 ½ bid, 102 ½ offered, the source said.

EQT under water

EQT’s split-rated notes sank further under water on Tuesday.

The 7% senior notes due 2030 dropped another 2½ points with the notes closing the session at 94 bid, 95 offered.

The 6 1/8% notes due 2025 were trading at 95 bid, 95½ offered, a market source said.

EQT priced a $1 billion tranche of the 6 1/8% notes and a $750 million tranche of the 7% notes at par on Jan. 15.

While the notes were split-rated, they were largely being traded on high-yield desks, a source said.

The notes were heavy straight out of the gate with the longer duration notes below par soon after breaking for trade.

“That’s never a good sign,” a market source said.

Hedge accounts were leaning into the notes which did not have good backing, the source said.

With Tuesday a down day for energy, the notes were continuing their downward spiral.

Energy under pressure

The energy sector led the new issue activity in 2020.

While several of the recent deals continued to hold their premium in the secondary space, others sank further below their issue price.

Range Resources’ 9¼% senior notes due 2026 maintained their spot as the worst performing deal of 2020.

The 9¼% notes traded off 2 points to close Tuesday at 94 7/8.

The Fort Worth, Texas-based oil and gas company priced a $550 million issue of the 9¼% notes at par on Jan. 9. While the notes were heavy out of the gate, they showed signs of a rebound.

However, sinking crude oil futures and company news dragged the notes lower.

Transocean’s 8% senior notes due 2027 dropped 1 point to close Tuesday at 98¾.

The Switzerland-based offshore drilling contractor priced a $750 million issue of the 8% notes at par on Jan. 8.

Laredo Petroleum’s 9½% notes dropped 1 point to 98½. The Tulsa, Okla.-based energy company’s 10 1/8% senior notes due 2028 also traded off 1 point to close the day at 98½.

Crude oil futures were taking a hit on Tuesday due to concern about an oversupply.

The barrel price of WTI crude for February delivery settled at $58.38, a decrease of 20 cents, or 0.3%, on Tuesday.

Brent crude oil dropped to settle at $64.59, a decrease of 61 cents or 0.9%.

Funds see Friday outflows

The dedicated high-yield bond funds saw $41 million of net outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $111 million of outflows on the day.

Actively managed high-yield fund saw $70 million of inflows on Friday, the source added.

With three of the present week's five daily fund flows numbers in the tally, the combined funds are tracking $487 million of inflows in the week that will conclude with Wednesday's close, according to the market source.

Indexes drop

Indexes were down at the start of the week after closing out the previous week mixed.

The KDP High Yield Daily index was down 4 points to close Tuesday at 71.88 with the yield now 4.89%. The index saw a cumulative gain of 5 bps on the week last week.

The ICE BofAML US High Yield index saw its first decline in 2020. The index shaved off 2.6 bps with the year-to-date return now 0.733%.

The index posted a cumulative gain of 29.6 bps on the week last week.

The CDX High Yield 30 index dropped 28 bps to close Tuesday at 109.34.

The index saw a cumulative loss of 14 bps on the week last week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.