Freedom Mortgage, Viasat on tap; Power Solutions in focus; EP Energy drops

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 19 – While no deals priced during Tuesday’s session, the domestic high-yield primary market’s calendar continued to grow.

Viasat, Inc. plans to price $500 million of eight-year senior notes with talk in the 5¾% area.

Freedom Mortgage Corp. is slated to price a $350 million offering of five-year senior notes (B2/B-) on Wednesday with initial price talk in the high 10% area.

The new deals join ADT Corp., Kosmos Energy Ltd. and Nexeo Solutions, Inc. (Neon Holdings, Inc.) on the forward calendar with all deals scheduled to clear the market by the week’s end.

In the European market, Sweden's DDM Holding AG mandated banks to arrange investor meetings with a possible euro-denominated offering to follow.

Meanwhile, Power Solutions’ dollar-denominated tranches continued to dominate activity in the secondary space with the notes again seeing minor improvement after skyrocketing out of the gate on Monday.

While Freedom Mortgage’s new offering was in the works, its outstanding 8¼% senior notes due 2025 were trading down.

EP Energy Corp.’s junk bonds continued their downward spiral on Tuesday after the company announced liquidity issues may prevent it from being able to meet its obligations on its notes due May 2020.

Viasat talk 5¾% area

News flow in the high-yield primary market remained light on Tuesday, as dealers continued to set the table for a handful of deals expected to clear during the final three sessions of the March 18 week.

Viasat talked its $500 million offering of eight-year senior secured notes (B1/BB+) to yield in the 5¾% area.

The yield came inside of initial guidance in the 6% area, a trader said, adding that $250 million of reverse inquiry helped to propel the deal into the market.

JP Morgan is leading the debt refinancing and general corporate purposes deal.

Freedom Mortgage for Wednesday

In a deal flying at, or just above, radar altitude, Freedom Mortgage plans to sell $350 million of five-year senior notes (B2/B-) on Wednesday.

Initial price talk has the notes coming with a yield in the high 10% area.

There is $100 million of reverse helping to bring Freedom Mortgage to market, the trader said.

JP Morgan is the lead for the debt refinancing.

Viasat and Freedom Mortgage take places aboard a $4.61 billion active calendar comprised of deals expected to clear by the end of the week.

ADT is marketing a $2.75 billion three-part deal.

There are two secured bullet tranches (Ba3/BB-) sized at $750 million apiece, including five-year notes whispered in the 5½% area and seven-year notes whispered in the 6% area.

A sole $1.25 billion tranche of eight-year non-call-three unsecured notes (B3/B-) comes with talk of 7½% to the 7¾% area. Pricing is expected Thursday.

Kosmos Energy is marketing $600 million of seven-year senior notes (expected ratings BB-/BB). The deal, with initial guidance in the 7% area, is playing to a mix of high yield and emerging markets accounts, sources say.

And Nexeo Solutions (Neon Holdings, Inc.) is selling $410 million seven-year senior secured notes (B3/B) with initial guidance of 9½% to the 10% area.

DDM mandate

The European new issue market also remained quiet on Tuesday.

Sweden's DDM Holding mandated Arctic Securities AS and ABG Sundal Collier ASA to arrange a series of investor meetings in the Nordic countries and Continental Europe beginning Wednesday.

A euro-denominated offering of three-year senior secured notes may follow, pending market conditions.

The European primary is expected to ramp up in the near term, a London-based debt capital markets banker said on Tuesday.

There are prospective issuers in the wings looking to place new junk bonds ahead of the Easter holiday (April 21). And the signals along the track ahead are unmistakably green, the banker added, noting that investors in Europe are seeking to put cash to work in speculative grade bonds.

What's more, those investors are unlikely to be deterred by headline news risk, such as Brexit, which is now perceived to be unfolding on a protracted timeline, the banker added.

Power Solutions in focus

Power Solutions’ dollar-denominated tranches continued to dominate activity in the secondary space.

The notes were making slight gains on Tuesday after skyrocketing after breaking for trade on Monday.

Power Solutions 8½% senior notes due 2027 were seen at par ¾ bid, 101¼ offered early in the session.

They were changing hands around 101 1/8 later in the afternoon after closing Monday at 101, according to a market source.

More than $80 million of the bonds were on the tape by the late afternoon.

Power Solutions’ 6½% notes due 2026 were seen at 101¾ bid, 102 offered early in the session and were changing hands at 102 1/8 later in the afternoon, sources said.

The notes closed Monday at 102.

More than $73 million of the notes were on the tape late in Tuesday’s session.

Power Solutions priced $2.95 billion and €700 million notes in three tranches on Monday.

Power Solutions priced a $1 billion tranche of the 6½% notes at par and a $1.95 billion tranche of the 8½% notes at par on Monday.

The secured tranche was downsized from $2 billion to $1 billion during the subscription process, which contributed to their demand in the secondary space.

The deal was playing to more than $12 billion of orders across all three tranches, sources said.

Freedom Mortgage trades down

While volume was light, Freedom Mortgage’s outstanding 8¼% senior notes due 2025 were trading down with a new offering in the works.

The 8¼% notes shaved off 2 1/8 points during Tuesday’s session to close at 89¼, a market source said.

With initial guidance for the new offering in the high 10% area, the outstanding notes were getting pushed down, a market source said.

EP Energy’s downward spiral

EP Energy’s embattled junk bonds continued to lose ground in high-volume activity on Tuesday after the company disclosed that liquidity issues may prevent it from meeting the maturity on its 2020 notes.

EP Energy’s 7¾% notes due 2026 were the most active in the capital structure.

The notes dropped almost 2 points to 78½ in the high-volume activity.

More than $21 million of the bonds were on the tape by the late afternoon.

EP Energy’s 9 3/8% senior notes due 2024 dropped 2¼ points to 24.

The 9 3/8% senior notes due 2020 dropped 3 points to 35.

EP Energy disclosed in its 10-K filing that it may not have enough liquidity to retire the 9 3/8% notes due May 1, 2020 upon their maturity, according to a market source.

There is $182 million of the notes outstanding.

EP Energy’s embattled junk bonds have furthered their descent in recent weeks.

The notes cratered last week after posting fourth-quarter earnings and reporting a $1.1 billion write-down for its Permian basin asset.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Monday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $16 million of outflows on the day.

However, actively managed high-yield funds saw $147 million of inflows on Monday, the source said.

With Tuesday and Wednesday flows remaining to be tallied into the current week's total, the combined funds were tracking $916 million of inflows in the three sessions encompassed by Thursday's open and Monday's close, the trader said.

Indexes mixed

Indexes were mixed on Tuesday after launching the week on strong footing.

The KDP High Yield Daily index rose 5 basis points to close Tuesday at 70 with the yield now 5.94%. The index was up 6 bps after a cumulative gains of 41 bps on the week last week.

The ICE BofAML US High Yield index gained 11.3 bps with the year-to-date return now 6.853%.

The index gained 6 bps on Monday after a cumulative gain of 84.8 bps on the week last week.

After sinking below 6% year-to-date returns on March 9, the index popped back above it on March 11.

The index initially shot past 6% returns on Feb. 25 after passing 5% returns on Feb. 12.

The CDX High Yield 30 index dropped 6 bps to close Tuesday at 106.47. The index was flat on the week after gaining 6 bps on Monday.

The index saw a cumulative gain of 97 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.