Genesis, Rayonier price $1.25 billion; Blue Racer, Virtusa soar; Occidental gains continue

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Dec. 10 – Another $1.25 billion cleared the primary market in the form of two oversubscribed dollar-denominated deals that saw formidable executions on Thursday.

Genesis Energy, LP and Rayonier A.M. Products Inc. brought one tranche each to junk bond investors.

Meanwhile, the secondary space continued to see some softness on Thursday as investors rotated out of some weaker credits.

“Guys are trying to get out of risk and take some profits,” a source said.

While the overall market was showing signs of softness after grinding to its tightest levels since February the previous week, new paper remained in demand with several recent deals trading several points above their issue prices.

Blue Racer Midstream, LLC/Blue Racer Finance Corp.’s 7 5/8% senior notes due 2025 (B2/B/B+) and Virtusa Corp.’s 7 1/8% senior notes due 2028 gained 3 to 4 points in the aftermarket.

Occidental Petroleum Corp.’s two-tranches of senior notes (Ba2/BB-/BB) continued to gain in active trading as WTI crude oil futures surged on Thursday.

Meanwhile, funds flows were relatively flat over the past week with high-yield mutual and exchange-traded funds adding $2 million in the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flows report.

High-yield energy

Genesis Energy, L.P. priced an upsized $750 million issue of 8% six-year senior notes (B1/B+) at par, 12.5 basis points through talk and 87.5 bps below the wide end of early guidance.

The deal was entirely spoken for at its original $550 million size by reverse inquiry, according to a bond trader.

Order books were six- to seven times the size of the deal, sources said.

The new Genesis paper rallied hard in the secondary market, heading out Thursday at 102 bid, 102½ offered.

Noting that the barrel price of West Texas Intermediate crude oil traded above $47 on Thursday (it was just above $36 at the end of October), a trader said investors are “piling in” to high-yield energy deals.

On Wednesday Blue Racer Midstream priced an upsized oversubscribed $600 million issue (from $550 million) of 7 5/8% five-year senior notes (B2/B/B+) 50 bps below the wide end of initial talk.

The new Blue Racer 7 5/8% notes due 2025 were going out Thursday at 103¾ bid, 104 1/8 offered.

“You're seeing a big appetite for high-yield energy paper, right now,” the trader asserted, adding that the dealers will by no means be concealing the fact from their energy-producing clients.

So watch for more energy deals sooner than later because they will almost certainly be coming, the source added.

Although the trader professed to have no names, in particular, it was not difficult to come up with a “for instance.”

Antero Resources Corp. has “a stack of maturities” it must address before the end of 2022, the trader said, noting that on-the-run Antero junk is generically 97 bid, 98 offered, at present.

Blue Racer in demand

Blue Racer’s 7 5/8% senior notes due 2025 traded as high as 105 on the break.

While the notes settled down in active trading on Thursday, they continued to trade with a strong premium.

The notes were marked at 103½ bid, 104 offered by one source.

Another source saw them at 103 5/8 bid.

And, as mentioned above, yet another source witnessed them at 103¾ bid at the end of the day.

There was more than $51 million in reported volume heading into Thursday’s close.

The deal played to as much as $2 billion in orders in the aftermarket with investors chasing the deal into the secondary space to increase their allocations, a source said.

The oil and natural gas company priced an upsized $600 million, from $550 million issue, of five-year senior notes (B2/B/B+) at par to yield 7 5/8% on Wednesday.

The yield printed at the wide end of final talk for a yield of 7½% to 7 5/8%, which had tightened from earlier talk of 7¾% to 8%.

Initial guidance was in the low 8% area.

Virtusa trades up

Virtusa’s 7 1/8% senior notes due 2028 were also trading several points above their issue price.

The notes traded as high as 104¼ before settling to trade in the 102¼ to 103¼ context, a source said.

They were marked at 103 bid, 103¼ offered heading into Thursday’s close.

While the issue size was small, the notes were active in the aftermarket, a source said.

“It was a small deal but it was placed in loose hands,” a source said. “There’ve been a lot of flippers.”

Virtusa priced a $300 million issue of the 7 1/8% notes at par. Initial guidance had been in the 8% area.

Energy lifted

Occidental’s recently priced tranches continued to gain in the secondary space with the energy sector, as a whole, lifted by a surge in crude oil futures.

Both tranches rose 1 point.

The 5½% senior notes due 2025 traded up to 102½ in the late afternoon after closing out the previous session on a 101-handle, a source said.

The 6 1/8% senior notes due 2031 traded up to 104 1/8 in the late afternoon.

Both tranches experienced about $25 million in reported volume.

Occidental priced a $750 million tranche of the 5½% notes and a $1.25 billion tranche of the 6 1/8% notes at par on Tuesday.

While the notes were already trading well, they were further supported by a gain in crude oil with investors expecting an uptick in demand as the Covid-19 vaccine is rolled out.

WTI crude oil futures settled at $46.97, an increase of $1.45, or 3.19% on Thursday.

Indexes

Indexes were again flat to down on Thursday as they were the previous session.

The KDP High Yield Daily index shaved off 3 points with the yield now 4.5%.

The index was up 2 points on Wednesday, 2 points on Tuesday and 8 points on Monday.

The ICE BofAML US High Yield index inched up by 0.6 bps with the year-to-date return now 5.2%.

The index shaved off 4.2 bps on Wednesday after gaining 7.8 bps on Tuesday and 12 bps on Monday.

The index shot past 5% returns last Friday.

The CDX High Yield 30 index dropped 11 bps to close Thursday at 108.98.

The index was up 15 bps on Wednesday after dropping 22 bps on Tuesday and 11 bps on Monday.

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