Upsized Sanchez Energy prices to cap $10.4 billion week, recent deals trade up

By Paul Deckelman and Paul A. Harris

New York, June 13 – The high-yield primary closed out a busy week on Friday with an upsized $850 million offering from Houston-based oil and natural gas exploration and production company Sanchez Energy Corp.

That regularly scheduled forward calendar offering brought the week’s new issuance up to $10.42 billion in 22 tranches, according to data compiled by Prospect News.

That was more than double the $4.82 billion of new U.S.-dollar-denominated, fully junk-rated offerings from domestic or industrialized country borrowers which had come to market the week before, ended June 6.

The week’s issuance, in turn, raised the year-to-date total to $160.54 billion in 306 tranches – just slightly off from the pace seen a year ago. Issuance totaled $161.26 billion in 362 tranches by this point on the calendar last year.

Besides the new Sanchez Energy bonds, which were seen to have firmed solidly when they hit the aftermarket, traders reported good gains in such recently priced new deals as those from Seventy Seven Energy Inc. – the oilfield services business of Chesapeake Energy Corp. – and clothing retailer Men’s Wearhouse, Inc., the latter being probably the week’s star secondary performer among the new transactions.

Statistical market performance indicators were mixed for a third consecutive session on Friday.

They were also mixed on a week-over-week basis from where they had ended up the previous Friday.

Market participants meantime also noted the continued flow of fresh money into Junkbondland, with flows into high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends – showing a sixth consecutive weekly gain.

Sanchez upsizes, at tight end

Market watchers chalked up a quiet late-spring Friday session to World Cup football action attracting attention far and wide, especially in Europe.

One deal crossed the finish line, however.

Sanchez Energy launched and priced an upsized $850 million issue of senior notes due Jan. 15, 2023 (B3/B-) at par to yield 6 1/8%.

The deal was increased from $700 million.

The yield printed at the tight end of yield talk that had been set in the 6¼% area.

RBC was the left bookrunner. Credit Suisse was the joint bookrunner.

The Houston-based oil and gas exploration and development company plans to use the proceeds to fund an acquisition, repay bank debt, and for general corporate purposes, including working capital.

Timing on the deal was accelerated. The roadshow was initially expected to run into the June 16 week.

Lately dealers seem to be pushing deal-timing, according to a trader who, when pressed for a reason, simply said: “Why wait? If the book is done get it out the door.”

Wave starts Monday

WaveDivision Holdings LLC plans to start a roadshow on Monday for a $150 million offering of five-year PIK toggle notes.

Deutsche Bank, Wells Fargo, RBC and SunTrust are joint bookrunners for the dividend deal.

Also in the week ahead, All Aboard Florida is expected to complete a $390 million offering of five-year senior secured PIK toggle notes, a project financing via J.P. Morgan and Morgan Stanley.

The deal had been expected to price before the end of the just-concluded week, sources said on Friday.

However project financings are apt to face headwinds in a high-yield market where investors may browse $500 million-plus offerings from ultra-familiar issuers wishing to refinance debt or fund acquisitions.

All Aboard Florida, a subsidiary of Florida East Coast Industries, plans to use the bond proceeds to finance all or a portion of the design, construction, development and equipping of the Miami to West Palm Beach portion of a higher speed intercity passenger train line from Miami to Orlando.

No credit ratings have come out so far on the deal, the trader recounted on Friday.

Neither has official price talk surfaced, although the initial guidance was 11%, the source said.

Also in the coming week, Sunshine Oilsands Ltd. is expected to price a $325 million offering of five-year senior secured notes, an informed source said on Friday.

The deal, which is also a project financing, was launched into the market late in the May 19 week.

Although no official price talk has circulated, early yield conversations took place in the context of 15%, market sources said.

Imperial Capital is the sole physical bookrunner. Morgan Stanley and Scotiabank are joint bookrunners.

Heading into the Friday session there was one other dollar-denominated deal parked on the calendar for the week ahead.

NUVOtv is roadshowing a $230 million offering of five-year senior secured notes via bookrunner Jefferies.

New deals trade up

In the secondary market, it may have been Friday the 13th, but there was not a black cat to be seen anywhere about.

Instead, traders expressed generally positive assessments of how things were going.

“I haven’t seen such a rush of new issues do this well” in a long time, one mused.

“It seemed like everyone just wanted to get them in,” he said of the recent rush of new deals that included the eight that came to market on Thursday, totaling more than $3.3 billion.

He said that “a lot of people were selling their shorter-duration paper to lengthen out a little bit. I guess they have confidence in the high-yield market right now.”

He said this was evident in the performance of the new deals.

“Everything did well,” he said. “Across the board.

“You saw where Men’s Wearhouse went, where Chesapeake went, they had a three-handle [i.e. around 103 bid.]

“It’s just a banner time for investors that bought the new issues.”

Sanchez shows strength

When the Sanchez Energy 6 1/8% notes due 2023 were freed for secondary dealings, a trader quoted the oil and gas operator’s new issue at 101 bid, 102 offered.

A second trader a little later on saw the bonds get even better, pegging them at 102 1/8 bid, 102 3/8 offered – well up from the par level at which the upsized $850 million offering had priced.

Thursday deals firm

Among the issues that priced on Thursday, a trader saw Seventy Seven Energy's 6½% notes due 2022 at 102½ bid, 103½ offered.

That was up from the par level at which the Oklahoma City-based company – the soon-to-be-spun-off oilfield services unit of natural gas and oil operator Chesapeake Energy – had priced its $500 million offering.

He saw the big deal of the day, from Gates Global LLC and Gates Global Co., rack up more modest gains in the 100½ to 100¾ area, about unchanged on Friday from where they had gone after pricing Thursday.

The Denver-based industrial manufacturer priced its $1.04 billion of 6% notes due 2022 at par as part of a $1.365 billion equivalent two-part offering that also included a euro-denominated tranche of eight-year notes.

Thursday’s offering of 4 7/8% notes due 2024 from Compass Minerals International, Inc. were seen on Friday in a 100¼ to 100¾ context.

That was a little up from the par level at which the Overland Park, Kan.-based producer of minerals for deicing, agricultural and industrial applications had priced its $250 million quick-to-market deal, after upsizing it from $200 million originally.

LMI Aerospace, Inc.’s $250 million of 7 3/8% second-priority senior secured notes due 2019 were seen by a market source up 1/8 point on Friday around 101¾ bid, 102¼ offered. The St. Charles, Mo.-based supplier of components and provider of engineering services to the aerospace and defense industries had priced its deal at par and the bonds had initially firmed to about 101 5/8 bid, 102 1/8 offered when they hit the aftermarket.

Men’s Wearhouse still looks good

Wednesday’s well-received offering from Houston-based men’s apparel retailer Men’s Wearhouse continued to hold its solidly higher aftermarket levels on Friday.

One trader quoted those 7% notes due 2022 in a 102¼ to 102¾ par range, while a second market source saw them even better than that, as high as 103 5/8 bid, 103 7/8 offered.

The company had priced the $600 million issue at par and the bonds traded strongly from the get-go.

Tenet Healthcare Corp.’s add-on to its 5% notes due 2019 was quoted Friday at a wide 102 to 104 context.

The Dallas-based hospital operator had priced that $500 million quick-to-market addition to its existing $600 million of the notes sold earlier this year at 101.5 to yield 4.639%.

Funds gain $277 million

A key factor behind the continued strength of both the high yield primaryside and the secondary market this year has been ample liquidity, with investors shoveling new money into Junkbondland in hopes of getting good returns there.

A market source said Friday that the trend continued in the latest week, as high-yield mutual funds and exchange-traded funds tracked by AMG Data Services, Inc. a unit of Thomson Reuters Corp.’s Lipper Analytics unit, showed $277 million inflow in the week ended on Wednesday.

It was the 6th straight week in which more money has come into the funds than flowed out of them, a stretch which has seen inflows totaling an estimated $2.32 billion according to a Prospect News analysis of the figures, including the $302 million cash addition seen in the week before, ended June 4.

On a year-to-date basis, the funds have shown a net gain of $6.1 billion for 2014, a new peak level. Inflows have now been seen in 18 of the 23 weeks since the start of the year, with outflows seen in the other five weeks.

Market indicators mixed

Statistical indicators of junk market performance meanwhile were mixed for a third consecutive session on Friday, and were likewise mixed versus where they had finished out the previous Friday, June 6.

The KDP High Yield Daily Index was up by 7 basis points on Friday to 75.03, its first gain after two straight losses, including Thursday’s 1 bp downturn.

Its yield, meanwhile, came in by 1 bp to 5.07%, its second straight narrowing. It had also declined on Thursday by 2 bps.

Those levels compared favorably with the 75.03 index reading and 5.08% yield seen the week before.

The Markit CDX Series 22 Index was unchanged on Friday at 108 15/32 bid, 108 19/32 offered, after having suffered three straight losses, including Thursday’s ¼ point drop.

It was down from where it had ended the previous week, at 109 bid, 109 1/16 offered.

© 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.