Noble upsizes; high-yield trading mixed on Fed’s rate hike; energy names down as oil declines

By Colin Hanner and Paul A. Harris

Chicago, Dec. 14 – The high-yield primary market saw a single deal on Wednesday, Noble Holding International Ltd.’s $1 billion of 7¾% seven-year senior notes. The issue was upsized from $500 million.

Trading was mixed on news that the Federal Reserve will raise interest rates by a quarter of a point, although most of the downward movement was felt in newly issued, tightly priced bonds, a trader said.

In new and recent issues, Carlson Travel Inc. was up marginally in several of its recent issues, RSP Permian, Inc. was down on the day, and others like Concho Resources, Inc. traded above their par issue prices but remained almost unchanged on the day.

The decision also caused a downturn in equity markets and oil prices, bringing high-yield exploration and production bonds down in tandem.

Weatherford International Ltd. was down several points, as was California Resources Corp., Superior Energy Services Inc. and Transocean Inc.

After announcing on Tuesday that it would not repay $57.1 million of its senior notes held by Clear Channel Holdings, iHeartMedia, Inc. continued to climb after a short period of losses in early-morning trading a day prior.

Noble doubles deal size

Noble Holding International priced Wednesday's sole deal in the primary market.

The Cayman Islands-based offshore drilling company doubled to size of its non-callable 7¾% seven-year senior notes issue (B1/BB-) to $1 billion from $500 million and priced those notes at 98.01 to yield 8 1/8%.

The yield printed at the tight end of yield talk in the 8¼% area. The reoffer price came in the middle of the 1.5 to 2.5 points discount talk.

The deal played to a book containing over $2 billion of orders, a trader said.

Credit Suisse Securities (USA) LLC, Barclays, Citigroup Global Markets Inc., DNB Markets Inc., HSBC Securities (USA) Inc., J.P. Morgan Securities LLC, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC were the joint bookrunners for the debt refinancing deal.

Gulfport Energy’s $600 million

A pair of overnight deals from the red hot energy sector was announced late Wednesday.

Gulfport Energy Corp. scheduled an investor conference call at 10 a.m. ET on Thursday.

The Oklahoma City-based oil and gas company plans to place $600 million of 8.5-year senior notes in a deal set to price later in the day.

Credit Suisse, BofA Merrill Lynch, Barclays, KeyBanc Capital Markets, PNC Capital Markets, Scotia Capital and Wells Fargo are the joint bookrunners for the acquisition financing.

Diamondback Energy, Inc. plans to price $250 million of 8.5-year senior notes.

The acquisition deal was scheduled to be marketed on a late Wednesday afternoon investor conference call.

Credit Suisse is the bookrunner.

The end is nigh

In spite of the late-Wednesday announcements from Gulfport and Diamondback, the conclusion of the 2016 new issue market appears to be at hand, sources said on Wednesday.

Although “Never say never” is one of the primary market's favorite proverbs, the liquidity that issuers prefer in order to ensure optimal execution will begin to thin quite soon, sources say.

People will be taking mandatory two-week vacations beginning in the week of Dec. 19 to Dec. 23, a trader said on Wednesday.

There is a small backlog of deals on the calendar expected to clear before the end of the year, although none of them has generated any recent news, sources say.

It includes Baffinland Iron Mines Corp., which is attempting to place $350 million of five-year senior secured notes (Caa1/B-) via Goldman Sachs & Co..

Early guidance has the deal coming in the 9% area, a trader said.

And Avison Young (Canada) Inc. is in the market with a $130 million offering of senior secured notes due 2021 (B3/B+) via bookrunner William Blair.

At least one market source was looking for Avison to price on Wednesday. However, no terms were available at press time.

One other deal remains as unfinished high-yield business.

Downstream Development Authority has been attempting to place $250 million of six-year senior secured notes via bookrunner Nomura Securities Co. Ltd.

Initial yield guidance was 9½% to 9¾%, according to a market source.

The deal was expected to price late last week. In the interim, it has been radio silence on Downstream Development, sources say.

Fund flows mixed

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

Actively managed funds saw big inflows of $550 million on the day.

However, high-yield exchange-traded funds saw $58 million of outflows on Tuesday, the trader said.

The cash flows of the dedicated bank loan funds, meanwhile, continued to be strongly positive.

The loan funds saw $365 million of daily inflows on Tuesday, the trader said.

Post-Fed affects new issues

Sentiment surrounding the Fed’s decision to raise interest rates caused the high-yield market to trek down 1/8 point to ¼ point on Wednesday afternoon. The tight pricing of high-yield new issues carried into Wednesday, as new and recent issues trading was mixed, though movement wasn’t too noteworthy.

After last week’s deal, Carlson Travel’s notes continued to see upward movement, particularly in the 6¾% notes due 2023, which went out with a 103½ bid, 104¼ offer, a market source said.

The 9½% notes went out with a 103¾ bid, 104¾ offer.

A trader said oil and gas producer RSP Permian’s 5¼% notes due 2025 were trading at 100 3/8 on the session, similar to Tuesday’s levels.

A market source said the notes finished with a 100 bid, 100½ offer, about a 3/8-point decrease from Tuesday’s levels.

Communications Sales & Leasing Inc.’s 7¼% notes due 2024 were down 1/8 point to 101 1/8, a trader said.

A market source quoted the notes with a 101 bid, 101 3/8 offer.

Concho Resources’ 4 3/8% notes due 2025 went out at “par ¼” a trader said, around the same levels as mid-morning trading.

A market source said the notes had a par bid and a par ¼ offer.

American Midstream Partners, LP’s 8½% notes due 2021 were trading “just below par,” a trader said, though the trader saw it printed at 100 3/8 on a smaller-volume trade.

Mid-morning Wednesday, another trader said the notes were trading around a 99¾ bid.

A market source said the notes went out with a par bid and a par ½ offer.

Oil down on rate rise

Oil prices fell on Wednesday after the Fed’s afternoon decision as the dollar swelled, prompting several energy names to fall.

West Texas Intermediate crude was down $1.94, or 3.7%, to $51.04 at the close, while Brent crude was down $1.82, or 3.3%, to $53.90.

Weatherford International’s 6½% notes due 2036 were down 3 points on a few trades, a market source said, and settled with an 80 handle.

Offshore driller Transocean Inc.’s 8 1/8% notes due 2021 were down 1¾ points to 102¾.

A market source said SESI LLC’s 7 1/8% notes due 2021 were down ½ point to 102¼

California Resources’ 8% notes due 2022 were down 1 point to 90½, a market source said.

iHeart beats again

Intraday swings on Tuesday initially saw iHeartMedia’s notes on the downswing, but they shot up as the afternoon continued.

The increases continued Wednesday, especially in the company’s 14% notes due 2021. They traded up 2 points to 41½, a market source said.

Also seeing a 2-point uptick were its 10% notes due 2018, which settled with a 70 handle.

Market indexes break pattern

The KDP High Yield index declined 1 basis point to 71.58, breaking a 10-session streak of consecutive gains. It is the second retreat in the last 17 sessions.

Yield remained consistent at 5.41%.

The Markit Series 27 CDX index retreated for the third-straight session, down more than 4/5 point to 106.06 bid, 106.10 offer.

The downturn dwarfed the 1/8-point losses seen in each of the previous two sessions.

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