Forward calendar fills up; Gaming & Leisure, Centene improve; Ultra drops on earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 11 – The domestic primary market was quiet on Friday after pricing $3.2 billion in three high-yield deals and $1 billion in one split-rated deal over the past week.

However, the forward calendar is filling up with four to five new deals on the horizon for the week ahead.

SRS Distribution, Inc. announced plans to start a roadshow on Monday for a $380 million offering of eight-year senior notes (Caa2/CCC+).

Ithaca Energy (North Sea) plc set initial price talk on a $350 million offering of five-year senior notes (Caa1/CCC+) in the mid 9% area.

Ocean Yield ASA mandated banks to arrange fixed-income investor meetings in the Nordic region starting Monday with a possible krone-denominated bond to follow.

Calfrac Holdings LP, Hearthside Food Solutions and Valeant Pharmaceuticals International, Inc. also have new offerings in the works.

Meanwhile, the flurry of trading activity surrounding the deals that priced over the past week tempered on Friday with earnings reports pushing outstanding issues into the spotlight.

Centene Corp.’s newly priced 5 3/8% senior notes due 2026 (Ba1/BB+) were seen slightly improved while WPX Energy, Inc.’s newly priced 5¾% senior notes due 2026 (B1/BB-) were largely unchanged.

After dominating the secondary space on Thursday, trading of the new paper from the two issuers died down on Friday.

After hovering close to par for much of the week, Gaming and Leisure Properties, Inc.’s $1 billion dual-tranche split-rated senior notes (Ba1/BBB-) broached 101 on Friday.

While new paper faded into the background, Ultra Petroleum Corp.’s junk bonds emerged as a volume leader on Friday.

The notes dropped 2 to 4 points as investors responded to a shift in the oil and gas company’s strategy for future growth.

MDC Partners Inc.’s 6½% senior notes due 2024 continued to weaken on Friday with the notes down another 2¾ points in steady trading volume.

The notes have been on a downward slide since the company reported first quarter earnings on Wednesday.

SRS, Ithaca on the road

SRS Distribution announced plans to start a roadshow on Monday for a $380 million offering of eight-year senior notes (Caa2/CCC+) to help finance the LBO of the company by Leonard Green & Partners LP.

Barclays is the lead left bookrunner.

Ithaca Energy set initial price talk on a $350 million offering of five-year senior notes (Caa1/CCC+) in the mid 9% area.

The deal, which has been on the road in Europe during the past week, will be rolled out in front of investors in the United States during the early part of the May 14 week.

Joint bookrunner Barclays will bill and deliver.

Ocean Yield mandated DNB Markets, Danske Bank, Fearnley Securities, Nordea and SEB to arrange a series of fixed-income investor meetings in the Nordic region starting Monday.

A Norwegian krone-denominated senior bond with a five-year tenor may follow.

DNB will be the global coordinator.

The week ahead

The May 14 week is set to get underway with a modest but respectable active calendar.

Aside from the above-mentioned deals from SRS Distribution and Ithaca Energy, Calfrac Holdings is on the road with $650 million of eight-year senior notes (B3/B-), a debt refinancing deal via sole bookrunner RBC.

Initial guidance is in the high 7% to 8% area, a trader said.

The roadshow wraps up Tuesday

Hearthside Food Solutions is marketing $375 million of eight-year senior notes (S&P: CCC+) through Wednesday.

Early guidance is 7¾% to 8%.

Joint bookrunner Barclays will bill and deliver for the LBO deal.

And Valeant Pharmaceuticals is expected to show up with $1.5 billion of notes – $750 million secured and $750 million unsecured – sometime after the launch of its bank loan, which is set to take place on Monday.

Goldman Sachs and JP Morgan are expected to lead a tranche apiece of the notes which are coming as part of the specialty pharmaceuticals company’s sizable $6.52 billion debt refinancing.

Elsewhere, look for a roadshow announcement on Monday from a debut issuer from the industrial sector, a market source advised.

The deal will be sized at $500 million-plus and will be helmed by Morgan Stanley.

Sell-side sources professed visibility on new deal activity for the May 14 week – at least four to five deals in addition to what has already been announced.

The weekly run-rate in the new issue market is expected to remain in the $3 billion to $5 billion range for the foreseeable future, sources say.

Issuance slows

The week just completed came in at the bottom end of that range with a total of $3.20 billion in three deals.

That was down from $4.28 billion in 12 deals the week before.

The latest deals bring year-to-date issuance to $88.08 billion in 161 tranches, trailing the 2017 pace of $111.75 billion in 206 tranches by 21.2%.

Out of focus

While new issues from Centene and WPX Energy were volume leaders on Thursday, they drifted out of focus on Friday with trading activity in the new paper dying down.

WPX Energy’s new 5¾% senior notes due 2026 were seen unchanged to slightly improved on Friday with the notes continuing to trade between par 5/8 and par 7/8.

However, trading of the new notes practically ground to a halt with only $13.5 million of the bonds traded by late afternoon Friday.

WPX Energy was a volume leader on Thursday with almost $90 million of the bonds traded during Thursday’s session.

The notes were also largely trading around par 5/8 on Thursday.

WPX Energy priced the upsized $500 million issue of 5¾% notes at par in a drive-by on Wednesday.

While trading of Centene’s 5 3/8% senior notes due 2026 also all but ground to a halt, the notes were up ½ point to 1 point on Friday in muted activity.

The notes were seen at par ½ bid, 101 offered with trades between par ¾ to 101, market sources said. Only about $18.25 million of the bonds traded by late Friday.

More than $97.25 million of the bonds traded on Thursday.

Centene priced the upsized $1.8 billion issue of 5 3/8% notes at par in a Wednesday drive-by.

Gaming & Leisure improves

After trading tight to par for most of the week, both tranches of Gaming and Leisure’s split-rated notes were seen passing above 101 on Friday.

Gaming and Leisure’s 5¼% senior notes due 2025 were seen trading between par ¾ and 101. Its 5¾% senior notes due 2028 were seen trading between 101 1/8 and 101½, a market source said.

However, trading volume was light with $10 million of the 5¼% senior notes and $6 million of the 5¾% senior notes on the tape by late afternoon.

The 5¼% notes were trading at par ½ on Wednesday and the 5¾% notes were trading at par 3/8.

The $1 billion bullet deal (Ba1/BBB-) came in two $500 million tranches, both of which priced at par in a drive-by on Monday.

Ultra Petroleum drops

Ultra Petroleum’s junk bonds took a hit on Friday after the oil and gas company announced a shift in its production strategy alongside its first quarter earnings report on Thursday.

Ultra Petroleum’s 6 7/8% senior notes due 2022 (B2/B+) dropped about 2¼ points to trade at 64.3 on Friday.

The 6 7/8% notes were the volume leaders on Friday with $54 million of the bonds traded by late afternoon.

Ultra Petroleum’s 7 1/8% senior notes due 2025 (B2/B+) dropped 3¾ point to trade at 60¼, according to a market source. The notes were also active on Friday with more than $32 million bonds traded.

While Ultra Petroleum reported better than anticipated earnings of 28 cents per share, the company also announced it would change its production strategy by switching from vertical well drilling to horizontal well drilling.

Ultra Petroleum stock dropped 13.43% on Friday after an 18% slide on Thursday.

MDC losses continue

MDC Partners’ 6½% senior notes due 2024 continued to weaken on Friday. The notes lost another 2¾ points with the notes now at 85½, a market source said.

“It’s softer again,” a market source said. “People don’t want to own it.”

The 6½% notes have been on a downward spiral since the company reported an earnings miss and revised its forward guidance on Wednesday.

The notes were trading at a 93 handle at the market open Wednesday but have steadily traded down since. The notes closed Thursday at 88¼.

MDC reported a loss per share of 56 cents for the first quarter, which missed analyst expectations of a loss per share of 44 cents.

The company lowered its guidance for organic growth to 1% to 3% from 4%.

Mixed Thursday flows

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

High-yield ETFs saw $225 million of inflows on the day.

However actively managed funds sustained $25 million of outflows on Thursday.

The daily numbers come on the heels of a report that the dedicated junk funds sustained $755 million of net outflows in the week to the Wednesday, May 9 close, according to Lipper US Fund Flows.

That left year-to-date cash flows at negative-$14.84 billion, according to a Prospect News analysis of the data.

In total, this year has seen six weekly inflows and 13 outflows in the 19 weeks so far.

Indexes mixed

Benchmarks for the high-yield secondary market were mixed on Friday with two seeing slight improvement and one a slight loss after all saw gains on Thursday.

The KDP High Yield index was up 1 basis point to 70.65 with the yield now 5.81%. The index was up 5 bps on Thursday.

The Merrill Lynch High Yield index continues to zero in on positive territory. The index was up 4.1 bps on Friday with the year-to-date return now negative 0.046%.

The index was up 9.8 bps on Thursday.

The index broke into positive territory after a long run of negative year-to-date returns on April 12.

However, the year-to-date return dropped back into negative territory on April 23, which is where it has remained.

The CDX High Yield 30 index was down slightly on Friday. The index dipped 4 basis points to 107.21 after a 35 bps rise on Thursday.

© 2015 Prospect News.
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