Primary slackens; new deals stay busy, energy names gain; funds off $335 million

Paul Deckelman and Paul A. Harris

New York, Feb. 22– After two strong sessions in a row, the high-yield primary market took a step backwards on Thursday, with syndicate sources reporting no pricings of new dollar-denominated and fully junk-rated issues during the session.

The day’s lone pricing activity came out of Europe, with French automotive equipment supplier Faurecia SA coming to market with a €700 million issue of seven-year notes.

Back in the dollar market, the sources said that price talk emerged on helicopter transportation company Bristow Group Inc.’s $300 million of five-year secured notes, with pricing seen likely on Friday.

Among recently priced junk issues, traders saw solid volume in such names as Sprint Corp., Weatherford International plc and Pilgrim’s Pride Corp., though all of those credits stayed within a narrow range not far from their respective issue prices.

Away from the new deals, druggist Rite Aid Corp.’s paper continued to trade actively for a third straight day, though with none of the volatility seen on Tuesday and again on Wednesday.

Oil and natural gas names like California Resources Corp., Chesapeake Energy Corp. and Whiting Petroleum Corp. firmed smartly, apparently given a lift by rebounding world crude oil prices.

Statistical market performance measures were lower all around on Thursday, their second straight session on the downside.

Another numerical indicator – the flow of investor cash into or out of high-yield mutual funds and exchange-traded funds, which is considered a reliable barometer of overall junk market liquidity trends – remained in negative territory for a sixth straight week after two weeks on the plus side to begin the year. Some $335 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday – although that was a considerably smaller shortfall than the yawning $6.31 billion cash hemorrhage reported last Thursday for the seven-day period ended Feb. 14 (see related story elsewhere in this issue).

Faurecia prices €700 million

In a quiet session on Thursday, Faurecia priced a €700 million issue of senior notes due June 15, 2025 (Ba1/BB+/BB+) at par to yield 2 5/8%.

The price and yield came on top of talk.

Societe Generale will bill and deliver and was a joint global coordinator and joint bookrunner with BNP Paribas and Natixis.

CM-CIC, Commerzbank and Santander were also joint bookrunners.

Bristow talked at 9% to 9¼%

In the dollar-denominated market, Bristow Group talked its $300 million offering of five-year senior secured notes (B2/B+) to yield 9% to 9¼%.

Official talk comes tight to the 9% to 9½% initial guidance, a trader said.

Books close at 11 a.m. ET Friday, and the offering is set to price thereafter.

Credit Suisse is the lead left bookrunner. Barclays is the joint bookrunner.

The Houston-based provider of helicopter services to the offshore energy industry plans to use the proceeds to repay its term loan and to put cash on its balance sheet.

Sprint volume stays strong

In the secondary arena, Sprint Corp.’s new 7 5/8% notes due 2026 were once again the most actively traded credit, with a market source seeing more than $50 million of those notes changing hands, although that was well down from the more than $200 million which had moved around on Wednesday.

He said the notes continued to come off from the highs they had initially notched on Tuesday after the Overland Park, Kan.-based wireless service provider had priced its upsized $1.5 billion transaction.

He quoted the paper at 99 5/8 bid, calling that down ¼ point.

At another desk, a trader said that the bonds moved around within a 99½ to 100¼ bid context on Thursday, although he said that “most of the prints had a 99ish handle.”

Sprint priced its quickly shopped issue at par on Tuesday after enlarging that deal from an originally announced $1 billion.

After pricing, the new Sprint paper had initially moved up to around 100 3/16 bid, with more than $50 million of turnover in early aftermarket dealings, but backed off from those highs in even more active dealings on Wednesday, which set the stage for Thursday’s continued easier levels.

Weatherford holds its own

Wednesday’s new issue from oilfield services company Weatherford International was also seen actively traded on Thursday, with almost $50 million of turnover.

A trader pegged those 9 7/8% notes due 2025 at 99¾ bid, calling them up ¼ point on the session.

At another desk, a market source said that the Weatherford paper was trading in a 99½ to 100¼ bid context, with “most of the prints at par, some around 99¾.”

Weatherford priced its quick-to-market $600 million issue at 99.34 to yield 10%.

When the bonds moved into the secondary realm, they had firmed to around the par level, though on light initial volume.

Pilgrim’s Pride near issue

There was also fair amount of activity in Greeley, Colo.-based poultry processor Pilgrim’s Pride’s two new issues.

A trader said that its 5 7/8% notes due 2027 were moving around in a range between 96¼ and 98 bid, with “a lot of the trades with a 96 handle, some around 97 – they were all over the place.”

A second trader saw the notes finishing at around 97½ bid, which he called unchanged on the day, with over $20 million of volume.

On Wednesday, the company did a $250 million add-on to its existing $600 million of 5 7/8s that it had sold last September, pricing that tap at 97.25 for a yield to maturity of 6.26%.

The other half of that deal was a $250 million tap of its existing $500 million of 5¾% senior notes due 2025, which had originally priced at par in March 2015.

The tap priced at 99.25 for a yield to maturity of 5.881%.

On Thursday, a trader quoted those notes up 1/8 point at 99½ bid, with over $15 million of volume.

A second trader saw the paper between 98 7/8 and 99¾ bid, with most trades going off with at least a 99 handle.

GFL not much traded

Other recent issues saw less aftermarket activity on Thursday.

A trader said that GFL Environmental Inc.’s 5 3/8% notes due 2023 stayed around the same par to 100¼ bid range they had occupied in initial secondary dealings on Wednesday, after the Vaughn, Ont.-based waste-management and environmental services company had priced its $400 million drive-by offering at par.

He said Thursday volume was in the $8 million to $10 million area.

Rite Aid remains busy

Away from the new deals, a trader said that Rite Aid’s most widely traded issue – its 6 1/8% notes due 2023 – “continued to generate considerable volume” on Thursday, with over $30 million changing hands.

He said that the notes were up ½ point on the day, ending at 101 bid.

That was a far cry from the intense volatility seen over the previous two sessions in the wake of the news that the Camp Hill, Pa.-based Number-Three U.S. drugstore chain operator has agreed to be acquired by Boise, Idaho-based supermarket giant Albertsons Cos.

That Tuesday news shot the 2023 notes up more than 7 points on the day to around the 102 bid mark, with an astounding trading volume of more than $260 million.

But on Wednesday, investors took some profits off those gains, with the Rite Aid issue seen having swooned 1½ points from Tuesday’s closing highs on nearly $70 million of activity.

Crude climb boost oil names

Elsewhere, a trader said names in the energy patch were up on Thursday, given a solid boost by a big jump in world crude oil prices.

April-delivery West Texas Intermediate, the main domestic crude grade, shot up by $1.09 per barrel in Thursday trading on the New York Mercantile Exchange, settling at $62.77, bouncing back from Wednesday’s modest loss. It was the sixth gain in the last seven sessions.

Key international grade North Sea Brent crude for April delivery meantime firmed by 97 cents per barrel in London futures dealings, closing at $66.39, its second straight advance and fourth in the last five sessions.

Against that backdrop, Los Angeles-based oil and natural gas exploration and production company California Resources’ 8% second-lien senior secured notes due 2022 were probably the busiest non-new deal name of the session, with a market source seeing that sector benchmark issue up 1¼ points at 80½ bid on $35 million of volume.

Oklahoma City-based Chesapeake Energy’s 8% notes due 2027 were 1½ point gainers at 96½ bid, on around $30 million of turnover. The company also reported favorable fourth-quarter results (see related story elsewhere in this issue).

And Denver-based E&P operator Whiting Petroleum’s 6 5/8% notes due 2026 jumped by nearly 2 points on the session to close at 102 bid as around $10 million changed hands.

Indicators stay lower

Statistical market performance measures were lower all around on Thursday, their second straight session on the downside. The indicators had mostly fallen on Wednesday after being mixed on Tuesday and higher across the board on Thursday and again on Friday.

The KDP High Yield Daily Index was off by 4 basis points on Thursday to end at 70.74. It had been unchanged on Wednesday after notching four consecutive gains before that, including Tuesday’s 12 bps rise.

Its yield meanwhile rose by 1 bp to 5.63% following an unchanged session on Wednesday, which had followed a narrowing over three successive days before that, including Tuesday, when it had come in by 5 bps.

The Markit CDX Series 29 High Yield Index suffered its fourth loss in a row on Thursday, retreating by 5/32 point to end at 106 19/32 bid, 106 21/32 offered. On Wednesday, it dropped by 11/32 point and it lost more than 3/8 point on Tuesday. On Monday, the index was published despite the market’s holiday close and finished marginally lower versus its Friday closing level.

And the Merrill Lynch High Yield Index was off for a second session in a row, falling back by 0.183% on Thursday, following Wednesday’s 0.029% decline. Before that, the market measure had improved for four consecutive sessions, including Tuesday’s 0.039% gain.

Thursday’s setback widened the index’s year-to-date deficit to 0.54% from 0.357% on Wednesday, although those loss levels were in from the 1.248% cumulative loss posted on Feb. 9, its second straight new widest deficit level for the year.

Its peak cumulative gain for the year so far was 0.936%, established on Jan. 26.

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