Crestwood Midstream prices; Staples improves; PG&E gains; funds add $655 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 11 – The domestic high-yield primary market returned to action on Thursday with one deal pricing and one more joining the forward calendar after a lull in activity during the previous session.

Crestwood Midstream Partners LP priced an upsized $600 million issue of eight-year senior notes (B1/BB-) at par to yield 5 5/8% in a Thursday drive-by.

Natural Resource Partners LP announced plans to start a roadshow on Monday for a $275 million offering of six-year senior notes.

While the active forward calendar is thin, one more deal is expected before the week draws to a close.

Mineral Resources Ltd. is expected to price its $750 million offering of eight-year senior notes (Ba3/B+) on Friday.

Meanwhile, the secondary space was firm on Thursday. There was an uptick in trading activity with buyers in search of paper, a market source said.

With the market firm and paper in demand, Staples Inc.’s 7½% senior secured notes due April 15, 2026 (B1/B+) and 10¾% senior unsecured notes due April 15, 2027 (B3/B-) were improved in high-volume activity on Thursday.

Power Solutions’ recently priced 8½% senior notes due 2027 (B3/B/B-) continued to gain steam with the notes shooting past their previous highs after weakening towards the end of March.

Pacific Gas & Electric Co.’s senior notes were also gaining steam on Thursday after California’s governor proposed the creation of a statewide insurance fund for utilities.

Meanwhile, fund flows marked their fifth consecutive week of inflows.

High-yield mutual funds and exchange-traded funds saw inflows of $655 million for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

Crestwood upsized and tight

In a Thursday drive-by, Crestwood Midstream Partners priced an upsized $600 million issue of eight-year senior notes (B1/BB-) at par to yield 5 5/8%.

The issue size increased from $500 million.

The yield printed at the tight end of yield talk in the 5¾% area.

Wells Fargo was the left bookrunner.

The Houston-based owner and operator of crude oil, natural gas and NGL midstream assets plans to use the proceeds to repay revolver debt related to its acquisition of Jackalope Gas Gathering Services, LLC.

NRP roadshow

Natural Resource Partners plans to start a roadshow on Monday in New York for a $275 million offering of six-year senior notes.

The deal, via sole bookrunner Citigroup Global Markets Inc., is expected to price Wednesday.

The Houston-based master limited partnership plans to use the proceeds to refinance its 10½% senior notes due in 2022.

Nearer at hand, Australia-based Mineral Resources is expected to price its $750 million offering of eight-year senior notes (Ba3/B+) on Friday.

The deal has been in the market with initial guidance of 7¾% to 8%.

Staples improves

After sloppy trading out of the gate, Staples’ 7½% senior notes due 2026 were brushing up against their issue price on Thursday.

The notes were quoted at par bid, par 3/8 offered on Thursday, according to a market source.

While the notes traded up to par in intraday trading, they closed the day at 99¾, which was flush with Wednesday’s close, sources said.

The notes remained among the most actively traded issues in the secondary space. More than $45 million of the bonds were on the tape by the late afternoon.

Staples’ 10 ¾% senior unsecured notes due 2027 continued to gain strength in the secondary space.

They were quoted at 102 bid, 102 3/8 offered early in Thursday’s session, according to one market source.

The notes closed Thursday at 101¾, a ¼ point increase from Wednesday, another source said.

More than $37.5 million of the bonds were on the tape by the late afternoon.

While Staples’ unsecured tranche has been firm in the secondary space, the secured tranche has lagged its issue price since breaking for trade.

The lackluster performance of the secured tranche was not unexpected with the B1 rating controversial, especially with a dividend payment as part of the use of proceeds, a market source said.

Staples priced a $2 billion tranche of the 7½% notes at par and a $1 billion tranche of the 10¾% notes at par on Monday.

Power Solutions on the rise

Power Solutions’ 8½% senior notes due 2027 continued to gain steam in high-volume activity on Thursday with the notes shooting past their previous highs.

The 8½% notes were up about 5/8 point to 101 7/8 in the late afternoon, according to a market source.

They remained major-volume movers in the secondary space with more than $37 million of the bonds on the tape by the late afternoon.

While less active with only a few million bonds in play, Power Solutions’ 6¼% senior notes due 2026 also continued to post gains with the notes trading up to 103¾.

Power Solutions was the last megadeal to hit the secondary space prior to Staples.

While Power Solution’s secured tranche of 6¼% senior notes due 2026 have maintained and increased the heights they achieved after hitting the secondary space, the 8½% senior unsecured notes have been volatile, sources said.

The notes traded as high as 101½ soon after breaking for trade but weakened into the final days of March with the notes dipping back to par.

Power Solutions priced a $1 billion tranche of the 6½% notes at par and a $1.95 billion tranche of the 8½% notes at par on March 18 as part of a $2.95 billion equivalent dual-currency offering that also included a €700 million tranche of seven-year 4 3/8% senior secured notes that priced at par.

Pacific Gas & Electric gains

Pacific Gas & Electric’s senior notes were again making gains in high-volume activity on Thursday after news broke about a pending proposal from California’s governor about a statewide wildfire insurance fund to aid utilities.

The 6.05% senior notes due 2034 rose 1½ points on the news, according to a market source.

They were seen changing hands at par late in the session with more than $33 million of the bonds on the tape.

The struggling utility company’s 4.45% senior notes due 2042 rose 1¾ point to 86¼.

The 3.3% senior notes due 2027 rose ¼ point to 88½.

Pacific Gas & Electric’s senior notes have been in focus since January with the utility falling from investment-grade status and subsequently filing for bankruptcy in less than a month due to liabilities from the California wildfires.

While the 6.05% notes traded as low as 80 on the bankruptcy news, they have slowly worked their way back to par since.

The proposal by California Governor Gavin Newsom would create a wildfire insurance fund to cover fire damages, a market source said.

Wednesday inflows

The cash flows of the dedicated high-yield bond funds were positive on Wednesday, the most recent session for which data was available at press time, according to a trader.

High-yield ETFs saw $61 million of inflows on the day.

Actively managed high-yield funds saw $10 million of inflows on Wednesday, the trader said.

The combined funds saw $655 million of net inflows in the week to Wednesday's close, according to Lipper US Fund Flows.

That's the 12th inflow in the past 14 weeks, the trader noted.

Indexes gain

Indexes were posting gains on Thursday after a mixed week.

The KDP High Yield Daily index rose 7 basis points to close Thursday at 70.52 with the yield now 5.74%. The index was up 1 bp on Wednesday, 1 bp on Tuesday and 7 bps on Monday.

The ICE BofAML US High Yield index was up 28.5 bps on Thursday with the year-to-date return now 8.358%. The index was up 8 bps on Wednesday, 1.4 bps on Tuesday and 9.8 bps on Monday.

The index shot past 8% year-to-date returns on Monday after only recently surpassing the 7% threshold on March 26 and passing 6% year-to-date returns on March 11.

The CDX High Yield 30 index rose 9 bps to close Thursday at 107.30.

The index rose 27 bps on Wednesday after dropping 16 bps on Tuesday and gaining 9 bps on Monday.

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