Morning Commentary: Junk opens flat as oil prices sag; Altice, Bruin E&P tee up deals

By Paul A. Harris

Portland, Ore., July 16 – High-yield bonds were trading flat amid a backdrop of sagging crude oil prices on Monday, sources said.

With the barrel price of West Texas Intermediate crude for August 2018 delivery down $2.63, or 3.7% at $68.38 at mid-morning, most high-yield energy names were unchanged, a trader said.

However, the California Resources Corp. 8% senior secured second-lien notes due December 2022, a benchmark issue which is said to trade in close correlation with crude oil prices, was down a point at 89 bid, the trader said.

Elsewhere, the Gogo Inc. (Gogo Intermediate Holdings LLC/Gogo Finance Co. Inc.) 12½% senior secured notes due July 1, 2022 were down half a point at 106¼ bid.

Among recent issues, the Simmons Foods, Inc. 7¾% first-lien senior secured notes due Jan. 15, 2024 (B1/BB-) continue to turn in a stellar performance in the secondary market.

The deal, which came at par in a $250 million issue on July 10, was 103 bid, 103½ offered on Monday, up from levels seen late last week, according to a trader.

Investors shorted the Arkansas poultry producer's lower coupon paper to pile into the higher coupon bonds, the trader said.

The Simmons Foods 5¾% second-lien senior secured notes due November 2024 were trading in a context of 81½ bid, 82½ offered on Monday. That paper was trading in the mid-to-high 80s in mid-June, the trader said.

Altice brings benchmark

In the primary market Altice France SA plans to price $1.25 billion and €650 million of eight-year senior secured notes (expected ratings B1/B) on Tuesday.

The deal was scheduled to be shopped on a global investor call scheduled for mid-morning on Monday.

Goldman Sachs International is the left bookrunner for the bond debt refinancing deal.

And Bruin E&P Partners LLC started a roadshow on Monday for a $600 million offering of eight-year senior notes.

The deal is expected to price on Friday.

J.P. Morgan Securities LLC, Barclays, BMO Securities, BOK, Capital One, Citigroup Global Markets Inc., Fifth Third Securities Inc., MUFG, RBC Capital Markets LLC and TD Securities (USA) LLC are joint bookrunners.

The Houston-based energy exploration and production company plans to use the proceeds to repay debt under its term loan and revolving credit facility, as well as to fund a dividend to its sponsor, ArcLight Capital Partners.

With respect to an energy deal announced late last week, Magnolia Oil & Gas talked its $400 million offering of eight-year senior notes (BB-/expected B3/BB-) to yield in the 6% area. Books close on Monday, and the deal is expected to price Tuesday afternoon.

Meanwhile there is a growing pipeline of new issue business, some of it expected to hit the market soon, sources say.

Look for CEVA Logistics to possibly bring $350 million of new senior secured notes later in the July 16 week, according to a market source, who expects Credit Suisse to lead the bond deal.

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