L Brands prints year's first deal; Sunoco $1.75 billion set for Tuesday; traders see modest profit taking

By Paul A. Harris

Portland, Ore., Jan. 8 – Junk was flat to modestly higher, up 1/8 point to ¼ point on Monday, a trader said.

The CDX HY29 index ended the session up 0.026 points at 108.925 bid, 109.005 offered, a hedge fund manager said.

In the secondary market there was a bit of profit taking, especially in the roaring energy sector, sources said.

In the primary market, L Brands, Inc. priced the first deal of 2018, a $500 million issue of 10-year senior bullet notes (Ba1/BB+/BB+) that came at par to yield 5¼%.

The yield printed at the tight end of the 5¼% to 5½% yield talk. Initial guidance was in the low-to-mid 5% area.

Monday's sole deal, which came as a drive-by, played to a considerable following. Not long before books closed orders were said to be $1.3 billion and growing, a trader said.

BofA Merrill Lynch, Citigroup, HSBC, J.P. Morgan and Wells Fargo were the joint bookrunners.

The Columbus, Ohio-based operator of specialty stores plans to use the proceeds to redeem its 8½% senior notes due June 15, 2019.

Sunoco $1.75 billion for Tuesday

Sunoco LP and Sunoco Finance Corp. plan to price $1.75 billion of senior notes in three tranches on Tuesday, according to a syndicate source.

The offer features $500 million minimum of notes due January 2023, $500 million minimum of notes due February 2026 and $400 million minimum of notes due March 2028.

The deal was scheduled to be shopped by means of a mid-morning conference call with investors on Monday.

Credit Suisse, RBC, BofA Merrill Lynch, BBVA, Mizuho, Natixis, TD, Goldman Sachs, Deutsche Bank, Morgan Stanley, PNC, Credit Agricole, Citigroup, SMBC Nikko and MUFG are the joint bookrunners for the for the debt refinancing deal.

Moss Creek marketing $650 million

Moss Creek Resources Holdings, Inc. plans to price $650 million of eight-year senior notes (expected ratings B3/B+) later in the Jan. 8 week.

BMO is the left bookrunner. Wells Fargo, Citigroup and Capital One are the joint bookrunners.

The Dallas-based independent oil and gas exploitation, production and acquisition company plans to use the proceeds to pay off its term loan and repay a portion of its revolver, with any remaining proceeds to be used for general corporate purposes.

Ingevity brings $300 million

Ingevity Corp. began marketing a $300 million offering of eight-year senior notes on Monday.

The deal comes with initial guidance in the 7% area and is expected to price Thursday.

BofA Merrill Lynch, Wells Fargo and J.P. Morgan are the joint bookrunners.

The North Charleston, S.C.-based packaging company plans to use the proceeds to finance the purchase of substantially all the assets primarily used in the pine chemicals business of Georgia-Pacific Chemicals LLC and Georgia-Pacific LLC, and for general corporate purposes.

Some profit taking

In the secondary market there was some profit taking on Monday, especially in the roaring energy sector, sources said.

The Chesapeake Energy Corp. 8% senior notes due June 2027 were 98¾ bid, 99¾ offered, heading into the Monday close, a trader said.

They were 99½ bid on Friday morning.

Recent energy deals were also off highs seen late last week, according to a hedge fund manager.

The Whiting Petroleum Corp. 6 5/8% bullet due January 2026 (B3/BB-) was 104¼ bid, 104¾ offered on Monday. They were 104 3/8 bid, 104 7/8 offered on Friday.

The upsized $1 billion issue priced at par on Dec. 12.

One week later Lonestar Resources US Inc. priced its 11¼% notes due January 2023, a deal that came with lots of extra yield (initial conversations were said to take place in the 8% to 9% range), and investor friendly tweaks to the structure and covenant package when it priced at par in a $250 million issue.

Those bonds were 103¾ bid, 104 3/8 offered on Monday, the manager said, versus Friday levels of 103 7/8 bid, 104 3/8 offered.

The barrel price of West Texas Intermediate (WTI) crude was $61.87 late Monday afternoon, up 43 cents, or 0.7% on the day.

The rally in crude prices has been nothing but robust since Whiting and Lonestar priced their deals: WTI is up 8.3% since Dec. 12, the day Whiting priced its deal.

Away from energy Post Holdings, Inc.'s 5 5/8% notes due January 2028 were up with the market on Monday at 102 bid, 102½ offered, a trader said. They were 100 7/8 bid, 101 3/8 offered on Friday.

The $1 billion issue priced at par on Nov. 28.

In the distressed universe, Acosta, Inc. 7¾% senior notes due Oct. 2022 were lower on word in the market that sponsor Carlyle Group booted the company CEO, a trader said.

The bonds were 68 bid, 70 offered on Monday, the trader said, adding that they traded last week around 74.

Friday inflows

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

High-yield ETFs saw $223 million of inflows on the day.

Actively managed funds saw $230 million of inflows on Friday.

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