TerraForm, Gran Tierra price, trade near issue; junk off as stocks fall; funds down $2.74 billion

Paul Deckelman and Paul A. Harris

New York, Feb. 8– A renewal of Wall Street’s stock market carnage saw high yield move mostly lower on Thursday.

But that did not keep the primaryside from churning out a pair of energy sector new issues, coming off the forward calendar.

TerraForm Global, Inc., an owner and operator of renewable energy projects such as solar and wind power, priced $400 million of eight-year notes at par.

Meanwhile, Gran Tierra Energy International Holdings, Ltd., a Canadian energy company operating in Colombia, did $300 million of seven-year notes.

Traders said both of those new issues stayed around their pricing levels in thin aftermarket dealings.

There was considerable activity in Wednesday’s new deal from oil and natural gas exploration and production company Sanchez Energy Corp., although not much change from Wednesday’s aftermarket price levels.

Existing energy sector names such as California Resources Corp., Chesapeake Energy Corp. and Noble Holding International Ltd. were seen down multiple points amid both the overall junk market retreat and a continued fall in oil prices.

But Canada’s MEG Energy Corp. bucked the overall negative trend.

Statistical market performance measures turned lower across the board on Thursday after being mixed for two sessions before that, their fourth downturn in the last six trading days.

Another numerical indicator – flows of investor cash into or out of high yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – remained in negative territory for a fourth straight week, as $2.74 billion more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday. That big drop came on top of $1.75 billion cash loss reported last week (see related story elsewhere in this issue).

TerraForm tight to guidance

In Thursday’s primary market, which generated a steady stream of news against a backdrop of turbulence in the global capital markets, TerraForm Global priced a $400 million issue of eight-year senior notes (Ba3/BB-) at par to yield 6 1/8%.

The yield printed tight to initial guidance that was set in the mid-6% area.

Citigroup was the lead for the debt refinancing deal, which was priced on the emerging markets desk, reflecting the location of the Bethesda, Md.’s assets.

Gran Tierra atop talk

Gran Tierra Energy priced a $300 million issue of 6¼% seven-year senior notes (expected ratings S&P: B+/Fitch: B+) at 98.612 to yield 6½%.

The yield printed on top of yield talk. Initial guidance was in the mid-to-high 6% area.

Global coordinator Credit Suisse will bill and deliver. RBC was also a global coordinator. Scotia was a joint bookrunner.

Proceeds will be used to repay outstanding amounts borrowed under the company’s revolving credit facility and for general corporate purposes, which may include development capital.

Jones talk, document changes

Jones Energy Holdings, LLC talked a $450 million offering of senior secured first-lien notes due March 15, 2023 (B2) with a 9½% coupon at approximately 2 points of original issue discount to yield 10%.

That talk comes well wide of initial guidance indicating an all-in yield in the mid-9% area.

There were also document changes.

Books close at 1 p.m. ET Friday, and the deal, via sole bookrunner Credit Suisse, is set to price subsequently.

Elis brings €1 billion

France-based Elis SA priced €1 billion of senior bullet notes (Ba2//BB+) in two tranches.

The deal included €650 million of 1 7/8% eight-year notes that priced at 99.646 to yield 1.95%. The yield printed inside of the 2% to 2 1/8% final yield talk. The initial yield talk was in the 2¼% area.

In addition Elis priced €350 million of eight-year notes at par to yield 2 7/8%. The yield printed at the tight end of the 2 7/8% to 3% yield talk. The initial yield talk was 3% to 3 1/8%.

The combined deal played to orders exceeding €4 billion, with demand skewed toward the five-year notes, a market source said.

HSBC will bill and deliver.

BNP Paribas, Credit Agricole CIB and HSBC were the global coordinators. ING, Natixis and SG CIB were active joint bookrunners.

Proceeds from the deal will be used to refinance the bridge loan put in place for the acquisition of Berendsen plc and for general corporate purposes, which may include the refinancing of existing debt.

Polygon prices secured deal

Sweden-based Polygon AB priced €210 million of five-year senior secured notes (B1/B+) at par to yield 4%.

Carnegie and Nordea managed the sale.

The Stockholm-based provider of property protection services plans to use the proceeds to repay debt.

Entertainment One’s add on

Entertainment One Ltd. is in the market with a £70 million add-on to its 6 7/8% senior secured notes due Dec. 15, 2022.

Meetings with investors were scheduled throughout the Thursday session in London, according to a source who expected the tap would price later Thursday or Friday.

JP Morgan is leading the deal.

Day’s deals trade near issue

In the secondary market, traders said that the day’s two new issues traded right around their pricing levels, on not much volume.

A trader saw TerraForm Global’s 6 1/8% notes due 2026 trading between 99¾ and 100¼ bid, before finally going out in a par to 100¼ bid context, on volume of around $10 million.

A second trader also pegged the Bethesda, Md.-based renewable energy asset operator’s bonds at that level, right around their par issue price.

One of the traders said there was considerably less activity – he saw all of $1 million moving around – in Grand Tierra Energy’s 6¼% notes due 2025, locating them around 98 5/8 bid.

The Calgary, Alta.-based company had priced its new deal at 98.612.

Sanchez trades actively

However little activity there was in the Thursday new deals, investors more than made up for it in Sanchez Energy, which had priced on Wednesday.

A market source said that over $99 million of the Houston-based E&P company’s new 7¼% senior secured first-lien notes due 2023 changed hands.

He saw those bonds range in price from 98¾ to 99 7/8 bid, before going home around 98 7/8 to 99 bid.

A second trader saw those bonds finishing between 99¼ and par.

Sanchez had priced $500 million of the notes at 98.973 on Wednesday, yielding 7½%, after the regularly scheduled forward calendar deal was upsized from an originally announced $400 million.

The new bonds had moved up to around a 99½ to 99¾ bid level in active initial trading of more than $25 million.

Energy issues in retreat

Away from the new deals, a trader said the overall market “was in retreat,” linking that downturn to the renewed slide in stocks. After snapping back by more than 500 points on Wednesday from the steep declines seen Monday and Tuesday, the bellwether Dow Jones Industrial Average plunged another 1,000 points plus Thursday, officially moving into correction territory by having now come off its recent highs by more than 10%.

Back in Junkbondland, large, widely traded benchmark issues were lower, particularly energy names such as California Resources’ 8% notes due 2022, which a market source saw fall by more than 4 points on the day to 79 3/8 bid.

Natural gas-focused Chesapeake Energy’s 8% notes due 2025 were seen lower by more than 3 points at 96½ bid, while driller Noble Holding’s 7¾% notes due 2024 slid by 2 3/8 points to just under 89.

But Canada’s MEG Energy bucked the trend, its 6 3/8% notes due 2023 up more than 1 point to 83 1/8 bid.

Indicators turn lower

Statistical market performance measures turned lower across the board on Thursday after being mixed for two sessions before that. It was their fourth downturn in the last six trading days.

The KDP High Yield Daily Index continued to decline for a 10th consecutive session on Thursday, falling by 7 basis points to end at 70.84. It had eased by 3 bps on Wednesday after falling 15 bps on Tuesday. The index had also nosedived by 26 bps on Monday and had swooned by 17 bps on Friday.

The Markit CDX Series 29 index lost more than 7/8 point on Thursday to end at 105 31/32 bid, 106 offered, its second straight downturn. It had dropped by almost 13/32 point Wednesday after pushing upwards by almost 1/8 point on Tuesday.

The Merrill Lynch High Yield Index was back on the downside on Thursday after firming on Wednesday to break out of a three-session rut.

It slid by 0.504% during the day versus Wednesday’s 0.324% gain, which had followed Tuesday’s 0.356% downturn.

The latest loss dropped the index’s year-to-date return to a 0.58% loss, deepening from Wednesday’s 0.076% YTD deficit, establishing a new negative peak. The cumulative red ink surpassed the previous mark of 0.399% seen on Tuesday.

Those negative levels are down from the index’s most recent positive year-to-date return of 0.181%, seen on Friday. And the current levels are well down from its 0.936% finish on Jan. 26, which had been the third consecutive new peak YTD level for the year so far.

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