SPX Flow junk offer eyed; travel lower, energy up on surging oil prices; Nine Energy zooms

By Abigail W. Adams

Portland, Me., March 8 – The domestic high-yield primary market remained dormant on Tuesday with only one offering on the forward calendar.

Redwood Star Merger Sub. Inc.’s (SPX Flow Inc.) $570 million offering of eight-year non-call three-year senior notes (Caa2/CCC) remained the only deal on deck.

The offering was the latest leveraged buy-out financing deal to tap the market.

While the company’s leverage will be high, the notes are also offering a hefty yield, sources said.

Meanwhile, the secondary space was softer on Tuesday after opening the day largely flat with the war in the Ukraine, surging crude oil futures, inflation and the Federal Reserve’s meeting next week continuing to weigh on the market.

“There’s little to no bid in the market,” a source said.

Credit spreads hit their widest level since December 2020 at 425 basis points on Monday, according to a market source.

Outflows were continuing to drag down the secondary space, which has not yet seen opportunistic buyers come in despite the widening of spreads.

Surging crude oil futures continued to have an inverse impact on the secondary space with travel names again moving lower while energy credits outperformed.

Losses continued to mount for Carnival Corp.’s and American Airlines, Inc.’s junk bonds on Tuesday.

However, oil refiner PBF Energy Inc.’s junk bonds made large gains during the session.

Nine Energy Service, Inc.’s 8¾% notes due 2023 (Caa3/D) were the largest gainer of the day with a better-than-expected earnings report and rising oil prices catapulting the notes up more than 11 points.

West Texas Intermediate crude oil futures traded as high as $129.44 before settling at $124.77, an increase of $5.37 or 4.5%.

Brent crude oil futures traded as high as $133.15 before settling at $129.20, an increase of $1.22 or 0.95%.

The continued surge in crude oil futures came as the United States announced it would ban the import of Russian oil on Tuesday.

SPX Flow eyed

SPX Flow’s $570 million offering of eight-year non-call three-year senior notes remained the only deal on the forward calendar on Tuesday as volatility continued to sideline primary market activity.

The deal is the latest leveraged buyout financing deal to come to the market and the leverage will be high, a source said.

The unsecured notes are pricing alongside a $1.54 billion term loan and a $200 million revolver.

The deal was being marketed with $328 million adjusted EBITDA, which seemed high to some sources, and 6.4x total leverage.

However, the notes will also carry a heft coupon with early guidance for a yield in the high 8% to low 9% area.

The deal has a long lead time with the roadshow scheduled to last until next Thursday.

“It’ll be interesting to see if there’s any CCC appetite,” a source said.

Travel names lower

Travel names continued to take a hit amid surging energy prices with losses mounting for Carnival’s and American Airlines’ junk bonds.

Carnival’s 5¾% senior notes due 2027 were down another 1½ points to close the day just shy of 91, according to a market source.

There was $36 million in reported volume, making the issue the most actively traded in the secondary space.

The note sank 3½ points on Monday.

The cruise line operator’s 6% senior notes due 2029 were off another 1 point to close the day at 90¾. There was $30 million in reported volume.

The notes were down 2½ points on Monday.

American Airlines’ 11¾% senior notes due 2025 fell another 1¾ points to close Tuesday just shy of 112.

There was $30 million in reported volume.

The notes sank 5 points on Monday.

“This is all about the impact of the war and oil prices,” a source said.

PBF Energy on the rise

PBF Energy’s junk bonds became the latest energy credits to surge as the energy sector remained well bid in contrast to the overall market.

The oil refiner’s 6% senior notes due 2028 were up 3 points to close the day at 80½, according to a market source.

There was $12 million in reported volume.

PBF Energy’s 7¼% notes gained 2 points to close the day at 90. There was $10 million in reported volume.

Nine Energy skyrockets

Nine Energy’s 8¾% notes due 2023 skyrocketed on Tuesday amid surging crude oil futures and a better-than-expected earnings report.

The 8¾% notes jumped more than 11 points to close the day at 61¼, according to a market source.

There was about $9 million in reported volume.

Nine Energy’s notes surged after the oil services company reported a large earnings beat. The company reported EBITDA of $4.6 million versus the $2 million expected.

Revenue was $105 million, a 13% increase from the previous quarter and better than guidance for revenue of $92 million to $100 million, according to a market source.

Analysts were expecting revenue of $78.9 million.

In addition to a surprise earnings beat, the oil field services company was bolstered by prospects for increased production from the oil and gas exploration companies it serves.

While the prospects for the company improved, the short-duration notes, which mature on Nov. 1, 2023, remain in distressed territory.

The notes currently yield 44%.

Fund flows

Daily fund flows were mixed on Monday, the most recent session data was available.

High-yield ETFs saw inflows of $98 million while actively managed funds saw outflows of $71 million, according to a market source.

Indexes

The KDP High Yield Daily index sank 35 points to close Tuesday at 61.88 with the yield now 5.4%. The index fell 21 points on Monday.

The CDX High Yield 30 index gained 36 basis points to close Tuesday at 103.96. The index sank 82 bps on Monday.

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