Rose Rock and C&S Group price to close out $8 billion week as quarter’s end nears

By Paul Deckelman and Paul A. Harris

New York, June 27 – The high-yield primary market got two new deals done on Friday to finish out a week that saw a number of opportunistic issuers pop up with quickly done financings as they played “Beat The Clock” ahead of Monday’s looming end to the month, the calendar second quarter and calendar first half.

However, syndicate sources said that neither of Friday’s offerings could be strictly classified in that vein, as both had emerged over the past few sessions and priced as regularly scheduled forward calendar deals.

Energy operator Rose Rock Midstream, LP did an upsized $400 million of eight-year unsecured notes.

Meanwhile, wholesale grocery distributor C&S Group Enterprises LLC also came to market with $400 million of eight-year paper, although this deal happened to consist of secured notes.

Traders reported that both of the day’s deals firmed by as much as 1 point when they hit the aftermarket.

Those two issues closed out a week that saw $8 billion of new U.S. dollar-denominated, fully junk-rated paper come to market in 17 tranches from domestic or industrialized-country issuers according to data compiled by Prospect News, narrowly shading the $7.38 billion which got done in 13 tranches the week before, ended Friday, June 20.

The week’s issuance brought the year-to-date tally of new junk credits up to $175.94 billion in 336 tranches, running about 4.2% ahead of the pace seen a year ago, when $168.83 billion of new paper had priced in 376 tranches, according to the data. For much of this year, the new-deal pace had lagged that of last year, which saw near-record levels of new issuance, with the gap sometimes as great as 20% or more. But a recent pickup in this year’s primaryside output gradually drew even with and eventually overtook last year’s pace as the first half drew to a close.

Traders saw some of the recently priced issues, such as those from AV Homes Inc., CNH Industrial NV, Memorial Resource Development Corp. and NGL Energy Partners LP ending the week on a strong note versus where they had priced, although other recent deals such as Endo International plc and SAExploration Holdings, Inc. essentially went nowhere after pricing.

The overall market remained on the soft side, with accounts seen having pretty much closed their books for the quarter and not wishing to go out on a limb and buy anything.

Statistical market-performance indicators were lower for a second consecutive session on Friday after having been mixed over the previous two sessions and higher for three consecutive sessions before that. They remained mixed for a fourth consecutive Friday versus where they had finished the previous week.

Rose Rock upsizes

Terms on two dollar-denominated deals surfaced during the Friday session in the primary market.

Rose Rock Midstream priced an upsized $400 million issue of eight-year senior notes (B1/B) at par to yield 5 5/8%.

The yield printed on top of yield talk and the deal was increased from $350 million.

Deutsche Bank Securities Inc., Barclays and Wells Fargo Securities LLC were the joint bookrunners.

The Tulsa, Okla.-based company plans to use the proceeds to repay revolver debt and for general partnership purposes.

C&S comes mid-talk

C&S Group Enterprises priced a $400 million issue of eight-year senior secured notes (B1/BB) at par to yield 5 3/8%.

The yield printed in the middle of the 5¼% to 5½% yield talk, and in line with earlier guidance in the low-to-mid 5% yield context, according to a trader.

J.P. Morgan Securities LLC, BofA Merrill Lynch, Wells Fargo Securities LLC and BMO Securities were the joint bookrunners.

The Keene, N.H.-based wholesale grocery distributor plans to use the proceeds to fund a tender for its 8% notes due 2017.

Ithaca Energy sets talk

Looking to the week ahead, Ithaca Energy Inc. talked its $300 million offering of five-year senior notes (Caa1/CCC+) to yield 8% to 8 ¼% on Friday.

Books close at 10 a.m. ET on Monday and the deal is set to price subsequently.

Joint bookrunner Barclays will bill and deliver. BNP Paribas Securities Corp., Deutsche Bank Securities Inc. and RBC Capital Markets are also joint bookrunners.

The Aberdeen, Scotland-based oil and gas exploration, development and production company plans to use the proceeds to repay bank debt.

Pfliederer prices at wide end

In the European session, Pfleiderer AG priced a €321.7 million issue of 7 7/8% five-year senior secured notes (Caa1/CCC+) at 99.476 to yield 8%.

The yield printed at the wide end of the 7¾% to 8% yield talk.

The deal was announced at a €320 million size, and it generated that amount of proceeds.

Deutsche Bank will bill and deliver and is leading a syndicate of banks that includes Commerzbank, Goldman Sachs and BNP Paribas.

The Dusseldorf, Germany-based wood products supplier plans to use the proceeds to refinance debt.

Day’s deals seen firmer

When Friday’s new issues were freed for secondary dealings, traders saw both issues going home quoted solidly higher.

A trader saw Rose Rock Midstream’s 5 5/8% notes due 2022 finishing up at 100 7/8 bid, 101 3/8 offered, better than their par issue price.

And he saw C&S Group’s 5 3/8% senior secured notes due 2022 ending in a 100 5/8 to 101 1/8 context, also improved versus their par issue price.

For a second consecutive session, traders did not report seeing any levels in the new issues which had priced in the market on Thursday. These included travel services concern Carlson Travel Holdings, Inc.’s $360 million of 7½%/8¼% senior PIK toggle notes due 2019, which had priced at par; San Juan, P.R.-based banking concern Popular, Inc., whose quickly shopped $450 million of 7% senior holdco paper due 2019 had priced at par after upsizing from an original $400 million; Conn’s Inc., a specialty retailer based in The Woodlands, Texas, whose $250 million of 7¼% notes due 2022 priced at par; and APX Group, Inc., a Provo, Utah-based home security services provider whose quick-to-market $100 million add-on to its existing 8¾% notes due 2020 had priced at 102 for a yield to worst of 8.198% and a yield to maturity of 8.339%.

Recent issues firm up

Among recently priced deals, traders said that some were ending the week on a firmer note versus their respective issue prices.

For instance, one saw AV Homes Inc.’s 8½% notes due 2019 having gotten as good as 101 5/8 bid, 102 1/8 offered.

The Scottsdale, Ariz.-based homebuilder had priced its $200 million offering at par on Wednesday, but the bonds had not been seen at that time in any initial aftermarket dealings.

A trader saw CNH Industrial NV’s 3 3/8% notes due 2019 at 100¾ bid, 101¼ offered.

The Basildon, U.K.-based international producer of agricultural and construction equipment, trucks and commercial vehicles had priced its quickly shopped $500 million issue on Wednesday at 99.426 via its CNH Industrial Capital LLC financing unit, to yield 3½%. It had initially traded on Thursday only a little above that, moving between 99 1/8 and 99 7/8.

Memorial Resource Development Corp.’s 5 7/8% notes due 2022 were seen by one trader having gained 1/8 point on Friday to end at 100¾ bid, 101¼ offered, while a second trader saw the bonds trading in a 100 5/8 to 100 7/8 context.

However, that was down a little from the levels as high as 101 bid at which those bonds had traded after the Houston-based master upstream energy limited partnership priced its $600 million drive-by issue – double the originally announced $300 million – at par on Wednesday.

Out of that same sector, a trader saw Tulsa-based NGL Energy Partners LP’s 5 1/8% notes due 2019 closing Friday at 100¾ bid, 101 offered. The quick-to-market $400 million issue had priced at par on Tuesday after it was upsized from $350 million originally.

St. Louis-based Belden Inc.’s 5¼% senior subordinated notes due 2024 were seen finishing up on Friday at 100 7/8 bid, 101 3/8 offered.

The manufacturer of electrical wire and cable’s $200 million quick-to-market deal priced on par at Tuesday, and traded all week in that same 100 7/8 to 101ish context, traders said.

Other deals lag

However, the recently priced issues were also something of a mixed bag. While some credits have pushed upward since they initially came to market, traders saw other names at best going nowhere, or even losing some ground.

For instance, a market source on Friday said that SAExploration’s 10% senior secured notes due 2019 were trading between 99 7/8 and 100 3/8.

The Houston-based oilfield services company’s $150 million offering had priced at par on Wednesday and had stayed there subsequently.

Hilcorp Energy’s 5% notes due December 2024 traded down 3/8 point on Friday, a trader said, pegging the Houston-based oil and gas exploration and production company’s $500 million drive-by issue at 99 7/8 bid, 100 3/8 offered, versus Tuesday’s par pricing level.

Away from the energy patch, a trader said that Endo International’s 5 3/8% notes due in January 2023 were wrapped right around par at 99 7/8 bid, 101 1/8 offered, which he called down 1/8 point.

Another trader saw those bonds at par bid, 100 3/8 offered.

Endo, a Dublin, Ireland-based pharmaceuticals manufacturer, had priced its $750 million deal on Wednesday in a quick-to-market transaction via its Endo Financing LLC and Endo FinCo Inc. funding subsidiaries. The bonds had priced at par after having been upsized from an originally announced $500 million.

Activity falls off

In the overall market, a trader characterized Friday’s session as “very, very quiet.”

He called the market softer on “really light volume.”

He noted that with the quarter ending on Monday, “people were closing up their books and not looking to take on any additional risk.”

He said no individual names really stood out and added that, generically, junk was off by about 1/8 to ¼ point.

Market indicators stay lower

Statistical indicators of junk market performance meanwhile, were lower Friday as they were in Thursday’s session, after having been mixed on Tuesday and Wednesday and higher across the board for the three sessions before that.

For a fourth consecutive week, they were mixed versus where they had ended up the previous Friday.

The KDP High Yield Daily Index eased on Friday by 4 basis points to close at 75.01, after having been unchanged for the three previous sessions.

Its yield edged up by 1 bp to end at 4.94%, after having been unchanged over the previous two sessions.

The index was up slightly from the even 75.00 reading at which it had finished the previous week on Friday, June 20, while its yield had come in from last Friday’s 4.97%.

The Markit CDX Series 22 Index was down by 1/16 point on Friday to close at 108¾ bid, 108 7/8 offered, its second straight loss. On Thursday, it had dipped by 3/32 point.

The CDX index was also down from the previous Friday’s level at 109 bid, 109 1/8 offered.

Even the usually robust Merrill Lynch High Yield Master II Index remained down in the dumps, losing 0.009% on the day for its third consecutive loss, following downturns of 0.006% on Thursday and 0.075% on Wednesday. Those losses had snapped a streak of 15 straight sessions in which the index had risen, going back to June 4.

The latest loss dropped the index’s year-to-date return to 5.632% from Thursday’s 5.641% and from its peak level for the year, 5.727%, recorded on Tuesday.

The index’s yield-to-worst rose for a third consecutive session, to 4.916% from Thursday’s 4.902%, and was up as well from Tuesday’s 4.847%, which had been its fourth consecutive new low for the year as well as an all-time low level.

Its average issue price declined to 105.7965 from 105.8258 on Thursday. Those levels were meantime below its high price for the year, the 105.9617 level recorded on Monday.

And its spread-to-worst over comparable Treasury issues widened to 366 bps from 365 bps on Thursday. Those spreads remain above Monday’s 353 bps, which had been the third successive new tight level for 2014.

Although junk bond yields are currently at their all-time lows, their spreads remain up by more than 100 bps from their historical tight levels around 250 bps over comparable Treasuries, first set back in 1997 and then matched in 2007.

For the week, the index lost 0.008% – its first weekly loss after 14 consecutive weeks in which it had gone higher each Friday from the Friday before, dating back to the week ended March 21. In the week ended June 20, the index had risen by 0.345%, for a year-to-date return of 5.641%.

© 2015 Prospect News.
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