Allegiant prices upsized add-on; Hudbay megadeal on tap; oil names jump on OPEC deal news

By Paul Deckelman and Paul A. Harris

New York, Nov. 30 – The high-yield primary market closed out the month of November on Wednesday on a relatively quiet note. There was just one smallish add-on deal seen having priced, low-cost airline operator Allegiant Travel Co.’s $150 million tap of its existing 2019 notes.

That was in contrast to Tuesday, when $1.78 billion of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers got done.

Two of those Tuesday deals – from Tesoro Logistics LP and Steel Dynamics, Inc. – were among Wednesday’s busiest issues, both up from where they had priced.

There was less activity seen in Tuesday’s other new issue, from Transocean Ltd., but that too moved up from its issue price.

Tuesday’s split-rated deal from Constellation Brands, Inc. topped the Most Actives list but struggled price-wise.

Away from the deals that have actually priced, syndicate sources said that timing on Hudbay Minerals Inc.’s $1 billion two-part issue had moved up, with a Thursday pricing now seen likely.

Apart from the new issues, traders said that energy-sector names such as California Resources Corp., Denbury Resources Inc. and Whiting Petroleum Corp. shot up in line with a sharp rise in crude oil prices on news that OPEC ministers plus non-OPEC producer Russia had agreed to cut output to support prices.

Statistical market performance measures turned higher on Wednesday after having been lower across the board on Tuesday and mixed on Monday, their second strong session in the last four trading days.

Upsized Allegiant prices rich

Allegiant Travel priced Wednesday's sole deal, an upsized $150 million add-on to its 5½% senior bullet notes due July 15, 2019 that came at 101.5 to yield 4.879%.

The issue size was increased from $100 million.

The reoffer price came at the rich end of the 101.25 to 101.5 price talk. Initial guidance was 101 to 101.25.

There was some reverse inquiry at play in the deal, a portfolio manager said.

Goldman Sachs & Co. was the bookrunner.

Hudbay accelerates, sets talk

Hudbay Minerals is on deck for Thursday.

The Toronto-based mining company set price talk and accelerated the timing on its $1 billion two-part offering of senior notes (B3/B) on Wednesday.

Notes maturing in January 2025 are talked to yield in the 7 7/8% area, and notes maturing in January 2023 are talked to yield 3/8 point inside of the yield of the 2025 notes.

Talk tightened on both tranches since the deal came into the market earlier in the week, a portfolio manager said, adding that the long tranche was guided earlier in the low-to-mid 8% area and the shorter duration notes, which based on talk could yield as low as 7 3/8%, were initially guided in the 8% area. They were being discussed in the 7 5/8% area late Tuesday and early Wednesday.

Tranche sizes remain to be determined; however, neither tranche will be sized at less than $400 million.

The Hudbay deal is now set to price Thursday, an acceleration of original timing that had it in the market into the Friday session.

Away from Hudbay, AdvancePierre Foods Holdings, Inc. is expected to price its $350 million offering of eight-year senior notes (B3/B-) before the end of the week.

The deal is shaping up to yield in the mid-to-high 5% context, the manager said.

Ritchie Bros. roadshow

Ritchie Bros. Auctioneers Inc. began a roadshow on Wednesday in New York and New Jersey for a $500 million offering of eight-year senior notes (BB-).

Initial guidance has the notes coming with a yield in the high 5% area, according to a portfolio manager who added that there is $100 million of reverse inquiry in the deal.

Goldman Sachs is the left bookrunner for the acquisition financing. RBC Capital Markets is the joint bookrunner.

Although the Ritchie Bros. offer is expected to remain in the market into the week ahead, it is conceivable that timing could be accelerated, the portfolio manager said.

Alta Mesa investor calls

Alta Mesa Holdings, LP plans to market a $450 million offering of eight-year senior notes (Caa1/B-) on investor calls set to take place on Thursday and Friday via left bookrunner Wells Fargo Securities LLC.

The Houston-based oil and natural gas company plans to use the proceeds, together with cash on hand, to fund the purchase of 9 5/8% notes due 2018 via a tender offer and/or redemption.

Tuesday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Tuesday, the most recent session for which data was available at press time, according to the portfolio manager.

Inflows into the high-yield exchange-traded funds remained quite vigorous, at $533 million on the day.

Asset managers saw $25 million of inflows on Tuesday.

Dedicated bank loan funds were also positive on the day, with $185 million of inflows on Tuesday, the manager said.

Tuesday deals trade up

Traders did not immediately report any initial aftermarket dealings in Las Vegas-based low-cost airline operator Allegiant Travel’s add-on 5 ½% notes due 2019 following their Wednesday pricing.

But they did see considerable activity in some of the new paper that had come to market on Tuesday.

A trader said that over $51 million of the new 5¼% notes due 2025 from Tesoro Logistics LP and co-issuer Tesoro Logistics Finance Corp. changed hands, seeing them finishing at 101¼ bid, calling that up 3/8 point on the day.

At another desk, a trader said that the bonds had traded in a 101-to-101 5/8 bid range during the day, with the last prints of the day going off in a 101¼-to-101½ bid context.

The San Antonio-based provider of midstream energy services had priced a quick-to-market $750 million of those notes at par on Tuesday, which then moved up about 7/8 point in initial aftermarket activity.

Steel Dynamics’ 5% notes due 2026 traded in a 100½-to-101 3/8 bid context, a trader said, seeing more than $50 million of volume.

He saw the bonds finishing off their day’s highs, trading between 100 5/8 and 100¾ bid.

Another market source pegged the bonds at 100¾ bid, calling that down ½ point on the day from the 101¼ bid level the Fort Wayne, Ind.-based steelmaker and metals recycler’s $400 million drive-by offering had hit when it was freed for secondary dealings late Tuesday after pricing at par earlier.

The new Transocean 6¼% senior secured notes due 2024 “didn’t trade very much on the day,” a trader said, seeing only around $8 million of those bonds having moved around. He saw them going home “wrapped around par.”

But that was well up from the 98.5 level at which the Zug, Switzerland-based undersea energy driller’s quickly shopped $625 million issue had come to market on Tuesday, yielding 6½%, after having been upsized from an originally announced $600 million. The notes had initially traded in a 99¼-to-99¾ bid context after pricing.

Constellation tops actives

Constellation Brands’ new split-rated (Ba1/BBB-/BBB-) offering of 3.7% notes due 2026 were the most busily traded issue of the day, a market source said, seeing more than $63 million traded.

He located the bonds at 99¼ bid, calling them off nearly ¾ point on the day.

The Victor, N.Y.-based wine, beer and whiskey maker and importer had priced an unscheduled $600 million of those notes at 99.909 on Tuesday after the issue was upsized from $500 million.

They initially traded slightly above par when they hit the aftermarket on Tuesday.

Energy names up

Away from the new issues, the news that the OPEC ministers had agreed to cut the cartel’s oil production by 1.2 million barrels per day, with Russia and other non-OPEC producers trimming another 600,000 barrels off the world’s daily oil output, sent world crude prices up by more than $4 per barrel.

That in turn lifted prices on junk-rated energy credits such as California Resources’ 8% notes due 2022, which gained 4¾ points on the day to end at 78½ bid, with over $51 million traded.

Denbury Resources’ 5½% notes due 2022 improved by 3¾ points to 82¾ bid, on volume of more than $16 million.

Whiting Petroleum’s 5% notes due 2019 ended at 98 7/8 bid, up 1 5/8 points on the day, with over $15 million having traded.

Indicators show improvement

Statistical market performance measures turned higher on Wednesday after having been lower across the board on Tuesday and mixed on Monday, their second strong session in the last four trading days.

The KDP High Yield index jumped by 16 basis points on Wednesday to end at 70.35, after having eased by 1 bp on Tuesday, its first loss after five straight gains before that.

Its yield came in by 4 bps to 5.78%, its fourth straight narrowing and fifth in the last six sessions; on Tuesday, it had declined by 1 bp for a second straight day.

The Markit Series 27 CDX index rose by more than ¼ point on Wednesday, ending at 104 25/32 bid, 104 13/16 offered, after having retreated by 1/16 point on Tuesday. It was the second such gain in the last three sessions.

And the Merrill Lynch High Yield index posted its seventh gain in the last eight sessions on Wednesday, rising by 0.156%, versus Tuesday’s 0.058% downturn, which had followed six straight advances.

That raised its year-to-date return to 15.222% from Tuesday’s 15.043% finish.

But those levels remain well under its peak cumulative return for the year so far of 16.768%, set on Oct. 25.

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