Morning Commentary: High yield unchanged on quiet late-year Friday; new Gulfport tops issue price

By Paul A. Harris

Portland, Ore., Dec. 16 – The high-yield bond market was basically unchanged at mid-morning, according to a buyside source.

The market is quiet, as you might expect on a late-year Friday, the buysider remarked.

High-yield ETF prices were higher on the morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.22%, or 18 cents, at $86.15 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.33 per share, was up 0.18%, or 7 cents.

Of Thursday's new issues – which came in a week that was dominated by issuance from the energy sector – the new Tesoro Corp. senior bullet notes (Ba2/BB+) were little changed from new issue prices.

The 4¾% seven-year notes and the 5 1/8% 10-year notes were both par bid, par ¼ offered, possibly reflecting a syndicate bid, the source said.

The former came at par in a downsized $850 million tranche, while the latter also came at par in an upsized $750 million tranche.

The deal, which saw $150 million of proceeds shifted to the longer duration paper from the shorter, underwent an investor friendly structural change which saw call protection on both tranches extended to the life of the bonds, from non-call-three and non-call-five, respectively.

Elsewhere the new Gulfport Energy Corp. 6 3/8% senior notes due May 15, 2025 (B2/B+), which priced late Thursday, were doing pretty well on Friday morning at par 7/8 bid, 101 1/8 offered, the buysider said.

The $600 million issue priced at par.

As with both Tesoro tranches, Gulfport priced at the wide end of price talk.

Meanwhile, in another energy deal that priced earlier in the week, the Concho Resources Inc. 4 3/8% senior notes due Jan. 15, 2025 (Ba2/BB+) continued to lag the new issue price on Friday.

The Concho 4 3/8% – a deal “priced on the screws,” sources said – were 99 bid, 99¼ offered Friday morning.

On Thursday that bond was 99 bid, 99½ offered, the buysider said.

Quiet primary

All was quiet in the high-yield primary market on Friday.

New issue activity for 2016 may now be concluded, sources say.

There is a backlog of deals on the active calendar, although none of them has generated news in recent days.

The calendar includes Baffinland Iron Mines Corp., which is attempting to place $350 million of five-year senior secured notes (Caa1/B-) via Goldman Sachs.

Early guidance has the deal coming in the 9% area, a trader said.

Avison Young (Canada) Inc. is in the market with a $130 million offering of senior secured notes due 2021 (B3/B+) via bookrunner William Blair.

And Downstream Development Authority has been attempting to place $250 million of six-year senior secured notes via bookrunner Nomura.

Initial yield talk was 9½% to 9¾%, according to a market source.

The deal was expected to price late last week. In the interim it has been radio silence on Downstream Development, sources say.

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