Quiet primary closes $7.3 billion new issuance week; recent deals trade near issue prices

By Paul Deckelman and Paul A. Harris

New York, Dec.16 – The high-yield primary market spent a quiet Friday, syndicate sources said, with no new U.S. dollar-denominated and fully junk-rated issues pricing during the session, in contrast to the $3.16 billion from domestic or industrialized-country which had priced during Thursday’s session.

While there were no new deal announcements on Friday, the sources said that there might still be enough liquidity in the market to accommodate a few deals should any arise on Monday or Tuesday.

Meanwhile several offerings remain on the forward calendar – from Downstream Development Authority, Avison Young (Canada) Inc. and Baffinland Iron Mines Corp.

The lack of any new issues Friday closes the books on the week’s new-issuance right where it was on Thursday, with $7.34 billion of new paper having come to market in 13 tranches, although that was down from last week’s $9.60 billion in 16 tranches.

In the secondary market, traders saw some activity in new issues from the likes of Tesoro Corp., Diamondback Energy Inc. and Gulfport Energy Corp., which mostly traded around their respective new issue prices.

Statistical market performance measures were mixed for a second consecutive session on Friday; they had turned mixed on Thursday after being lower on Wednesday – their first negative session this month – and higher across the board on Tuesday. Friday was their third mixed performance in the last five.

The indicators were meantime down all around from where they had finished out last Friday, Dec. 9, their first loss after three consecutive higher weeks.

No deals but year not done

No deals priced on Friday. Nor were there any new deal announcements.

However it may be premature to bring down the final curtain on the 2016 high-yield new issue market, sources said.

On Friday the dealers were mulling the possibility of bringing business to market in the early part of the week ahead, anticipating that there will be sufficient liquidity on Monday and Tuesday to get deals done.

It would have to be the right deal, a syndicate banker said, adding that an on-the-run issuer, well known to the market and requiring little if any work on the part of investors, could come to the primary market during that time frame.

However, depending on market conditions, the business in question could just as easily be pushed into the early part of 2017, the banker added.

Backlog

Meanwhile there is a backlog of deals that has been hanging on the active calendar since early December.

There was news on Friday about Downstream Development Authority which has been in the market with $250 million of six-year senior secured notes, via bookrunner Nomura.

The company announced Friday that it has terminated its cash tender offer and related consent solicitation for $285 million of its 10½% senior secured notes due 2019.

There was no official word on the new bond offer, which the tribal gaming concern brought to market for the purposes of refinancing debt. The company did not immediately return a Friday call from Prospect News.

However market sources were taking the Downstream Development off their calendars following the termination of the tender.

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

That deal had originally been talked with a 9½% coupon at 98 to 99 for an all-in yield of 9¾% to 10%, a trader said on Friday.

There was talk during the week that the prospective issuer was mulling structural tweaks, sources said.

However there was no official word.

Meanwhile, the Dec. 12 week came and went with no fresh news on Baffinland Iron Mines Corp.’s $350 million offering of five-year senior secured notes (Caa1/B-) via Goldman Sachs.

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

Mixed Thursday flows

Cash flows for dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $230 million of outflows on the day.

However actively managed funds saw $60 million of inflows on Thursday.

The news follows a Thursday report from Lipper US Fund Flows that the dedicated junk funds saw $3.75 billion of inflows for the week to Wednesday's close, sources said.

Meanwhile daily cash flows for dedicated bank loan funds continue to be robust, the trader said.

New issue pace slackens

With no new bonds pricing on Friday, the week’s tally of such junk paper held steady at where it had been at the close on Thursday, with $7.34 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers pricing in 13 tranches, according to data compiled by Prospect News.

That was off from the $9.60 billion which had priced in 16 tranches last week, ended Dec. 9, though it was well up from the week before that, ended Dec. 2, when $4.73 billion had gotten done in 10 tranches.

This week’s primary activity pushed the year-to-date issuance total up to $226.59 billion in 357 tranches.

That was running 12.8 % behind the new-deal pace seen at this time last year, when $260.02 billion had priced in 408 tranches, the Prospect News data indicated.

That was narrower than the 16.1% gap between this year’s and last year’s issuance which had been seen last week.

© 2015 Prospect News.
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