Comstock Resources, Magnolia Oil & Gas on tap; Intelsat climb continues; WeWork rebounds

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 13 – The domestic primary market remained quiet on Friday with the European primary market seeing the lone deal of the day price.

Germany-based Kaefer Isoliertechnik GmbH & Co. priced a €250 million issue of 5.5-year senior secured notes (B1/BB-/BB) at par to yield 5½% on Friday.

While no new paper entered the space on Friday, the forward calendar continued to grow with two deals on deck for the July 16th week.

Comstock Resources, Inc. is expected to price $850 million of senior notes due 2026 in the coming week.

Magnolia Oil & Gas is also expected to price $400 million of eight-year senior notes (/BB-/BB-).

Meanwhile, Intelsat Luxembourg SA’s junk bonds remained in focus with the broadcast satellite company’s 8 1/8% senior notes due 2023 again jumping 2 points after a 2-point rise on Thursday.

WeWork Cos. Inc.’s struggling 7 7/8% senior notes due 2025 (Caa1/B+/BB-) have been on the rise over the past week with the notes up about 1 point on Friday.

While the secondary space was quiet on Friday, it was firm with spreads seen tightening and bids coming in better, a market source said.

Tesla Inc.’s 5.3% senior notes due 2025 were up about ½ point on Friday although the increase did not appear to be connected to any news event, a market source said.

Sprint Corp.’s junk bonds were up about ½ point on the week, despite some negative news that cast doubt on its merger with T-Mobile.

Kaefer’s secured deal

Germany-based Kaefer Isoliertechnik GmbH & Co. priced a €250 million issue of 5.5-year senior secured notes (B1/BB-/BB) at par to yield 5½% on Friday.

Joint bookrunner Deutsche Bank will bill and deliver for the debt refinancing and general corporate purposes deal. BNP Paribas and UniCredit were also joint bookrunners.

Comstock Resources eight-year deal

Comstock Resources is expected to price $850 million of senior notes due 2026 (Caa1/B/B) in the July 16 week.

BofA Merrill Lynch is leading the debt refinancing deal.

Also in the week ahead, Magnolia Oil & Gas is expected to price $400 million of eight-year senior notes (/BB-/BB-).

Early talk has the deal coming to yield in the 6% area, sources say.

The roadshow is scheduled to wrap up Tuesday.

Catching a bid

While there was little movement in terms of price in the secondary space on Friday, the market was well bid.

“It’s hard to say if it’s well bid because it’s supposed to be, or it’s just quiet, or if there’s some capitulation with short covering,” a source said.

Regardless of the reasons, the secondary space was firm throughout the week.

Credit spreads tightened about 15 bps from the previous week and the triple C credit spreads reached their tightest point in four years, a market source said.

“It was a decent risk on week,” the source said. With equities also putting in a strong performance, the high yields market was following suit.

Intelsat in focus

Despite a downgrade from S&P, Intelsat’s junk bonds continued their upward momentum on Friday.

The company’s 8½% notes were seen up another 2 points to 85½ bid, 86 offered in high volume activity, a market source said.

S&P downgraded its corporate credit rating on Intelsat to SD from CCC+.

The downgrade was due to the company’s repurchase of $600 million of its 7¾% notes due 2021 at a discount to par, which the ratings agency considered a default because lenders received less value than promised. (see related story)

While S&P downgraded Intelsat, Moody’s changed its outlook on the company to stable from negative on Thursday.

Intelsat’s junk bonds jumped 1 to 2 points on Thursday after the Federal Communications Commission approved the company’s C-band proposal to open the spectrum to 5G signals.

WeWork rebounds

While still trading below their issue price, WeWork’s struggling 7 7/8% senior notes due 2025 have been on the rebound over the past week.

The notes were set to close Friday at 97½ bid, 98 offered, a market source said.

They were seen trading between 97¾ and 98 during Friday’s session although volume was light. The notes were seen at 96 bid, 97 offered on Monday.

While the notes have been on the rise over the past week, they are still below issue price, a market source said.

WeWork’s 7 7/8% notes, which priced at par on April 25, have struggled since hitting the market with the deal pointed to as one of the worst in 2018.

The notes dropped to a low of 92¾ in May. While they spiked to 98¾ in June they quickly traded down and have remained in the 95 ½ to 96 range until their rise over the past week, according to Trace data.

Tesla up

Tesla’s 5.3% senior notes due 2025 were among the issues to benefit from stronger bids in the market on Friday.

The notes were up about ½ point on Friday to 90½ bid, 91½ offered, a market source said.

Despite Tesla CEO Elon Musk’s daily presence in the headlines, the rise of the notes did not appear to be connected to any news event, the source said.

Sprint holds

While there have been several headlines over the past week that could have negatively impacted Sprint, the company’s junk bonds held steady with some seen up ½ point on the week, a source said.

Sprint’s 75/8% notes due 2025 closed Friday at 102¾ after opening the week at 102¼. The notes rose despite some negative news that cast doubt on the company’s merger with T-Mobile.

The U.S. Department of Justice is appealing court approval of the Time Warner-AT&T merger, throwing a monkey wrench into a ruling that signaled a green light for merger and acquisition activity in the telecommunications sector.

Sprint’s majority shareholder SoftBank’s dealings in China were also in the spotlight over the past week. With escalating trade tensions, the investments may complicate regulatory approval for the T-Mobile merger.

Indexes gain again

Three benchmarks for the high-yield secondary market rounded out the week with gains after all posted gains on Thursday.

The KDP High Yield index was up 6 basis points to 70.39 with the yield now 5.88%.

The index has seen a solid streak of gains and has steadily climbed all week. The index was up 4 basis points on Thursday, 6 bps Wednesday, 1 bps on Tuesday, and 3 bps on Monday.

The Merrill Lynch High Yield index was again on the rise on Friday. The index gained 6.7 bps with the year-to-date return now 0.587.

The index was up 15 bps on Thursday, dropped 10.6 bps on Wednesday, and rose 15.4 bps rise on Tuesday and 25.5 bps rise on Monday.

The index has now been in positive territory for six consecutive trading days. It turned positive on July 6.

The CDX High Yield 30 index again saw a healthy increase on Friday. The index was up 23 bps to close the day at 106.92.

The index was up 33 bps on Thursday, dropped 24 bps on Wednesday and 11 bps on Tuesday, and was up 28 bps on Monday.

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