Nordic primary active; trading volume light; Tesla down; Sanchez, California Resources gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 20 – The summer doldrums were in full effect in junkbondland on Monday with the domestic primary market dormant and trading volume in the secondary space light.

While no dollar-denominated deals were launched on Monday, two Nordic deals from Teekay LNG Partners LP and WOW Air surfaced.

Meanwhile, the secondary space was “very slow and very quiet,” on Monday, sources said.

Names in the energy sector were active and saw gains as the barrel price of West Texas intermediate crude oil for September delivery continued to rebound from last week’s lows.

California Resources Corp.’s 8% senior secured second-lien notes due December 2022 were again active amid the move in oil futures and saw a modest gain.

Sanchez Energy Corp.’s junk bonds were up 1 to 2 points in active trading on Monday.

While trading volume was light, Denbury Resources Inc.’s recently priced 7½% senior secured second-lien notes due Feb. 15, 2024 (B3/B+) also saw a slight improvement on Monday.

Meanwhile, Tesla Inc.’s 5.3% senior notes due 2025 were down about 1 point after the latest cycle of headlines surrounding the electric car manufacturer.

Nordic deals

Although there was no new issue news in the dollar-denominated market on Monday, news surfaced on a pair of Nordic deals.

Teekay LNG Partners LP announced that it mandated global coordinators DNB Markets and Nordea, and joint bookrunners Danske Bank and Swedbank to arrange a conference call with fixed income investors on Tuesday, ahead of a NOK-denominated offering of five-year senior unsecured bonds.

Iceland-based low-cost air carrier WOW Air is seeking to place three-year senior secured floating-rate notes, expected to come in euro-denominated bonds or Swedish Krona-denominated bonds.

Pareto Securities is leading the offer.

The doldrums

Away from the Nordic deals, there was no news on the new issue front from the major currencies and little likelihood that there will be until September, sources say.

September is expected to be a busy month in the new issue market, sources say, as the banks line up bond deals backing European and North American merger and acquisition related financings.

The energy sector

Names in the energy sector were on the rise on Monday as the price of crude oil continued to rebound from last week’s lows.

California Resources 8% senior notes due 2022 saw decent trading volume on an otherwise quiet day with the notes up about ½ point, a market source said.

The 8% notes were seen at 87 bid, 87½ offered on Monday and were changing hands between 87 and 87 3/8.

Denbury Resources’ newly priced 7½% notes also saw a modest improvement on Monday. The notes were quoted at par 3/8 bid, par 7/8 offered on Monday, according to a market source.

The notes were at par ¼ bid, par ½ offered on Friday.

While the notes were up about ¼ point, trading of the new paper was light, a market source said.

Denbury priced an upsized $450 million issue of the notes at par on Aug. 14.

The price of West Texas intermediate crude oil settled at $66.43, up 52 cents, or 0.8%, on Monday.

Crude oil has slowly risen after a steep decline on Aug. 15 when it briefly dipped into the $64 range before settling at $65.01 due to a surprise increase in U.S. inventories.

Sanchez on the rise

Sanchez Energy’s junk bonds were also on the rise on Monday and were seen up 1 to 2 points in decent trading volume.

Sanchez Energy’s 7¾% senior notes due 2021 were up about 2 points and were seen trading at 69¼.

The oil and gas exploration and production company’s 6 1/8% notes were up about 1 point. They were seen trading up to 55.

While Sanchez Energy’s junk bonds do not move in concert with the price of crude oil in the same way as California Resources 8% notes, it is a high beta name, a market source said.

The rise in Sanchez Energy’s junk bonds comes after a period of prolonged clobbering after the company released its second-quarter earnings report on Aug. 7.

Sanchez saw a large earnings miss in the second-quarter with a loss of 26 cents per share versus analyst expectations for a loss of 6 cents.

The large loss was attributed to its hedging activities.

Sanchez said in an investor presentation that it has more than 20,000 barrels a day of oil hedged in the second quarter at $52.61 a barrel, well below market prices.

The 7¾% notes were trading around 88 in the run up to the earnings report.

The 6 1/8% notes were trading around 69.

Tesla down

Tesla’s 5.3% senior notes due 2025 were down about 1 point on Monday after the latest round of headlines about the beleaguered electric car manufacturer.

The 5.3% notes were seen trading between 87 and 87½ on Monday. The movement in the notes continues to be topical with investors responding to headlines, a market source said.

The 5.3% notes dropped on Monday after news broke that Saudi Arabia’s sovereign wealth fund is in talks to invest $1 billion in Tesla competitor Lucid Motors Inc.

The sovereign wealth fund was pointed to by CEO Elon Musk as the source of his confidence that funding had been secured to take the company private.

The price target for Tesla stock was slashed by a J.P. Morgan analyst on Monday with the privatization proposal appearing less and less likely.

Tesla’s 5.3% notes traded up to 93 after Musk’s infamous “funding secured” tweet on Aug. 7. They continue to rise and fall based on the tone of the latest batch of headlines about the company.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, a trader said.

High-yield ETFs sustained $153 million of outflows on the day.

However actively managed high-yield funds saw $38 million of inflows on Friday, the trader said.

Indexes flat to up

Three benchmarks for the high-yield secondary market opened the week either flat or with gains after closing Friday mixed.

The KDP High Yield Daily index saw modest gains on Monday. It was up 2 basis points to close the day at 70.39 with the yield now 5.86%. The index was up 5 bps on Friday.

The Merrill Lynch High Yield index was up 10 bps on Monday with the year-to-date return now 1.594%. The index was up 2.7 bps on Friday.

The CDX High Yield 30 index was flat on Monday closing the day at 106.72. The index was down 1 bps to close Friday at 106.72.

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