Domestic primary dormant; California Resources gains continue; HCA improves; Diebold up on financing

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 27 – The domestic primary market remained dormant on Monday with trading volume in the secondary space half the normal amount, sources said.

The slow pace of activity is expected to persist throughout the week with all eyes on the steady flow of deals expected in September.

While major currency deals continue to hold out until post Labor Day weekend, one more Nordic deal is on deck from Ship Finance International Ltd.

HCA Inc.’s recently priced 5 5/8% senior notes due 2028 (Ba2/BB-) were volume leaders on Monday with the notes again seeing a slight improvement.

HCA’s 5 3/8% senior notes due 2026 were less active and unchanged on the day. However, both tranches are now firmly entrenched above par.

California Resources Corp.’s 8% senior secured second-lien notes due December 2022 were again volume leaders with the notes up another 1 point after a steady climb throughout last week.

Vistra Energy Corp.’s 5½% senior notes due 2026 (Ba3/BB/BB) saw renewed attention in the secondary space. While active, the notes were largely unchanged.

Diebold Inc.’s struggling 8½% senior notes due 2024 jumped almost 5 points after the company announced it had secured financing for a $650 million term loan.

Ship Finance on deck

The major currencies new issue market remained quiet on Monday and is expected to remain so until the extended Labor Day Holiday weekend concludes on Sept. 4, sources say.

However, the Nordic new issue market continued to generate news.

Ship Finance International mandated Nordea and a syndicate of banks to arrange a series of fixed income investor meetings in the Nordic region beginning Tuesday.

A five-year NOK-denominated senior unsecured bond issue may follow, subject to market conditions.

HCA in focus

HCA’s 5 5/8% senior notes due 2028 were in focus in the secondary space with the notes continuing to see minor improvements. The notes were up 1/8 to ¼ point to trade between par ¼ and par ½, a market source said.

About $20 million of the bonds were on the tape by late afternoon.

HCA’s 5 3/8% senior notes due 2026 were less active in the secondary space and were largely unchanged from Friday’s close at par 5/8.

HCA priced $2 billion in two-tranches on Aug. 9 at par, which included a $1 billion tranche of the 5 3/8% notes and a $1 billion tranche of the 5 5/8% notes.

The notes largely lagged their issue price in the secondary market. However, the notes gained steam and have traded above par since last week.

California Resources gains continue

California Resources 8% senior notes due 2022 were again one of the most actively traded issue of the day with about $17 million of the bonds on the tape by the late afternoon.

The notes rose 1 point as oil futures gained slightly with all eyes on fresh indicators for supply.

The 8% notes were seen at 90 bid, 90½ offered early in the session with most trades between 90 and 90¼, source said.

The barrel price of West Texas intermediate crude oil for October delivery was up slightly to $68.81, an increase of 15 cents or 0.22%.

The 8% notes made steady gains last week with U.S. oil inventories declining faster than previously anticipated.

Attention will be on fresh supply indicators with oil futures expected to remain volatile.

Vistra active

Vistra Energy’s 5½% senior notes due 2026 were active in the secondary space on Monday although the notes were unchanged on the day.

The notes were trading between 101 5/8 and 101 7/8 with more than $13 million of the bonds on the tape.

The integrated power company priced an upsized $1 billion issue of the notes at par on Aug. 7.

Diebold jumps

Diebold’s 8½% senior notes due 2024 jumped on Monday after the company announced it had secured financing for a term loan.

The notes were up almost 5 points in active trading to close the day at 70½, according to a market source.

The gains came after Diebold announced it had secured a $650 million commitment from two institutional investors, which it is expected to receive through a term loan.

While the notes received a boost on Monday, they are still well below their levels prior to the company’s second-quarter earnings report, which sent the notes into freefall.

Diebold reported in early August a loss per share of 21 cents versus analyst expectations for earnings per share of 1 cent for the second quarter.

The company also announced it was negotiating a credit agreement with its principal lenders.

The credit agreement amendment, which would allow for the term loan, is subject to approval.

Diebold also recently hired Credit Suisse and Evercore as financial advisers to help the company explore a sale.

Prior to Diebold’s second-quarter earnings report, the notes were trading around 92.

Friday inflows

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

High-yield ETFs saw $111 million of inflows on the day.

However actively managed sustained $10 million of outflows on Friday.

Indexes gain

Three benchmarks for the high-yield secondary market started the week strong after ending last week on firm footing.

The KDP High Yield Daily index was up 6 basis points to close Monday at 70.54 with the yield now 5.78%. The index saw a strong performance last week and gained 9 bps on the week.

The Merrill Lynch High Yield index continued its streak of gains with the year-to-date return now just shy of 2%.

The index was up 9.8 bps on Monday with the year-to-date return now 1.956%. The index has seen a solid upward momentum since it crossed into the black on July 6.

The CDX High Yield 30 index also started the week off strong. The index was up 18 bps to close Friday at 107.17. The index saw a 27 bps gain last week.

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