Maxim Crane adds to gains; Tenneco improves in junkland; Medical Properties falls

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 18 – The primary market remained quiet on Friday as the new issue bourse appears poised to enter the horse latitudes of late summer, sources say.

The comparatively brisk $10 billion new issue pace set during the first half of August is expected to fall off dramatically during the week ahead, although there is one anticipated transaction from Syneos Health Inc.

Meanwhile, it was an indecisive day in the secondary space as buyers and sellers vied for control of the market.

The market was lifted early in the session after opening down ¼ point only to be dragged lower midsession only to be again lifted into the close.

“Today was confusing,” a source said. “First ETFs came out with BWICs, then they came out with OWICs, then they came out with BWICs again.”

While the market gyrated between nominal gains and losses throughout the session, it ended the day largely flat.

And while indecision rocked the market on Friday, trading volume was thin as activity surrounding recent issues tempered.

Maxim Crane Works Holdings Capital, LLC’s 11½% second-priority senior secured notes due 2028 (Caa1/B-) were quiet on Friday with the notes largely tucked away.

However, they continued to add to the strong gains made on the break in light volume.

Tenneco Inc.’s 8% senior secured notes due 2028 (B1/B) broke their downtrend with the notes improved as buyers lifted the broader market.

Medical Properties Trust Inc.’s senior notes (Ba1/BB+) were under pressure on Friday after a Wall Street Journal report indicated the real estate investment trust’s financial transaction with its third-largest tenant, Prospect Medical Holdings, was in jeopardy.

Medical Properties has refuted some of the claims made in the article.

Primary eyed

On the primary market horizon, one transaction could materialize in the form of a $1.7 billion notes offer backing the buyout of Syneos Health by Elliott Investment Management, Patient Square Capital and Veritas Capital

Goldman Sachs was heard to be pre-marketing the Syneos bonds in the context of 9%.

A $2 billion Syneos term loan is also being pre-marketed with spread whisper of 425 to 475 basis points, a trader said.

Turning to market technicals, high-yield ETFs sustained $1.028 billion of daily cash outflows on Thursday, according to a bond trader.

It was their tenth largest outflow of the year, and was primarily driven by an $838 million daily outflow from exchange-traded fund JNK.

The dedicated high-yield bond funds sustained $1.09 billion of net outflows on the week to the Wednesday, Aug. 16 close, the trader noted, adding that it was the fourth consecutive weekly outflow, leaving the year-to-date net cash flows of the junk funds at negative $13.159 billion.

Despite the aforementioned burst of early August new issue activity, the high-yield market widened significantly in the first half of the month, sources say.

The high-yield CDX index, at 457 basis points bid on Friday, was more than 50 bps wide of the 405 bps low on July 26, a portfolio manager said.

The euro-denominated market had a similar widening, according to a market source in London who cited the closely followed iTraxx Crossover index, comprised of the 75 most liquid sub-investment-grade euro-denominated entities. That index was 427 bps bid on Friday, versus 376 bps bid at the end of July, the source said.

A continuing parade of negative economic and financial headlines out of China and spiking risk-free rates were conspicuous among concerns expressed by high-yield market sources as the past week wound down.

Maxim Crane adds

Maxim Crane’s 11½% second-priority senior secured notes due 2028 continued to add on Friday after a strong break the previous session.

The 11½% notes gained ¼ point to trade in the 99¾ to par ¼ context, a source said.

However, the notes have largely been tucked away with only $7 million in reported volume during the session.

The 11½% notes had a strong break the previous session and rose to a 99-handle.

The cheap pricing for secured paper may have been too good to ignore, a source said.

The crane rental and lifting services company priced a $500 million issue of the 11½% notes at 98.158 to yield 12% on Thursday.

The yield printed at the wide end of the 11¾% to 12% yield talk.

The aftermarket performance of several recent deals have been credit specific with some names outperforming while others have tanked.

Tenneco improves

Tenneco’s 8% senior secured notes due 2028 improved on Friday after sinking more than 4 points below their deeply discounted issue price since breaking for trade on Tuesday.

The 8% notes gained about ½ point to trade in the 81¾ to 82 context heading into the market close, a source said.

There was $20 million in reported volume.

The notes bottomed out in the 81¼ to 81½ context on Thursday.

Tenneco’s notes have plunged since the $1.9 billion issue of the 8% senior secured notes priced at 85 to yield 11.933% on Tuesday.

While the notes offered a large yield, many market players felt the deal did not price cheaply enough.

Medical Properties under pressure

Medical Properties’ senior notes were under pressure on Friday after a Wall Street Journal report indicated a financing transaction with the REIT’s third-largest tenant was in jeopardy.

Medical Properties’ 5% senior notes due 2027 fell 2 3/8 points to close the day at 80½, according to a market source.

The yield was about 11%.

There was $7 million in reported volume.

Medical Properties’ 4 5/8% senior notes due 2029 fell 2 points to close the day at 72¾ with the yield also about 11%.

However, volume was light with only $1 million in reported volume on the tape.

The notes were under pressure after media reports circulated that its transaction with its third-largest tenant, Prospect Medical Holdings, was in jeopardy.

Medical Properties and Prospect Medical announced in May an agreement for Medical Properties to receive equity from Prospect’s managed care business in place of a cash payment of $573 million on amounts owed.

Prospect Medical had stopped paying rent to Medical Properties and has been a drag on the REIT’s earnings.

The Wall Street Journal was the first to report that regulators had placed the transaction on hold, which was not disclosed during Medical Properties’ earnings.

Medical Properties shot back at the article and the “continued chorus of intentionally deceptive claims being perpetuated by individuals with a clear financial incentive to do so,” the company said in a press release.

The regulator hold on the transaction’s approval was standard and non-controversial with final approval expected, the company said.

Indexes

The KDP High Yield Daily index shaved off 2 bps to close Friday at 49.73 with the yield now 7.78%.

The index was down 23 bps on Thursday, 10 bps on Wednesday, 14 bps on Tuesday and 1 bp on Monday.

The index posted a cumulative loss of 50 bps on the week.

The CDX High Yield 30 index shaved off 1 bp to close Friday at 101.7.

The index was down 35 bps on Thursday, 32 bps on Wednesday and 39 bps on Tuesday after adding 9 bps on Monday.

The index posted a cumulative loss of 98 bps on the week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.