Morning Commentary: New energy bonds trade to premiums; junk ETFs see inflows

By Paul A. Harris

Portland, Ore., Sept. 8 – Energy sector issues priced during the post-Labor Day week were holding above issue prices on a quiet Friday morning in the junk bond market, according to a trader in New York.

The Crescent Energy Finance LLC 9¼% senior notes due February 2028 (B1/BB-/BB-) were 102 1/8 bid, 102 5/8 offered, the trader said.

Those prices reflect the entire $850 million issue – the $400 million original issue that priced at the beginning of the year, the $300 million add-on notes that priced in July, and Thursday’s $150 million add-on notes – presently trading as a single series, the trader said.

The Houston-based independent energy company priced the Thursday tap, upsized from $125 million, at 101.125 to yield 8.858%.

Earlier in the week, in what traders have characterized as an ultra-tight execution, Permian Resources Corp. priced a $500 million issue of Permian Resources Operating, LLC senior notes due Jan. 15, 2032 (B2/BB-/BB-) at par to yield 7%.

Those bonds, which came in an oversubscribed Wednesday drive-by, were wrapped around issue price on Thursday, with traders lamenting that the execution appeared all but totally bereft of an upside in the secondary market.

However, that paper was par 1/8 bid, par 5/8 offered on Friday morning, the trader said.

Energy names are enjoying the support of strong crude oil prices, sources say.

At mid-morning, the barrel price of West Texas Intermediate crude for October 2023 delivery was 47 cents higher at $87.34, up 0.54% on the day, and up a hefty 9.4% in the past two weeks.

The dollar-denominated primary market was quiet on Friday, with the first week of autumn in the high-yield bond market coming to a close having seen an underwhelming $815 million face amount of issuance in three tranches.

However, the pace promises to pick up in the week ahead, with an active forward calendar that features $2.35 billion heading into the weekend and more expected to be announced.

Star Parent, Inc. is marketing a $1.7 billion offering of seven-year senior secured notes (B1/B) coming in support of the buyout of Syneos Health Inc. by Elliott Investment Management, Patient Square Capital and Veritas Capital.

Initial guidance is in the 9% area. The roadshow is scheduled to run through Wednesday.

French TV producer/distributor Banijay Entertainment SAS is shopping a $350 million minimum offering of 5.5-year senior secured notes (B1/B+/BB-) on a roadshow that wraps up on Monday.

Initial talk is in the low-to-mid 8% area.

Banijay Entertainment’s overall €910 million equivalent two-part offering also includes a €350 million minimum tranche of the notes with initial guidance in the mid-to-high 7% area.

Calgary, Alta.-based Greenfire Resources Ltd. is on the road with a $300 million offering of five-year senior secured notes (B3/B+), set to price during the week ahead.

Initial guidance has the deal coming with a 12% all-in yield at a discount of about 2 points.

The Sept. 11 week could also see the launch of an M&A megadeal, according to a portfolio manager.

A $4 billion equivalent amount of senior secured notes backing the buyout of Worldpay is expected to come in tranches of dollar- and euro-denominated notes, the manager said, adding that Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC will have the lead.

And United Arab Emirates-based Shelf Drilling Holdings, Ltd., engaging the services of Goldman Sachs, held one-on-one meetings with bond investors in the U.S. ahead of a possible speculative-grade notes offering – proceeds to address intermediate-term maturities – that could surface in the week ahead, the trader said.

The company’s EM zip code notwithstanding, domestic high-yield accounts are having a look, the source added.

Fund flows

High-yield ETFs saw a healthy $412 million amount of daily cash inflows on Thursday, according to a market source.

Actively managed funds endured negative cash flows on Thursday, sustaining $64 million of outflows on the day.

News of Thursday’s daily cash flows follows a Thursday report that the combined funds saw $252 million of net inflows on the week to the Wednesday, Sept. 6 close.

The ETFs accounted for that amount and more, posting $452 million of inflows on the week, their second weekly inflow in the past seven weeks, the source said.

Meanwhile the actively managed accounts, the asset managers, saw their fourth weekly outflow in the past six weeks.

Year-to-date cash flows of the dedicated junk bond funds stood at negative $11.7 billion at Thursday’s close, according to the market source.

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