Chesapeake Energy, Basic Energy price; Altra on tap; Tallgrass hovers at par; Refinitiv active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 25 – The domestic primary market continued to churn out new deals on Tuesday with two issues pricing, including one that had been postponed in the spring.

Chesapeake Energy Corp. priced $1.25 billion of senior notes (Caa1/B-) in two drive-by tranches.

In a deal initially marketed in March, Basic Energy Services, Inc. priced a $300 million issue of 10¾% five-year senior secured notes (B3/B) at 99.042 to yield 11%.

The notes were well above their issue price in secondary trading.

Altra Industrial Motion Corp. set price talk for its $400 million offering of eight-year senior notes with the deal expected to price on Wednesday.

The European primary market’s forward calendar also continued to grow with Avis Budget Finance plc planning a roadshow for a €350 million offering of senior notes due January 2026 (expected B1/confirmed BB).

Meanwhile, the secondary space was heavier on Tuesday with the market in general down about ¼ point.

Despite the soft day, high yield bonds were holding up well despite the backup in treasuries, a market source said.

While another strong day for oil and gas, Tallgrass Energy Partners, LP and Tallgrass Energy Finance Corp.’s newly priced 4¾% senior notes due 2023 (Ba3/BB+/BBB-) continued to hover around par in active trading.

Refinitiv’s dollar-denominated tranches were back in the spotlight as major volume movers during Tuesday’s session with the notes continuing to lose ground as the notes’ settlement date approaches.

CenturyLink, Inc.’s 7½% senior notes due 2024 dropped about ½ point on Tuesday after the resignation of the company’s chief financial officer.

California Resources Corp.’s 8% senior secured second-lien notes due December 2022 continued to improve with oil futures increasing their gains.

Chesapeake Energy’s $1.25 billion drive-by

In Tuesday's primary market, Chesapeake Energy priced $1.25 billion of senior notes (Caa1/B-) in two drive-by tranches.

An $850 million tranche of six-year notes priced at par to yield 7%. Pricing came at the tight end of the 7% to 7¼% yield talk. Initial talk was in the context of 7% to 7¼%.

A $400 million tranche of eight-year notes priced at par to yield 7½%, in the middle of price talk in the 7½% area. Initial talk was in the context of 7¼% to 7½%.

The company contemplated a 10-year tranche, according to an investor. However, the market's receptivity to such a structure was open to question.

Goldman Sachs was the left bookrunner. JP Morgan, Wells Fargo and MUFG were the joint bookrunners.

The Oklahoma-based oil and gas company plans to use the proceeds, together with cash on hand and borrowings under its credit facility, if necessary, to repay term loan debt, with any excess proceeds to be used for general corporate purposes which may include debt repayment, including its second lien notes.

Basic Energy finishes deal

Basic Energy Services priced a $300 million issue of 10¾% five-year senior secured notes (B3/B) at 99.042 to yield 11% on Tuesday, according to market sources.

The yield printed on top of initial talk in the 11% area.

The company postponed the deal in March when it found the availability of attractive rates and flexibility on the part of bond buyers lacking, according to a company statement issued at that time.

BofA Merrill Lynch was the left bookrunner for the debt refinancing and general corporate purposes deal.

The notes were “up big time,” in secondary trading, a market source said. They were seen at 101 bid, 102 offered.

Altra Industrial Motion talk

Altra Industrial Motion talked its $400 million offering of eight-year senior notes (B2/B+) to yield in the 6¼% area.

Official talk comes inside of initial price talk in the high 6% area to 7%.

Books close at 4 p.m. ET Tuesday, and the deal is set to price on Wednesday.

Goldman Sachs & Co. is the left bookrunner.

Avis Budget euro deal

Avis Budget Finance plans to start a roadshow on Wednesday in London City for a €350 million offering of senior notes due January 2026 (expected B1/confirmed BB).

Joint bookrunner Credit Agricole CIB will bill and deliver. Barclays, Deutsche Bank and JPMorgan are also joint bookrunners.

The Parsippany, N.J.-based vehicle rental company plans to use the proceeds to redeem its 5 1/8% senior notes due 2022, with any remaining proceeds to be used for general corporate purposes.

Holding up

While a generally heavy day, the high yield secondary market was holding up well despite a backup in treasuries. The average spread has tightened about 20 bps in the past two weeks, a market source said.

“Levels have held firm,” the source said.

All eyes will be on the Federal Reserve on Wednesday. While a rate increase is widely anticipated, market players will be watching for indications of what the path forward for future rate hikes will be.

Tallgrass hovers

Tallgrass Energy’s newly priced 4¾% senior notes due 2023 continued to hover around par in active trading on Tuesday.

Sources pegged the notes at 99 7/8 bid, par 1/8 offered early in the session and 99¾ bid, par ¼ offered later in the afternoon.

“They didn’t do much,” a market source said.

Tallgrass priced an upsized $500 million issue of the 4¾% notes at par in a Monday drive-by.

The issue size was increased from $400 million. The yield printed at the tight end of the 4¾% to 4 7/8% yield talk.

Sources attributed the lackluster performance in the secondary space to the low coupon. However, the company was able to not just get the deal done, but upsize it, a source said.

Refinitiv weakens

Refinitiv’s dollar-denominated tranches of its recent $4.25 billion equivalent offering again saw high-volume trading as the notes’ settlement date approaches.

The notes continued to weaken in the trading activity.

Refinitiv’s 8¼% senior notes due 2026 (Caa2/B-/B+) were seen at 99½ bid, par offered with most trades around 99¾, a market source said.

More than $50 million of the bonds were on the tape by late afternoon.

The notes were trading between par and par 1/8 on Monday.

Refinitiv’s 6¼% senior notes due 2026 (B2/B/BB+) were seen at par ¼ bid, par ¾ offered with most trades around par ½, a market source said.

More than $30 million of the bonds had traded hands by late afternoon Tuesday.

The notes were trading around par 7/8 on Monday. Both issues were down about 1 point from their high after pricing.

The trading activity was largely driven by flippers looking to free up capital before the settlement date for the notes on Oct. 1, a market source said.

The settlement date for the deal was much longer than normal. However, the date is quickly approaching.

Refinitiv priced its four-tranche offering on Sept. 18 with both dollar-denominated tranches pricing at par.

CenturyLink down

CenturyLink’s 7½% senior notes due 2024 dropped about ½ point after the company’s chief financial officer resigned. The notes were seen at 106¾ bid, 107¼ offered on Tuesday.

While down following the high-profile resignation, “it’s not too crazy,” a market source said.

CenturyLink announced after the market close Monday that chief financial officer Sunit Patel will leave the position effective Sept. 28.

Patel will leave CenturyLink to serve as executive vice president and merger and integration lead at T-Mobile where he will spearhead strategic planning to integrate Sprint and T-Mobile as the companies move forward with their merger, according to a T-Mobile news release.

Energy gains continue

California Resources’ 8% senior notes due 2022 continued their upward momentum on Tuesday as oil futures continued to climb.

The 8% notes were seen at 94½ bid, 95 offered on Tuesday. They were up another ½ point for a 2 point gain on the week.

The barrel price of West Texas intermediate crude oil for November delivery extended their gains on Tuesday settling at $72.28, an increase of 20 cents, or 0.78%.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Monday, the most recent session for which data was available at press time, an investor said.

High-yield ETFs sustained $115 million of outflows on the day.

Actively managed high-yield funds were essentially flat on the day, with $5 million of inflows on Monday, the source added.

Indexes flat

Three benchmarks for the high-yield secondary market were largely flat on Tuesday after opening the week mixed.

The KDP High Yield Daily index was flat on Tuesday, closing the day at 70.41 with the yield 5.84%. The index gained 5 bps to close Monday at 70.41.

The Merrill Lynch High Yield index was the sole index to dip slightly on Tuesday. The index was down 1.3 bps with the year-to-date return now 2.29%. The index was down 3.8 bps on Monday.

The CDX High Yield 30 index was also flat on Tuesday, closing the day at 107.29, flush with Monday.

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