Morning Commentary: Sanchez Energy, EP Energy bonds tumble, Verscend’s $1.15 billion on deck

By Paul A. Harris

Portland, Ore., Aug. 10 – Select high-yield energy names were under pressure on Friday morning, traders said.

The bonds of Sanchez Energy Corp., which sustained a big drop in price earlier in the week after the company reported that it was on the wrong side of some oil price hedges and was seeing poor performances from some of its wells, fell further on Friday.

Sanchez Energy’s 6 1/8% senior notes due January 2023 were offered at 54½ on Friday morning after having traded earlier at 55, said a trader who was marking them down 5 to 6 points on the day.

Nearer maturity paper, the Sanchez Energy 7¾% senior notes due June 2021, were at 70¼ bid on Friday, also substantially lower on the day, a trader said.

Earlier in the week Sanchez said 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.

Elsewhere in the energy sector EP Energy Corp.’s bonds fell on Friday.

The 9 3/8% 1.5-lien senior secured notes due May 2024 issued by EP Energy LLC and Everest Acquisition Finance Inc. traded Friday at 77, whereas last week they traded at 81¾, a trader said.

EP Energy’s stock was down more than 8%.

On Thursday the Houston-based company reported a second quarter loss of $58 million, or 23 cents per share.

Oil prices were up a dollar on Friday morning.

The barrel price of West Texas Intermediate crude oil for September 2018 delivery was up $1.01, or 1.51% at $67.82, at mid-morning.

However high-yield ETFs were lower on the morning.

Against a backdrop of weaker equities, the iShares iBoxx $ High Yield Corporate Bd (HYG) was down 6 cents, or 0.06%, at $85.99 per share.

Recent deals

In spite of that weakness, recent issues tended to be holding in at new issue prices or better, sources said.

Herbalife Nutrition Ltd.’s 7¼% senior notes due August 2026 (B1/BB-) were at par 7/8 bid at mid-morning after trading as high as 101 3/8 bid earlier in the session, a trader said.

The $400 million issue priced at par on Thursday.

Marriott Vacations Worldwide Corp.’s new 6½% senior notes due 2026 (S&P: BB-) were at par ½ bid on Friday morning.

The $750 million issue priced at par on Thursday.

However both of HCA Inc.’s new senior bullet issues (Ba2/BB-) were wrapped around their new issue prices after having “priced on the screws,” traders said.

The 5 3/8% notes due September 2026 were at 99¾ bid, par offered on Friday morning. The $1 billion tranche priced on Thursday at par, at the tight end of yield talk set in the 5½% area and inside initial guidance set in the 5 5/8% area.

The new HCA 10-year bullet, the 5 5/8% notes due September 2028, were also wrapped around par on Friday morning, traders said.

The $1 billion 10-year tranche also priced at par, at the tight end of yield talk set in the 5¾% area and inside initial guidance set in the 5 7/8% area.

Finally, BMC Software’s new dollar-denominated paper, the 9¾% notes due September 2026 issued by Banff Merger Sub, Inc., were at par 1/8 bid on Friday morning.

The deal came with extensive covenant concessions but didn’t appear to have priced excessively cheap, a trader remarked.

Earlier in the week, prior to the covenant changes, the deal was rumored to be having difficulties.

However the roadshow ended Wednesday in Los Angeles, where the deal played to an enthusiastic audience, the trader said.

At final talk the deal was heard to be playing to $4.5 billion of orders, a market source said.

Also on Thursday, BMC Software priced €301.5 million of eight-year paper at par to yield 8 3/8%, the middle of the 8¼% to 8½% yield talk and the wide end of initial talk in the 8¼% area.

Verscend on deck

A rejuvenated new issue market – poised to put up its biggest weekly issuance total since March – was taking a breather on Friday morning.

Verscend Holding Corp. had the stage to itself

The Waltham, Mass.-based provider of payment services to the health care industry sweetened the price talk on its $1.15 billion offering of eight-year notes (Caa2) and made investor friendly changes to the offering documents, perhaps stealing a page from the above-mentioned BMC Software deal, a trader suggested.

Official talk is 9¾% to 9½%, according to a trader who added that the deal has undergone covenant changes bearing primarily upon how the company may disburse cash and incur additional debt.

Earlier whisper was in the context of the 9¼% area, and 9¼% to 9½%, sources say.

Books were scheduled to close at noon ET Friday, with the deal – to help finance the company’s acquisition of Cotiviti Holdings, Inc. – expected to price thereafter.

© 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.