Cleveland-Cliffs prices; Bausch Health pulls offering; Uniti in focus; Tutor Perini jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 2 – Following a week with no new issuance, the domestic high-yield primary market saw one deal price on Monday.

Cleveland-Cliffs Inc. priced a revised $725 million offering at a discount.

However, Bausch Health Americas Inc. announced it would not be moving forward with a planned offering of senior notes.

Meanwhile, the secondary space saw another volatile day with the market opening with losses but closing the day with gains.

Anticipation the Federal Reserve will help ward off the economic impact of the coronavirus with another rate cut helped buoy the secondary space.

However, the wild fluctuations were creating paralysis with many unsure of the future direction of the market, a source said.

With a shortage of new paper, topical news was a major driver of trading activity on Monday.

Uniti Group Inc.’s junk bonds were in focus and posting gains following news of a settlement with its former parent company Windstream Holdings Inc.

Tutor Perini Corp.’s 6 7/8% senior notes due 2025 jumped in active trading following news of a takeover bid.

After suffering the brunt of last week’s sell-off, the oil patch firmed on Monday with Range Resources Corp.’s, Chesapeake Energy Corp.’s and Whiting Petroleum Corp.’s junk bonds all improving in active trading.

Cleveland-Cliffs reopens primary

Following a shutdown in the high-yield new-issue market lasting more than a week, brought on by coronavirus-related volatility roiling the global capital markets, Cleveland-Cliffs priced $725 million of 6¾% six-year senior secured notes (Ba3/BB-) at 98.783 to yield 7% on Monday.

The deal bore the bruises of extremely challenging market conditions.

The secured notes tranche was upsized from $550 million.

Prior to upsizing the secured notes tranche, the deal had been in the market as a $950 million two-part offer that also included a $400 million tranche of unsecured notes.

That unsecured tranche was withdrawn.

The yield printed at the tight end of the 7% to 7¼% yield talk. Price talk specified a slight discount.

The deal also came with changes to tenor, structure and covenant language (see related story in this issue).

Credit Suisse was the lead.

You call that stability?!

Cleveland-Cliffs was the first deal to clear the market since Graphic Packaging International, LLC priced $450 million of 3½% unsecured notes (Ba2/BB+) on Feb. 21.

Since then the market has seen a couple of new high-yield offers.

Advantage Solutions Inc. ran a roadshow for a $1.145 billion two-part deal: $345 million 6.5-year senior secured notes and $800 million seven-year senior unsecured notes.

Like the Cleveland-Cliffs deal, Advantage Solutions came on a timeline that implied it would clear the market late last week.

There were no updates Monday on the Advantage Solutions offer.

In the euro-denominated market, meanwhile, Fugro NV became the first prospective issuer of 2020 to pull a junk deal, as it postponed its €500 million offering of five-year senior secured notes (B3/B) due to market conditions.

Fugro announced the postponement in a press release that appeared last Friday.

Market volatility is also understood to have sidelined at least one sizable deal.

Early last week, Bausch Health Americas was heard to be ready to roll out a $3.25 billion two-part offering of senior secured notes (Ba2/BB/BB) in eight- and 10-year tranches.

A syndication effort was already underway for the company's $5.14 billion term loan.

However, late Monday Bausch Health cited market conditions as it announced that it would not go forward with either the loan or the notes at this time.

Given that Cleveland-Cliffs managed to get its deal done on Monday, which was a banner session in the stock market, Prospect News enquired of one high-yield syndicate official if the new deal machine can be expected to reactivate.

“I'm afraid we're going to have to see a little bit more stability than we saw today,” replied the banker, adding that – stock rallies notwithstanding – Monday was indeed a volatile session.

Although the Dow Jones industrial average advanced a whopping 5% on the day, retracing a respectable portion of the ground it lost last week, junk bonds were incrementally higher, with the high-yield ETF, $JNK up just 0.2% on the day, a trader said.

Uniti’s settlement

Uniti’s senior notes were on the rise following news the communications infrastructure REIT had reached a settlement with its former parent company.

Uniti’s recently priced 7 7/8% senior notes due 2025 were among the most actively traded issues in the secondary space.

The notes were up more than 2 points and stood poised to close the day at 105 5/8, according to a market source.

The bonds saw more than $37.5 million in reported volume.

Uniti priced a $2.25 billion issue of the 7 7/8% notes at par on Feb. 5.

Uniti’s 8¼% senior notes due 2023 were also active and posting gains.

The notes gained 3¼ points to trade up to 96¾ by the late afternoon, according to a market source.

News broke on Monday that Uniti and Windstream had settled the dispute over their lease agreement.

Uniti agreed to give Windstream $1.75 billion in capital improvement over 10 years, $490 million in cash and $285 million for the purchase of unused fiber, Bloomberg reported.

Windstream and Uniti were scheduled to go to trial on March 3 if a settlement could not be reached.

The dispute stems from Windstream’s spin-off of Uniti in 2015 and the subsequent lease-back agreement where Windstream was paying Uniti for use of its fiber optic cables.

A holder of Windstream’s junk bonds claimed the lease-back violated a covenant of one of Windstream’s bonds.

The holders’ subsequent victory in court pushed Windstream to file for Chapter 11 bankruptcy in February 2019.

With a settlement now reached regarding the lease, Windstream is poised to emerge from bankruptcy by the middle of 2020.

Tutor Perini jumps

Tutor Perini’s 6 7/8% senior notes due 2025 jumped in active trading following news of a takeover bid.

The 6 7/8% notes were up almost 6 points in active trading, according to a market source. They closed the day at 97 with more than $22 million in reported volume.

Apollo Global Management approached Tutor Perini with a takeover bid that values the company at $1 billion, Reuters reported.

Apollo is offering about $17 per share in cash for the construction company, according to the report.

However, there is no guarantee the bid will be accepted.

The 6 7/8% notes are putable at 101 plus accrued interest upon a change of control.

Energy firms

The energy sector was among the hardest hit in last week’s sell-off and was the major benefactor of the market’s rebound on Monday.

Chesapeake Energy’s 11½% senior notes due 2025 rose 3¼ points to close the day at 60½, according to a market source.

There was about $15 million in reported volume by the late afternoon.

Whiting Petroleum’s 5¾% senior notes due 2021 were also up about 3¼ points to 62¼ with more than $10 million in reported volume, according to a market source.

Range Resources’ 4 7/8% senior notes due 2025 gained 4½ points to 68½.

Range Resources’ 9¼% notes due 2026 were up 4 points to 71.

Crude oil futures skyrocketed on Monday due to optimism that OPEC will cut production to stabilize oil prices.

The barrel price of WTI crude oil for April delivery jumped to $47.52, an increase of $2.76 or 6.17%.

$1.97 Friday outflows

The dedicated high-yield bond funds sustained $1.97 billion of net daily cash outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $668 million of outflows on the day.

Actively managed high-yield funds sustained $1.3 billion of outflows on Friday, the source said.

In the first two sessions of the weekly reporting period that will conclude with Wednesday's close, the combined funds tracked approximately $5.1 billion of net outflows, according to the market source.

In the week to last Wednesday's close, the latest full week for which data is available, the combined junk funds sustained approximately $4.2 billion of net outflows, according to Lipper US Fund Flows.

Indexes gain

After steep losses in the previous week, indexes were on the rise on Monday.

The KDP High Yield Daily index gained 23 points to close Monday at 69.57 with the yield now 5.71%.

The index saw a cumulative loss of 224 bps on the week last week.

The ICE BofAML US High Yield index gained 49.2 bps with the year-to-date return now negative 1.088.

The index sank into negative territory last week when it posted a cumulative loss of 199.1 bps on the week.

The CDX High Yield 30 index gained 28 bps to close Monday at 105.68.

The index posted a cumulative loss of 338 bps on the week last week.

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