Morning Commentary: Ranger Oil jumps on acquisition news; junk funds track outflows

By Paul A. Harris

Portland, Ore., March 2 – After opening 1/8 point to ¼ point lower on Thursday, the high-yield bond market was down a solid ½ point at mid-morning as rate scares – sparked by new inflationary headlines – were hobbling the markets in the United States, sources said.

The yield of 10-year Treasuries shot above 4% on news that in the face of central bank efforts to cool off the U.S. economy with interest rate increases, the cost of acquiring and retaining workers continues to climb.

Ten-year governments were yielding 4.06% at mid-morning.

With the Dow Jones industrial average down 0.1% at that time, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.2%, or 15 cents, at $73.72.

The bonds of Ranger Oil Corp. were up 5 points in two days on news that Calgary, Alta.-based Baytex will acquire Ranger in a $2.5 billion cash and stock deal in which Baytex will also assume Ranger’s $603 million of Ranger debt, a trader said.

The Penn Virginia Escrow LLC/Penn Virginia Holdings, LLC 9¼% senior notes due August 2026 changed hands at 106 on Thursday morning in active trading, the source said.

Penn Virginia was renamed Ranger Oil following the merger of Penn Virginia and Lonestar Resources in October 2021.

Most of the bonds minted Wednesday during the biggest primary market session in a month were trading at premiums to their issue prices on Thursday morning, the trader said.

Among them were two tranches of junk that came in an acquisition financing from Ritchie Bros. Auctioneers Inc.

The Ritchie Bros. Holdings Inc. 6¾% senior secured notes due March 2028 (Ba2/BB+) were par ¼ bid, par ½ offered, while the Ritchie 7¾% senior notes due March 2031 (B1/BB-) were par ¾ bid, 101¼ offered.

Trading was super-active, the source remarked.

Both tranches, $550 million secured and $800 million unsecured, came at par, inside of price talk, as they played to big demand, sources said.

Two dollar-denominated tranches of sustainability-linked senior notes (Ba2/BB-/BB-) sold Wednesday by Israeli pharmaceutical giant Teva were above issue prices, in active trading.

The Teva Pharmaceutical Finance Netherlands II BV/Teva Pharmaceutical Finance Netherlands III BV 7 7/8% notes due September 2029 were par 3/8 bid, par 5/8 offered, while the 8 1/8% notes due September 2031 were wrapped around par ¼, the trader said.

The 2029 bonds came in an upsized $600 million tranche (from $500 million) and the 2031 paper came in a $500 million tranche, both at par.

Teva's $2.49 billion equivalent debt-refinancing megadeal also included an upsized €800 million tranche (from €500 million) of 7 3/8% notes due September 2029 and €500 million of 7 7/8% notes due September 2031. Both also priced at par on Wednesday.

Elsewhere the new Frontier Communications Holdings, LLC 8 5/8% first-lien secured notes due March 2031 (B3/B/BB+) changed hands at par 5/8 on Thursday morning, the trader said.

The $750 million issue came at par and went out 99¾ bid, par ¼ offered on Wednesday afternoon.

The primary market remained generally quiet on Thursday, save for a $650 million perpetual preferred deal (Ba3/B/BB-) from NRG Energy Inc. set to price on a high-yield syndicate desk later in the day. Talk is in the 10¼% area.

Fund flows

The dedicated high-yield bond funds sustained $1.09 billion of net daily cash outflows on Wednesday, according to a market source.

High-yield ETFs saw $1.04 billion of outflows on the day.

Actively managed high-yield funds sustained $50 million of outflows on Wednesday, the source said.

News of Wednesday’s daily outflows comes as the market awaits news on the weekly cash flows of the various asset classes from fund-tracker Refinitiv Lipper, expected later Thursday.

Pending that report the junk bond funds are tracking $1.7 billion of net outflows on the week that concluded with Wednesday’s close, according to the market source.

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