Robust Thursday prices $3.17 billion; secondary junk bonds improve with broader market

By Cristal Cody and Paul A. Harris

Tupelo, Miss., Oct. 7 – Issuers priced $3.17 billion of dollar-denominated junk in eight tranches on Thursday.

The session's strong and steady news volume bore indications that higher Treasury rates, especially those of five-year and 10-year government paper, are having an impact on the high-yield new issue market, a trader said.

Junk issues in the secondary market mostly improved Thursday as stocks gained and Treasury yields climbed after the number of weekly initial and continuing unemployment claims came in lower than analysts expected Thursday.

“The market was holding in OK,” a source said. “Treasuries were getting hit pretty good this morning after the jobless claims came in below expectations – that spurred equities and put other products under pressure today. We’ve certainly seen it in our market, although there was some pretty good buying from ETF-type guys right out of the [gate].”

Robust Thursday

In a busy primary market on Thursday, Oregon Tool Inc. priced a downsized $300 million issue (from $350 million) of 7 7/8% eight-year notes (Caa1/CCC+) at par, at the tight end of final talk, but around 100 basis points wide of initial guidance in the high 6% area.

Orders lagged at that initial guidance, a trader said, noting that the company was able to attract interest among investors that amounted to around $100 million, well below deal size.

At 8% books built to $500 million, the trader added.

Athabasca Oil Corp. priced $350 million of 9¾% five-year senior secured first lien notes with attached warrants for commons shares at 97 to yield 10.54%.

And Iliad Holdings SAS extended the marketing period for its €3.6 billion equivalent four-part dollar/euro offering of senior secured notes (B2/B+) into the Oct. 11 week, as order books have been slow to build, sources say.

Pricing is now expected on Wednesday, Oct. 13.

The roadshow had previously been expected to wrap up on Oct. 7 (see related stories in this issue).

Conceding that there is some repricing afoot in the primary market, a trader said that it is natural, given the extent to which rates in general have backed up.

“It's a positive thing that had to happen,” the trader asserted.

Secondary overview

New high-yield bonds in the secondary market that were pressured on Wednesday “bounced back from the lows of yesterday,” a source said.

The 6% second-lien secured notes due 2030 (Caa2/CCC+) that Frontier Communications Holdings, LLC and Frontier Communications Parent, Inc. sold Tuesday climbed about ¼ point to ½ point after trading under par on Wednesday.

The new 4½% senior notes due 2030 (B1/BB-/BB) from Sunoco LP and Sunoco Finance Corp. traded ½ point to ¾ point better than issuance over the session.

Thor Industries, Inc.’s upsized offering of 4% senior notes due 2029 (B1/BB-) held mostly steady at par Thursday.

Thor’s notes “were a little bit below par yesterday but made their way back,” a market source said.

Gannett Holdings LLC’s 6% first-lien senior secured notes due 2026 (B1//BB) also “popped up today” after drifting below par on Wednesday, a source said.

The notes traded ½ point to ¾ point better than issuance.

Meanwhile, Bonanza Creek Energy, Inc.’s 5% senior notes due 2026 (B1/BB-/BB-) improved another ¼ point to ½ point and went out Thursday trading ½ point to 1 point stronger than where the issue priced Tuesday.

“Bonanza Creek’s deal definitely held in,” a source said.

Frontier recovers

Frontier’s 6% second-lien secured notes due 2030 (Caa2/CCC+) improved in secondary trading on Thursday to 100¼ bid, 100½ offered, a source said.

The notes traded as low as 99 1/8 bid on Wednesday before going out at 99 5/8 bid.

The Norwalk, Conn.-based telecom sold $1 billion of the notes on Tuesday at par, at the tight end of the 6% to 6¼% talk.

Sunoco gains

Sunoco’s 4½% senior notes due 2030 (B1/BB-/BB) climbed to 100½ bid, 100¾ offered Thursday, a market source said.

The notes traded as low as 99½ on Wednesday before going out at 100 1/8 bid in the prior session.

The issuers priced $800 million of the notes at par on Tuesday on the tight side of talk in the 4 5/8% area and inside of initial guidance in the high 4% area.

The Dallas-based master limited partnership, which provides wholesale fuel distribution services, dropped a proposed tranche of 10.5-year senior notes following the deal announcement.

Thor notes steady

Thor Industries’ 4% senior notes due 2029 (B1/BB-) traded around par by the close Thursday, a source said.

The Elkhart, Ind.-based recreational vehicle manufacturer sold $500 million of the notes on Tuesday at par in a deal upsized from $400 million.

The yield printed at the tight end of talk in the 4 1/8% area and tighter than the 4¼% to 4½% initial guidance.

Gannett improves

Gannett Holdings’ 6% first-lien senior secured notes due 2026 (B1//BB) were quoted higher at 100½ bid, 100¾ offered in the junk space Thursday, a market source said.

The notes traded better than where the issue was seen Wednesday at 99 7/8 bid.

The McLean, Va.-based media and marketing company sold $400 million of the notes on Tuesday at par.

The yield printed at the tight end of the 6% to 6¼% talk and inside of initial guidance in the mid-6% area.

Bonanza Creek stronger

Bonanza Creek Energy’s 5% senior notes due 2026 (B1/BB-/BB-) improved another ¼ point to ½ point to trade Thursday at 100½ bid, 101 offered, a source said.

The issue was seen on Wednesday at 100½ bid.

Bonanza Creek and post-merger entity Civitas Resources, Inc. sold $400 million of the notes on Tuesday at par to yield 5%, at the tight end of the 5% to 5¼% yield talk. Initial guidance was in the low-to-mid 5% area.

The notes carry a mandatory call at par plus accrued interest if the merger does not close by Dec. 31.

Civitas Resources will be a Denver-based energy exploration and production company.

$294 million weekly outflows

The dedicated high-yield bond funds sustained $294 million of net outflows in the week to Wednesday's close, according to market sources.

The most recent daily fund flow data had the high-yield ETFs sustaining $574 million of daily outflows on Wednesday.

Actively managed high-yield funds were positive on Wednesday, posting $110 million of inflows on the day, a market source said.

Indexes rise

The iShares iBoxx High Yield Corporate Bond ETF turned positive for the first time over the week and closed up 1 cent at $87.02.

The KDP High Yield Daily index ended the day at 69.69 and a 3.83% yield versus 69.68 and a 3.83% yield on Wednesday, 69.88 and a 3.76% yield on Tuesday and 69.90 with a 3.73% yield on Monday.

The CDX High Yield 30 index rose to 109.07 from 109.017 on Wednesday, 109.04 on Tuesday and 109.12 at the start of the week.

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