Rayonier postpones junk deal; Norwegian flat; Nine Energy skyrockets; Transocean rises

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 20 – The European high-yield primary bond market was active on Friday, where three issuers raised a combined total of €1.275 billion.

The only news in the dollar-denominated market came in the form of a deal postponement.

Rayonier Advanced Materials Inc. (RYAM) withdrew its $325 million offering of five-year senior secured notes (B3/B) asserting that current conditions in the market were not sufficiently attractive (see related stories in this issue).

While no deals priced on Friday, the primary market is expected to resume its active pace in the week ahead with the market expecting $3 billion to $7 billion in new issuance.

Meanwhile, the secondary space closed the week on firm footing with the cash bond market paring its losses from the previous session to add ¼ point, a source said.

The market has rallied strongly since the start of the year with investors emboldened by macro data that suggests the Federal Reserve is winning its war against inflation.

Dovish comments from a Federal Reserve official on Friday helped pare losses from Thursday’s sell-off, which was sparked by hawkish comments by other Federal Reserve officials.

While the market has widely priced in a 25 basis points rate increase on Feb. 1, there remains a great deal of debate and uncertainty about the future rate hike schedule, a source said.

And while many see the Federal Reserve in the final stage of its tightening campaign, the question of recession continues to weigh on markets.

High-yield credit spreads stood at 429 at Thursday’s close with credit poised for losses if a more severe recession than anticipated takes hold, a source said.

The market saw some derisking over the past week; however, money is continuing to be put to work in the space, particularly in new issues, a source said.

The deals to price during Thursday’s session followed different trajectories in the aftermarket with Nine Energy Service, Inc.’s 13% senior notes due 2028 (Caa2/CCC) skyrocketing on Friday while Norwegian Cruise Line’s 8 3/8% senior secured notes due 2028 (B1/BB-) fell flat.

Transocean Inc.’s most recently priced 8¾% senior secured notes due 2030 (B2/B-) reclaimed their previous level in active trading on Friday.

European primary

The European high-yield primary market was active on Friday, where three issuers raised a combined total of €1.275 billion.

Two were Italian high-yield corporates.

Telecom Italia priced an €850 million issue of TIM SpA five-year senior bullet notes (B1) at par to yield 6 7/8%, at the tight end of yield talk.

LimaCorporate SpA priced a €295 million issue of Euribor plus 575 bps five-year senior secured floating-rate notes (B3/B-) at 93, at the rich end of price talk, and on top of spread talk.

And in a Nordic execution, Norwegian debt collector B2Holding ASA priced a €130 million add-on to its Euribor plus 690 bps floating-rate notes (B1/B+) at 98.75, at the cheap end of talk.

Rayonier withdraws

The only news in the dollar-denominated market came in the form of a deal postponement.

Rayonier Advanced Materials (RYAM) withdrew its $325 million offering of five-year senior secured notes (B3/B) asserting that current conditions in the market were not sufficiently attractive (see related stories in this issue).

Looking to the week ahead, the dollar-denominated market is looking for $3 billion to $7 billion, according to a bond trader.

Issuers will likely try to get in ahead of the Fed, said the trader, referring to the Federal Reserve’s rate-setting Federal Open Market Committee, which is scheduled to meet from Jan. 31 to Feb 1.

There were a couple of possible issuer names.

UK-based Harbour Energy plc is a potential issuer for the week ahead, according to a high-yield portfolio manager based on the East Coast of the United States.

And NRG Energy, Inc. continued to be mentioned as a prospective issuer, late into the Jan. 16 week.

Nine Energy skyrockets

Nine Energy’s 13% senior notes due 2028 claimed the title of the “best performing new deal of 2023” with the notes skyrocketing 9 points since breaking for trade.

The 13% notes had a strong break on Thursday with the notes opening Friday’s session on a par-handle, a source said.

However, the notes continued their meteoric rise and traded up to a 102-handle by the late afternoon.

The notes were marked in the 102 to 102¼ context heading into the market close with the yield falling to 12 5/8%, a source said.

There was $15 million in reported volume.

The deep discount, hefty yield, and strong bid for CCC credits drove demand for the small issue, a source said.

In a uniquely structured refinancing deal, Nine Energy priced a $300 million issue of the 13% notes at 95 on Thursday.

The notes were packaged into 300,000 units which included one senior note and warrants for five shares of the company’s common stock.

Norwegian flat

While Norwegian Cruise Line’s 8 3/8% senior secured notes due 2028 played to strong demand during bookbuilding, the notes fell flat in the secondary market with the tight pricing leaving them little room to run, a source said.

The notes traded as low as 99¾ on Friday but were marked at 99 7/8 bid, par 1/8 offered heading into the market close.

There was $88 million in reported volume.

Norwegian priced an upsized $600 million, from $500 million, issue of the 8 3/8% senior notes at par in a Thursday drive-by.

The yield printed tighter than the 8½% to 8¾% yield talk.

While the deal rode to market on reverse inquiry, interested investors dropped off as pricing tightened, a source said.

Transocean recoups

Transocean’s 8¾% senior secured notes due 2030 recouped losses from the previous session to reclaim the heights seen after breaking for trade.

The 8¾% notes opened Friday on a 101-handle but broke above by the market close.

The notes were marked at 101¾ bid, 102¼ offered in the late afternoon and stood poised to close the day wrapped around 102, sources said.

There was $30 million in reported volume.

Friday’s trading level was close to the heights reached after breaking for trade on Tuesday before weakness in the market dragged the notes lower.

In its second pass at the high-yield market in as many weeks, the offshore drilling contractor priced $1.175 billion of the 8¾% notes at par in a Tuesday drive-by.

Indexes

The KDP High Yield Daily index shaved off 3 points to close Friday at 53.32 with the yield now 6.88%.

The index fell 27 points on Thursday, gained 19 points on Wednesday and shaved off 1 point on Tuesday.

The index posted a cumulative loss of 12 points on the week.

The CDX High Yield 30 index gained 49 bps to close Friday at 102.11.

The index fell 58 bps on Thursday, 44 bps on Wednesday and 36 bps on Tuesday.

The index posted a cumulative loss of 89 bps on the week.

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