Novelis, Ashton Woods, Mr. Cooper price; Air Transport on deck; CVR Energy, Laredo Petroleum lag

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 13 – The domestic high-yield primary market saw an active start to the week with three drive-by deals pricing and one more joining the forward calendar.

Novelis Corp. priced a $1.6 billion issue, Mr. Cooper Group Inc. priced a $600 million issue and Ashton Woods Homes Co. priced a $250 million issue.

Air Transport Services Group, Inc. joined the forward calendar with a $400 million offering of eight-year senior notes.

Meanwhile, new paper remained in focus. However, the recent deals from the energy sector were lagging their issue price in active trading on Monday.

CVR Energy, Inc.’s five- and eight-year senior notes (B1/BB-/BB-) and Laredo Petroleum, Inc.’s five- and eight-year senior notes (B3/B+) were trading below par on Monday, which was a soft day for the energy sector in general.

While the new paper was active, Pacific Gas & Electric Co.’s 6.05% senior notes due 2034 dominated activity in the secondary space with the notes posting gains following news its wildfire settlement with California will be tax deductible.

Novelis $1.6 billion inside of talk

An active Monday primary market saw Novelis Corp. price a $1.6 billion of 10-year senior notes (B2/B+) at par to yield 4¾% in a drive-by.

The yield printed inside of both yield talk, which was in the 5% area, and initial guidance which was in the low 5% area.

The company had an opportunity to massively upsize the deal, but elected not to do so, a trader said.

Mr. Cooper Group priced $600 million of 6% seven-year notes in a quick-to-market Monday trade.

Initial guidance had the deal coming to yield in the low-to-mid 6% area.

The deal was heard to have been playing to a significant amount of reverse inquiry and to have been playing to $3 billion of demand, a trader said.

Ashton Woods Homes priced a $250 million issue of eight-year notes (expected ratings Caa1/B-) at par to yield 6 5/8%, also in a quick-to-market trade.

The yield printed at the tight end of the 6 5/8% to 6¾% yield talk and in line with initial guidance in the mid-to-high 6% area.

While the issue was small, the new paper was active and trading up after breaking for trade.

The 6 5/8% senior notes were trading the par ½ to par 5/8 context, a market source said.

More than $83 million of the bonds changed hands heading into the market close.

Meanwhile, a modest forward calendar took aboard one deal set to price later in the Jan. 13 week.

Air Transport Services Group plans to start a roadshow on Tuesday for a $400 million offering of eight-year senior notes (expected ratings Ba3/B+).

SunTrust is the left bookrunner.

CVR Energy lags

CVR Energy’s two tranches of senior notes were both lagging their issue price in active trading on Monday.

The 5¼% senior notes due 2025 were changing hands at 99 5/8 in the late afternoon, according to a market source. The bonds saw more than $47 million in estimated volume.

The petroleum refining and nitrogen fertilizer manufacturer’s longer duration tranche was also trading at a discount.

The 5¾% senior notes due 2028 were changing hands at 99½ with more than $31 million on the tape, a source said.

CVR Energy priced a downsized $1 billion offering in two tranches on Friday.

The deal included a $600 million tranche of the 5¼% notes and a $400 million tranche of the 5¾% notes, both of which priced at par.

The 5¼% notes priced on top of yield talk and in the middle of early guidance in the 5¼% area.

The 5¾% notes also printed on top of yield talk and in the middle of early guidance in the 5¾% area.

The deal was downsized from $1.1 billion.

Laredo Petroleum down

Laredo Petroleum’s new senior notes were also lagging in heavy volume in the secondary space, despite the notes’ hefty coupon.

The 9½% senior notes due 2025 were changing hands at 99 7/8 in the late afternoon, according to a market source.

The bonds were among the most actively traded issues in the secondary space with $166 million on the tape.

The 10 1/8% senior notes due 2028 were also in focus although the notes fared worse than the company’s shorter duration tranche.

The 10 1/8% notes were changing hands around 99½ with more than $176 million in estimated volume, according to the source.

Laredo priced an upsized $1 billion amount of senior notes in two tranches on Friday.

The deal included a $600 million tranche of the 9½% notes and a $400 million tranche of the 10 1/8% notes, which both priced at par.

The 9½% notes priced at the wide end of the 9¼% to 9½% yield talk and in the middle of early guidance in the 9½% area.

The 10 1/8% notes priced at the wide end of yield talk in the 10% area, which was also the early guidance.

Monday was a soft day for the energy sector in general with crude oil futures again down as investors’ concern over hostilities between the U.S. and Iran fade.

The barrel price of WTI crude for February delivery settled at $58.08, a decrease of 96 cents or 1.6%.

PG&E dominates

Pacific Gas & Electric’s 6.05% senior notes due 2034 dominated activity in the secondary space with the notes posting gains following news that its settlement agreements for the California wildfires will be tax deductible.

The notes rose more than 2 points to 109½. More than $344 million bonds were on the tape by the late afternoon, a source said.

PG&E recently announced that expenditures related to its role in the 2017 and 2018 wildfires would be tax deductible, including the recently agreed to $1.68 billion settlement with California.

The tax deductions may save PG&E upwards of $470 million, Bloomberg reported.

$200 million inflows on Friday

The dedicated high-yield bond funds saw $200 million of daily cash inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $195 million of inflows on the day.

Actively managed high-yield funds saw $5 million of inflows on Friday, the source said.

Indexes mixed

Indexes opened the week as they ended the last – mixed.

The KDP High Yield Daily index rose 2 points to close Monday at 71.89 with the yield now 4.86%.

The index saw a cumulative loss of 8 bps on the week last week.

The ICE BofAML US High Yield index gained 8 bps with the year-to-date return now 0.543%.

The index saw a cumulative gain of 102 bps on the week last week.

The CDX High Yield 30 index dropped 10 bps to close Monday at 109.66.

The index saw a cumulative gain of 18 bps on the week last week.

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