Fortress prices add-on; Cimpress joins forward calendar; energy names drop; BMC Software gains

By Abigail W. Adams

Portland, Me., May 29 – The high-yield primary market was off to a slow start on Tuesday with new issue volume expected to remain light throughout the week.

While light, the domestic and European primary market both saw an add-on price and one new dollar-denominated deal hitting the road.

Fortress Transportation and Infrastructure Investors LLC priced a $100 million add-on to its 6¾% senior notes due 2022 (B1/B+) at par in a Monday drive-by.

Cimpress NV began a roadshow for a $400 million offering of eight-year senior notes on Monday. The deal is primarily being marketed to European investors, a market source said.

In the European primary market, Aker ASA priced a NOK 500 million add-on to its Nibor plus 265 basis points senior notes due 2023.

With political crises in Spain and Italy dragging down equity markets and oil prices on the decline, new issue activity is expected to be day by day, sources said.

Meanwhile, the secondary market started the week off soft with the overall market down ¼ to ½ point, a market source said.

High beta energy junk bonds were taking a hit from the decline in oil prices with California Resources Corp.’s 8% senior notes due 2022 again the most actively traded bond of the day.

The sector in general was down about 1 point on Tuesday, a market source said.

BMC Software Inc.’s 8 1/8% senior notes due 2021 gained about 1 point on news KKR & Co. LP will acquire the company.

Fortress adds on

Fortress Transportation priced a $100 million add-on to its 6¾% senior notes due 2022 (B1/B+) at par plus accrued interest from March 15, according to a market source.

Pricing came in line with official price talk for a reoffer price of par and initial guidance at par, according to a market source.

Morgan Stanley is the sole bookrunner for the Rule 144A and Regulation S for life offering.

The 6¾% notes were not active in the secondary market. Small add-ons such as Fortress Transportations “usually get tucked away,” a market source said.

The deal was most likely the result of a reverse inquiry, sources said.

While only about 250,000 of the bonds were seen trading by late afternoon, they were well above their reoffer price at 101 5/8.

Fortress priced the original $250 million of the 6¾% notes in March 2017 at 97 and since then has twice sold add-ons, $100 million in August 2017 and $100 million in December 2017.

Prior to the add on, they were trading at 101¾, according to Trace data.

Cimpress on the road

Cimpress began a roadshow for a $400 million offering of eight-year senior notes on Monday with pricing expected on Friday, according to a market source.

J.P. Morgan Securities LLC, BofA Merrill Lynch, MUFG and SunTrust Robinson Humphrey Inc. are underwriters for the Rule 144A and Regulation S offering.

Proceeds will be used to redeem the company’s outstanding 7% senior notes due 2022 (B1/B+), which have $275 million outstanding.

While the deal is both Rule 144A and Regulation S, it is primarily being marketed to European investors, sources said.

Aker adds on

Despite the political turmoil in Italy and Spain, the European primary market completed a deal.

Aker priced a NOK 500 million add-on to its Nibor plus 265 basis points senior notes due 2023 at par to yield Nibor plus 265 bps.

DNB Markets, Nordea, and SEB were joint bookrunners for the Regulation S offering.

The add-on brings the total outstanding amount of the senior notes to NOK 2 billion. Aker priced an initial offering of NOK 1.5 billion five-year senior notes in January.

Issuers on the sidelines

New issue volume in the domestic and European primary market will be a day by day process with potential issuers feeling out market conditions, sources said.

While there have been whispers of issuers coming forward, opportunistic energy names and names outside the energy sector are “going to take a look-and-see approach,” a market source said.

Political tensions in Italy and Spain sent equity market reeling on Tuesday.

In terms of new issuances in the European market, “I wouldn’t expect too much until things quiet down a bit,” a market source said.

With the barrel price of West Texas intermediate crude oil for July delivery on the decline amid speculation OPEC countries and Russia will increase production, potential issuers are also wary about entering the market, a source said.

However, the sharp decline in the 10-year Treasury yield is good news for junk bonds, a market source said.

“At least we have one helpful factor. The spreads are widening and the risk is becoming more attractive,” the source said.

Energy drops

High beta energy names were taking a hit on Tuesday with the barrel price of West Texas intermediate crude oil for July delivery again on the decline.

California Resources 8% senior notes due 2022 were again the most actively traded junk bond of Tuesday’s session.

The notes were off 1½ point on Tuesday but popped back a little bit to close the day down ¾ point, a market source said.

They were seen at 85¾ bid, 86¾ offered late afternoon Tuesday. More than $25 million of the bonds traded during Tuesday’s session.

The 8% notes were also in focus on Friday with the notes dropping 2½ points to trade at 87¼.

The barrel price of crude oil continued its decline on Tuesday settling around $66.81. The barrel price of crude oil was down more than $3 on Friday to $67.50.

While California Resources 8% senior notes move in lock-step with oil prices and tend to have the most pronounced changes as oil prices fluctuate, other high beta energy names were also down on Tuesday, a market source said.

Oasis Petroleum’s 6 7/8% senior notes due 2022 and 6 7/8% senior notes due 2023 (B3/BB-) were both off about ½ point due to the drop in oil prices, a market source said.

Oasis’ 6 7/8% senior notes due 2022 traded down to 102¼. The 6 7/8% notes due 2023 traded down to 101 1/8.

Oasis’ recently priced 6¼% senior notes due 2026 (B3/BB-) were quoted down about ¾ point on Tuesday. The notes, which priced at par on April 30, were seen at 99¾ bid, 100¼ offered.

BMC gains

While the overall market was soft on Tuesday, BMC Software saw gains on news investment firm KKR would acquire it.

BMC’s 8 1/8% senior notes due 2021 were up about 1 point to trade at 102 5/8, a market source said. The notes were active in the secondary space with more than $16 million bonds traded.

News broke Tuesday that KKR will acquire BMC from private equity firms Bain Capital and Golden Gate Capital for $8.5 billion, which includes debt, Reuters reported.

Indexes see losses

Three benchmarks for the high-yield secondary market opened the week as they closed the last one – with losses.

The KDP High Yield index saw its fourth consecutive day of losses on Tuesday.

The index was down 10 basis points to close Tuesday at 70.29 with the yield now 5.94%. The index has posted losses since last Wednesday.

The Merrill Lynch High Yield index sank deeper into negative territory on Tuesday.

The index dropped 18.6 bps with the year-to-date return now negative 0.456%.

The index has been in negative territory since May 15.

The CDX High Yield 30 index again saw the most significant decline on Tuesday. The CDX index was down 101 bps on Tuesday. The index closed the day at 105.635 bid, 105.715 offered, according to a market source.

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