Primary quiet; Gaming & Leisure active; Dish bonds volatile; Sanchez Energy drops, Valeant gains on earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 8 – The primary market was quiet on Tuesday, which sources attributed to news the United States will pull out of the Iran nuclear deal.

With the possible resulting volatility, potential issuers were left thinking today might not be the day.

However, activity is expected to resume later in the week, a syndicate banker said. Nemaska Lithium, Inc.’s $300 million offering of five-year notes is expected to price on Thursday.

Ithaca Energy (North Sea) plc began an international roadshow for a $350 million offering of five-year senior notes (Caal/CCC+).

Meanwhile, both tranches of Gaming & Leisure Properties, Inc.’s newly priced $1 billion split-rated senior notes (Ba1/BBB-) were active in the secondary market with the notes losing steam throughout the day while still trading at or above their issue price.

Dish Network Corp.’s junk bonds were volatile on Tuesday with the longer dated bonds up 2 points early in the session but down 4 points by the end of the day.

The early rise was attributed to short covering and the afternoon drop to news of Dish’s continued struggle to find a partner for its planned wireless network.

Sanchez Energy Corp.’s 6 1/8% senior notes due 2023 (Caa1/B-) dropped 5 points in heavy volume trading on Tuesday after an earnings miss and disappointing production levels.

Valeant Pharmaceuticals’ junk bonds were up 1 to 2 points after an earnings beat and an announced rebranding with the company to take on the name Bausch Health Cos. Inc. in July.

Meanwhile, McDermott International Inc.’s 10 5/8% senior notes due May 2024 (B2/B-) continued to trade more than 6 points above their issue price.

Nemaska Lithium 11% to 11½%

While quiet pervaded the primary market on Tuesday, there were a couple of new issue news items.

Nemaska Lithium is marketing a $300 million offering of five-year senior secured notes in a price range of 11% to 11½%.

The deal is expected to price Thursday.

Clarksons Platou and Pareto Securities are the joint lead managers.

The Quebec City-based chemical company plans to use the proceeds to fund capital expenditures.

Ithaca Energy starts roadshow

Ithaca Energy began an international roadshow on Tuesday in Tel Aviv for a $350 million offering of five-year senior notes (Caal/CCC+).

Initial price talk is in the low 9% area, a trader said.

The roadshow travels Europe for the remainder of the May 7 week and runs in the United States the following week, wrapping up on Wednesday, May 16.

The debt refinancing deal is set to price thereafter.

Joint bookrunner Barclays will bill and deliver. Deutsche Bank, BNP Paribas, RBC and Wells Fargo are also joint bookrunners.

Europe on holiday

Meanwhile, the European primary market remained quiet on Tuesday, following Monday's bank holiday in London, according to a debt capital markets banker there.

Several European countries have week-long holidays underway, which should serve to mute new issue activity.

However, look for things to pick up in the May 14 week, the banker said.

Gaming & Leisure in focus

Gaming & Leisure’s two tranches of senior notes were in focus in the secondary market with the 5¼% notes due 2025 and the 5¾% notes due 2028 both seeing heavy trading volume.

However, the notes slipped throughout the day.

The 5¼% were quoted at par ¼ bid, par ½ offered mid-morning. The 5¾% senior were seen at par 1/8 bid, par 3/8 offered.

Both notes traded down 1/8 point from an early high on Tuesday, a market source said.

The 5¼% notes were seen trading at par ¼ in the late afternoon with the 5¾% notes trading at par.

The notes were “priced near perfection,” a market source said.

With the tight pricing, there was little room for significant gains in the secondary market, the source said. The $1 billion bullet deal (Ba1/BBB-) came in two $500 million tranches, both of which priced at par in a Monday drive-by.

The 5¼% notes printed at the tight end of both official talk and initial talk in the 5 3/8% area.

The 5¾% notes printed in the middle of both price talk and initial guidance in the 5¾% area.

Dish volatile

Dish’s longer duration junk bonds saw a volatile day with the notes up early in the session but down significantly at the day’s end.

The long duration bonds were up 2 points early in the session, which a market source attributed to short covering after Dish reported an earnings miss.

However, the longer duration notes were down 4 points on the day at the market close, the source said.

Dish’s stocks and bonds traded off in the afternoon on news that Dish is still far from securing a partner for its planned wireless network.

Dish Chairman Charlie Ergen gave an update on Dish’s progress towards launching a wireless network on its first quarter earnings report conference call, which has been key to its long-term strategy.

Dish had a slight earnings miss with earnings per share of 70 cents versus analyst expectations for earnings per share of 72 cents and revenue of $3.46 billion versus analyst expectations of revenue of $3.5 billion.

Dish’s short duration bonds were off ½ point to 1 point on the day, a market source said.

Sanchez Energy drops

There was a slight pullback in energy sector names on Tuesday with the barrel price of West Texas intermediate crude oil for June delivery down after President Donald Trump announced the United States would withdraw from the Iran nuclear deal.

However, the drop in Sanchez Energy’s 6 1/8% senior notes due 2023 was due to earnings. The 6 1/8% notes were down 5 points on the day with the notes wrapped around 66 in active trading.

Sanchez Energy reported a net loss per share of 30 cents. Analysts were not expecting a loss and forecast an earnings per share of 22 cents.

Sanchez Energy’s production of 80,572 barrels of oil equivalent per day in the first quarter also lagged the company’s guidance of production between 82,000 and 84,000.

Valeant Pharmaceuticals gains

While Sanchez Energy dropped on earnings, Valeant Pharmaceuticals’ junk bonds gained after an earnings beat and an announced name change.

Valeant’s junk bonds were up 1 to 2 points after the company reported first quarter earnings prior to the market open, a market source said.

The benchmark 6 1/8% senior notes due 2025 were up 2 points in active trading to 92.

Valeant reported non-GAAP earnings per share of 88 cents compared to analyst expectations of 60 cents per share and raised its 2018 guidance to $8.15 billion to $8.35 billion from $8.10 billion to $8.3 billion.

Valeant also announced it will change its name Bausch Health in July as part of a rebranding effort.

McDermott stays strong

McDermott’s 10 5/8% senior notes due 2024 continue to trade at 103 after pricing at 94.75 on April 4.

The downsized $1.3 billion issue was a partially hung deal and bridge participants were forced to take the bonds at 94.75.

Given subsequent developments, they should have taken it hand over fist.

McDermott’s deal came cheap because the dealer wanted it off its books at any price, a market source said.

Talk widened dramatically from price talk in the 10½% area, which circulated the market on March 28.

Initial chatter had the six-year notes coming in the mid-to-high 8% context, a trader recounted.

There were also changes to the offering document, some of them bearing upon how the company may disburse cash and incur additional debt.

While the notes struggled during bookbuilding, they gained 4 points their first day in the secondary market.

However, the notes shot up to 103 after shareholders approved McDermott’s merger with Chicago Bridge & Iron last week.

The merger brought the deal into the market. Proceeds were slated to be used to repay debt at both entities and for general corporate purposes.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Monday, the most recent session for which data was available at press time, a buyside source said.

High-yield ETFs saw $30 million of inflows on the day.

However, actively managed funds sustained $110 million of outflows on Monday.

Accounts have some cash, the source remarked, adding that lately those able to invest in leveraged loans have been taking advantage of opportunities there in the absence of a high yield bond calendar.

Generally, accounts are treading water, the buysider said, noting that cash coming in and cash flowing out seem to be approximately equal.

Indexes see losses

The KDP High Yield index took a slight dip on Tuesday after two consecutive trading days of gains. The index was down 1 point to 70.54 with the yield now 5.84%.

The index climbed 12 basis points over the past two trading days.

The Merrill Lynch High Yield index also slipped on Tuesday after a 13.4 basis point jump on Monday. The index was down 3.6 basis points with the negative year-to-date return now 0.224.

The CDX High Yield 30 index saw the most significant decline on Tuesday. The index was down 12.8 bps on Tuesday at 106.65 bid, 106.72 offered. The index was up 5 bps on Monday.

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