Valeant rebounds; Alcoa finishes weak again; Chesapeake announces layoffs; Bombardier firms

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Sept. 29– Sellers continued to enter the high-yield bond market on Tuesday following a hefty sell-off on Monday.

“Everybody is selling everything,” a trader said.

And while the market was deemed lower again, a trader said there was “a bounce of a point or so in a lot of this stuff.”

One bouncing name was Valeant Pharmaceuticals International Inc., which had gotten “bludgeoned yesterday with the stock” as Congressional Democrats sought to hand the company a subpoena.

Still, most things remained in retreat. For instance, Alcoa Inc. bonds continued to weaken after the company announced Monday that it would split itself into two companies.

Also lower was Chesapeake Energy Corp., which announced a round of layoffs as the Oklahoma City-based oil and gas producer struggles amid a low oil price environment.

Tuesday brought no news on the new issue front.

Two deals, NN, Inc. and SunOpta Foods Inc., are on the active calendar.

Books were scheduled to close Tuesday for NN's $300 million offering of eight-year senior notes (Caa1/B). SunTrust Robinson Humphrey Inc. is the left bookrunner. KeyBanc Capital Markets Inc. and Regions Capital Markets are the joint bookrunners.

And SunOpta Foods began marketing a $330 million offering of senior secured second-lien notes due 2022 (B3) on Monday. The deal, via joint bookrunners BMO Securities, Jefferies LLC and Rabobank, is set to price during the week of Oct. 5.

Outflows on Monday

The dedicated high-yield bond funds saw outflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield exchange-traded funds sustained $186 million of outflows on the session.

Asset managers saw $121 million of outflows on the session.

Olin paper rises

In recent issues, Olin Corp.’s $720 million of 9¾% senior notes due 2023 – one part of the $1.22 billion issue, which also included $500 million of 10% senior notes due 2025 – “bounced a bit,” a trader said.

The trader saw the issue moving up “over a point” to end with a 102 handle.

A second trader called the issue up “1 and change” points to 102.

The deal came Monday downsized from $1.5 billion and “at much wider spreads than originally talked,” a trader said.

Valeant rallies

Valeant Pharmaceuticals’ bonds rebounded a bit on Tuesday, just one day after it was reported that Congressional Democrats want to subpoena the company in regards to its price increases.

A trader said the 6 1/8% notes due 2025 were one of the more active issues in the junk arena, trading “60 times.” The trader deemed the issue up 1½ points at 95¾.

Another trader said the name “traded up but then gave back some of the gains, finishing up marginally.” He pegged the 6 1/8% notes at 94½ bid, 95 offered, which was down a touch from the intraday high around 96.

Alcoa slides

Alcoa paper continued to decline Tuesday following news out Monday regarding the aluminum maker splitting itself into two separate companies.

A trader saw the 5 1/8% notes due 2024 slipping almost a point to 83¼. However, a second market source called the issue off 4 points at 83 bid.

Alcoa will spin off its plane and car parts business, a unit that has seen faster growth, from its traditional aluminum business. The company has struggled as commodity prices have dropped, especially amid an aluminum glut.

“Any of these commodity and mining guys are just getting clobbered,” a trader said.

In that vein, First Quantum Minerals Ltd.’s 7% notes due 2021 fell a deuce to 65¼.

“You don’t see them much lately,” a trader said.

Chesapeake slips

Chesapeake Energy debt was “a touch softer,” a trader said, after the company announced a round of layoffs on Tuesday.

The Oklahoma City-based oil and gas producer has struggled along with its sector peers amid low oil prices.

The trader placed the 6 5/8% notes due 2020 around 73½.

Another trader deemed that issue off half a point at 73½, but he saw the 5¾% notes due 2023 rising almost a point to 64¾.

At another desk, the 6 5/8% notes were seen at 74¼ bid, up a touch.

Chesapeake’s convertible bonds were falling, according to market sources.

“This stuff just blew out yesterday,” one trader noted, referring to Monday’s sell-off that was spurred in part by a hefty downturn in commodities. Come Tuesday, the 2.5% convertible notes due 2037 were down “1½ points further,” trading at 86.

The trader added that the bonds had drifted down to 87.625 from 88.75 on Monday and that it was a dealer buying up paper.

“Then they turned around and sold it at 86,” he said.

As for the 2.75% convertible notes due 2035, the trader saw no trades of size in the issue, though he saw the paper at 98.625 on Monday. That equaled about a 13.5% yield to put in November, he said.

The bonds drifted down, but the stock climbed up on the news, rising 8 cents, or 1.19%, to $6.79.

Chesapeake was said to be cutting about 15% of its total workforce, with the layoffs occurring at every level. The company is expected to take a one-time charge of $55.5 million in the third quarter related to payroll taxes.

Those getting the axe are reportedly receiving “generous” severance packages.

Bombardier boosted

Bombardier Inc. bonds got a boost Tuesday as the Quebec provincial government vowed to provide the airplane manufacturer financial assistance if necessary.

A market source pegged the 7¾% notes due 2020 at 84¼, up 2¼ points.

Premier Philippe Couillard said the Canadian company is a “huge asset” to the province, despite its ongoing difficulties in getting its CSeries jet up and running.

On Friday, Bombardier said that certification tests for the CS100, the smaller of the CSeries planes, were over 88% completed. The company believes that it is on track to put the new planes into service in the first half of 2016.

Markets stay soft

The high-yield bond market was pushed down yet again on Tuesday, though market indicators differed on just how much.

The KDP High Yield Daily index fell to 65.78, a new 52-week low versus the previous low of 65.93, as yields widened to just north of 7%. On Monday, the index closed at 66.04 with a 6.91% yield.

As for the CDX North America Series 24 High Yield index, it ended down over a tenth of a point at 99.57 bid, 99.67 offered.

© 2015 Prospect News.
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