No pricings; downsized inVentiv deal, Steak n Shake on tap; energy names jump on rise in oil

By Paul Deckelman and Paul A. Harris

New York, Sept. 28 – The high-yield primary market saw yet another quiet session on Wednesday, with no dollar-denominated and fully junk-rated issues having priced during. It was the second such shutout over the last three trading days.

Syndicate sources blamed the drought on the quarter-end earnings blackout and the impact of a Deutsche Bank bond conference going on in Arizona this week.

But they said that at least two new deals are expected to come to market during Thursday’s session: health-care industry services provider inVentiv Group Holdings, Inc.’s downsized $670 million of eight-year notes and restaurant chain operator and franchisor Steak n Shake, Inc.’s $400 million of seven-year secured paper.

They also said that broadcaster CBS Radio Inc. began shopping a new eight-year deal around to potential investors.

Alcoa, Inc. once again dominated activity among recently priced issues, with both halves of the aluminum producer’s two-part megadeal seen having firmed smartly.

Away from the new deals, energy names such as California Resources Corp., Whiting Petroleum Corp. and Chesapeake Energy Corp. were solidly higher on Wednesday, in line with a jump in world crude oil prices on the news that OPEC member states have reached a preliminary agreement on curbing oil production in order to strengthen prices.

Statistical market performance measures turned higher across the board on Wednesday, after having been mixed over the previous three sessions.

inVentiv downsizes, sets talk

A quarter-end earnings blackout and the Deutsche Bank 2016 Leveraged Finance Conference are subduing primary market activity, sources say.

Nothing cleared the dollar-denominated new issue market on Wednesday; however, dealers set about positioning offers to price in what is proving to be a back-loaded final week of September.

inVentiv Group Holdings downsized its offering of eight-year senior notes (Caa2) to $670 million from $720 million, shifting the $50 million of proceeds to its concurrent term loan.

The shift increases the loan size to $1.73 billion from $1.68 billion.

The notes offering is talked to yield 7½% to 7¾%, well inside of initial guidance of 8% to 8¼%, sources say.

The deal, which is set to price Thursday, was playing to $2 billion of orders early Wednesday, according to a portfolio manager.

Steak n Shake talk 8½% area

In another deal expected to price Thursday, Steak n Shake talked its $400 million offering of seven-year senior secured notes (B2/B-) to yield in the 8½% area.

Jefferies LLC has the books for the offering, which saw official talk come toward the wide side of the 8¼% to 8½% early guidance, sources said.

CBS Radio spinoff deal

One new offering came aboard the active calendar.

CBS Radio is shopping $460 million of eight-year senior notes (B3/B-).

The deal is expected to price in the middle part of the week ahead.

Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Citigroup Global Markets Inc., BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. and Wells Fargo Securities LLC are the joint bookrunners.

Proceeds, along with proceeds from concurrent bank debt, will be used to fund a distribution to CBS Corp. in connection with its spinoff of CBS Radio. Remaining proceeds will be used for general corporate purposes and ongoing cash needs.

The dollar-denominated active calendar is racked and stacked with deals totaling $4.56 billion, heading into Thursday. Timelines carry some of those offerings well into the week ahead.

However, not all of these prospective issuers are going to walk away from the market with the easy terms of August, buyside and sellside sources said on Wednesday.

Some of this calendar could end up getting pushed back, a portfolio manager said, adding that there is a bit of uneasiness out there among investors right now, although it's difficult to put fingers on the reasons.

In any case, the appetite is fading for high-yield deals that don't come with high yields, the manager added.

Jerrold talk 6¼% to 6½%

The table was also set for a high-volume finish to September in the European primary market.

Jerrold FinCo plc talked its £375 million offering of five-year senior secured notes to yield 6¼% to 6½%.

The debt refinancing/general corporate purposes deal, which is in the market via global coordinator and bookrunner Credit Suisse Securities (Europe) Ltd., is set to price on Thursday.

Schoeller Allibert talk 8% area

Schoeller Allibert Group BV talked its €210 million offering of five-year senior secured notes (B2/B-) in the 8% area.

The deal, in the market via lead bookrunner Citigroup, is expected to price before the end of the week.

Elsewhere, Sarens Bestuur NV came out with initial price talk in the low-to-mid 5% context on a €125 million add-on to its 5 1/8% senior notes due Feb. 5, 2022 (BB-).

The deal, via ING, BNP Paribas and Degroof Petercam, is set to price Friday.

Tuesday inflows

The cash flows of the dedicated high-yield bond funds were positive on Tuesday, the most recent session for which data was available at press time, the portfolio manager said.

High-yield exchange-traded funds saw $92 million of inflows on the day.

Asset managers saw $10 million of inflows on Tuesday.

Alcoa improvement continues

The new Alcoa two-part megadeal remained the most active name among recently priced new issues, a status it has held since it came to market last Thursday.

A trader saw its 6¾% notes due 2024 up by 1 full point on the session, closing at 103 ½ bid, while seeing its 7% notes due 2026 up by ¾ point, to 102½ bid.

At another desk, another trader saw the 7% paper up by as much as 1 1/8 point on the day, ending at 102¾ bid, with over $30 million changing hands.

He said that the 6¾% notes gained 1 point to end at 103¼ bid, on volume of over $17 million.

The New York-based aluminum and aluminum products company priced $750 million of the 6¾% notes last Thursday at par in a regularly scheduled forward calendar deal, along with $500 million of the 7% notes, which also priced at par.

The two-part megadeal came to market via the company’s Alcoa Nederland Holding BV subsidiary after having been upsized to $1.25 billion from $1 billion originally and restructured with the addition of the 10-year tranche to what was originally just a single-tranche deal.

Recent Targa paper rises

Also among the recently priced names, Targa Resources Corp.’s 5 1/8% notes due February 2025 were seen having moved up by ¼ point on the day, to par bid, with around $11 million having changed hands.

The Houston-based energy company priced $500 million of those notes at par last Thursday, as part of a quickly shopped $1 billion two-part deal – upsized from $800 million originally – that also included $500 million of 5 3/8% notes due February 2027, which also priced at par.

Energy names see upturn

A trader said that away from the new deals, oil and gas names such as California Resources were all solidly higher, in line with a jump in crude prices.

The benchmark U.S. crude oil grade, West Texas Intermediate for November delivery, shot up by $2.38 per barrel, settling at $47.05 on the New York Mercantile Exchange, while the international benchmark, Brent crude for November delivery, zoomed by $2.72 per barrel, to $48.69, on the London ICE Futures exchange.

The gains came as it was reported that OPEC had reached a deal to limit production for the first time since 2008. The decision came as members of the cartel held an informal meeting in Algeria.

Though details have not yet been decided – official terms are expected to be ironed out at a formal meeting in November – OPEC members agreed to cut total production to 32.5 million barrels per day.

Currently, the organization is pumping a total of 33.24 million barrels per day.

California Resources’ 8% second-lien notes due 2022, for instance, were “up smartly,” a trader said, seeing the issue adding over 2 points to close at 66.

There was “pretty heavy volume” in the name, he added, as over $30 million traded.

Whiting Petroleum Corp. was another gainer, as its 6¼% notes due 2023 rose 1½ points to 89, according to a trader.

In Chesapeake Energy, a trader said the 4 7/8% notes due 2022 were nearly 1½ points higher at 82.

Even Vanguard Natural Resources LLC’s 7 7/8% notes due 2020 pushed higher, moving up a point to 49.

Indicators strengthen

Statistical market performance measures turned higher across the board on Wednesday, after having been mixed over the previous three sessions. It was the third upside session in the last six trading days, with the indicators having risen last Wednesday and Thursday and then turned mixed on Friday and staying that way on Monday and Tuesday of this week.

The KDP High Yield index gained 5 basis points on Wednesday to end at 70.69, its eighth straight gain after six consecutive losses before that. On Tuesday, the index had improved by 4 bps.

Its yield came in by 3 bps on Wednesday, moving down to 5.27%, after having been unchanged on Tuesday. It was the yield’s fifth such narrowing in the last seven sessions.

The Markit Series 27 CDX index rose by nearly ½ point on Wednesday, to 104¼ bid, 104 9/32 offered, its first gain of the new series, which began trading on Tuesday. Markit “rolls” its index, or begins a new series with a slightly different roster of companies followed, every six months, in late March and late September.

The Merrill Lynch High Yield index gained 0.158% on Wednesday, rebounding after two straight sessions on the downside, including Tuesday’s 0.033% retreat. Those twin losses, in turn, had followed five successive upturns before that.

Wednesday’s advance raised the index’s year-to-date return to 14.889% from Tuesday’s 14.708% close. Those levels still remain down from the 14.992% cumulative return set on Sept. 8, its peak level for 2016 so far.

Stephanie N. Rotondo contributed to this review

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