No deals price in dull session; XPO slates; El Paso Pipeline, Kinder Morgan jump on consolidation plan

By Paul Deckelman and Paul A. Harris

New York, Aug. 11 – The new week opened on Monday in Junkbondland on a quiet note, typical for a summer Monday, traders said.

No new issues were seen having priced during the session.

And syndicate sources reported only one new deal announcement on the day, from Greenwich, Conn.-based transportation logistics company XPO Logistics, Inc., whose $500 million five-year note offering is expected to price later in the week.

Traders did not see much activity among recently priced issues, outside of the split-rated QVC Inc. 10.5-year notes, which ended slightly lower, but on brisk volume.

Friday’s purely junk-rated new credits from Intrepid Aviation Group Holdings LLC and NCSG Crane & Heavy Haul Corp. were being quoted around bid to slightly higher than their respective issue prices.

Away from the new deals, traders saw a fair amount of upside activity in the bonds of Kinder Morgan, Inc. and especially El Paso Pipeline Partners, LP. This came as Kinder announced plans to simplify its complex operational structure by consolidating its various energy holdings. It plans to purchase all of the outstanding equity in its affiliated companies El Paso Pipeline Partners, Kinder Morgan Energy Partners, LP and Kinder Morgan Management, LLC.

Trading was otherwise reported dull on the day, though with a firmer bias.

Statistical indicators of junk market performance were higher across the board on Monday for the first time since July 23, after having been mixed for a fifth straight session on Friday, versus the six-session losing streak seen previously.

XPO Logistics starts roadshow

XPO Logistics began a roadshow on Monday for a $500 million offering of five-year senior notes (B1/expected B-).

The deal is comes with initial guidance in the 8% area, according to a trader, who added that it is expected to price on Thursday.

Credit Suisse, Morgan Stanley, Citigroup and Deutsche Bank are joint bookrunners for the acquisition financing.

A deal here and there

Apart from XPO, there was no news on Monday.

American Eagle Energy Corp. is in the market with a $175 million offering of five-year senior secured notes (Caa1/CCC/) via bookrunner GMP Securities.

Early guidance on the deal was 11%, according to a trader, who recounted that it was launched a week ago in the midst of a substantial sell-off and prior to a record-setting $7.1 billion outflow from dedicated high-yield funds.

Therefore, said the trader, the early guidance may have been overtaken by events.

“The market is skittish,” the trader said.

“It remains volatile but the bleeding has stopped,” the source added, referring to those record-setting outflows.

“Most accounts appear to have had cash levels where they needed to be, and there was very little evidence of emergency cash raising.”

Meanwhile, new issue volume is likely to remain muted for the remainder of August, with just a deal here and there, the trader said.

Conspicuous acquisition financings announced in late July and early August are very likely post-Labor Day business, the source added.

The flow of cash remained negative on Friday, according to another trader, who said that high-yield ETFs saw $72 million of outflows on the day while actively managed high-yield accounts saw $30 million of outflows.

However, the market was improved on Monday, said the source, who reported seeing better buying during the session and added that the index was up 3/8 of a point on the day in light volume.

QVC trades actively

In the secondary market, one of the few names standing out among recently priced new offerings was QVC Inc. Its 4.45% notes due 2025 were seen at 99 23/32 bid, down 1/8 of a point, on volume of more than $28 million, topping the most-actives list.

QVC, a West Chester, Pa.-based cable, satellite and broadcast television network specializing in televised home shopping, priced a quickly shopped $600 million of those split-rated (Ba2/BBB-/BBB-) notes on Thursday at 99.86 to yield 4.467%.

Those notes were part of a $1 billion two-part offering that also included $400 million of 5.45% 20-year notes that priced at 99.784 to yield 5.468%. The latter tranche was not among the most actively traded credits on Monday.

Little junk new-issue trading

Apart from that name, traders did not see a lot going on in the purely junk-rated new issues.

“There was nothing happening,” one trader said.

Another trader noted, for instance, that Friday’s new offering of 9½% senior secured second-lien notes due 2019 from NCSG Crane & Heavy Haul Corp. generated about $4 million of trading volume, but added that “there were just two $1 million trades.”

He pegged the bonds trading inside a 100¼ to 100½ range.

That was up from the par level at which the Edmonton, Alta.-based provider of mobile crane rental and heavy-haul services had priced its downsized $305 million deal on Friday.

Elsewhere among the recent deals, he said that BWAY Intermediate Co., Inc. was “a typical sign of this market.”

He said that the Atlanta-based rigid container manufacturer’s Thursday offering of 9 1/8% notes due 2021 “was a $650 million deal – you’d figure that a day or two afterwards, you’d have some type of volume.”

Instead, “$1.5 million of bonds traded today – and actually, it was one piece of 500 [$1,000 bonds] that traded three times.”

He said the bonds were pretty much unchanged, trading at par, which was up a bit from the 99.364 level at which that deal had priced to yield 9¼%, after it was downsized from an originally announced $770 million.

US Shale Solutions, Inc.’s 12½% senior secured notes due 2017 racked up just $1 million of volume, he said. The Houston-based oilfield services provider priced the notes as part of $210 million of units, each unit consisting of one $1,000 face amount bond plus warrants to buy 2.78 shares of the company’s common stock. Those units ended up pricing at $970.

Intrepid Aviation Group Holdings’ $250 million add-on to its existing 6 7/8% notes due 2019 were seen by a trader at another desk up 1/8 of a point at 102 bid 102 3/8 offered.

The Stamford, Conn.-based commercial aircraft leasing company priced $215 million of the notes on Friday at 102 to yield 6.356%, after upsizing the transaction from an originally announced $150 million.

Kinder Morgan moves market

Away from the new deals, Kinder Morgan was the big mover today, after the Houston-based midstream energy company announced plans to consolidate its corporate structure by acquiring the equity of its three affiliates – El Paso Pipeline Partners, Kinder Morgan Energy Partners, LP and Kinder Morgan Management, LLC – and fold them into one supersized corporate structure.

The biggest gainer was El Paso Pipeline’s 7¾% notes due 2032, which jumped 15 points to close at 125½ on volume of over $15 million, putting it high up on the most-actives list. Its 4.3% notes due 2024 firmed to just under 102 bid, with more than $12 million having changed hands.

Kinder Morgan’s 5% notes due 2021 finished at 107½, a gain of 5½ points, on over $5 million traded.

All of the companies’ other issues “saw $1 or $2 million of trading,” the trader said.

The New York Stock Exchange-traded equity of all four companies was solidly higher in heavy trading on Monday.

Quiet day overall

Overall, another trader declared, “it was a pretty quiet session.”

He added, “All of the sellers must have been on vacation because there were nothing but buyers around.”

He estimated that “90% of the people in the market were buyers,” with total Trace volume of around $2 billion.

Statistical indicators of junk market performance were higher across the board on Monday, after having been mixed over the previous five sessions and lower for six straight sessions before that. Monday’s gain was the first such higher session seen since July 23.

The KDP High Yield Daily index posted its fifth straight strengthening by 16 basis points to end at 73.15, after having edged up by 2 bps on Friday.

The yield, meanwhile, came in by 5 bps to 5.43%, its fifth consecutive narrowing, after tightening by 6 bps Friday.

The Markit CDX Series 22 index posted its second advance in a row, improving by 5/32 of a point to end at 107 7/32 bid, 107 9/32 offered. It had jumped by 19/32 of a point on Friday, after having been under pressure for the previous three sessions.

And the widely followed Merrill Lynch High Yield Master II index gained 0.317% on Monday, after having retreated by 0.026% on Friday, continuing its recently choppy pattern.

Monday’s rise lifted the index’s year-to-date return to 4.461%, up from 4.131% on Friday, though still well down from the 5.751% return recorded on July 7, the peak level so far for 2014.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.