Upsized Tesoro Logistics, NRG drive by, new bonds gain; U.S. Steel off, Endo, oils continue retreat

By Paul Deckelman and Paul A. Harris

New York, May 9 –After two sessions of relative inactivity, the high yield primary realm got back into the pricing business on Monday, as two quickly shopped new issues totaling $1.7 billion came to market.

Tesoro Logistics LP, which gathers, processes, transports and stores crude oil, natural gas and refined products, priced an upsized $700 million of senior notes in two parts – a $450 million issue of new eight-year notes and a $250 million add-on to its existing 2021 paper.

Traders said that both tranches firmed by more than 1 point on brisk volume when the issue was freed for aftermarket activity.

Later on in the session, wholesale power generation company NRG Energy, Inc. did an upsized $1 billion of new 10-year notes.

Those bonds, too, strengthened in the aftermarket, rising by more than ½ point on sizable volume.

Syndicate sources meantime heard of several new deals hitting the road for marketing to potential investors – foodservice distributor Performance Food Group, Inc., doing a dollar-denominated deal, and in the euro-denominated market, Swiss confectioner Barry Callebaut AG and German paper tissue-products supplier WEPA Hygieneprodukte GmbH.

Back among issues which have recently priced, the heretofore strong new five-year deal from United States Steel Corp. slid in heavy trading in the face of overall weakness in metals and other commodities.

That also pulled down oil and gas issues, continuing a retreat that started on Friday among such names as Chesapeake Oil Corp., California Resources Corp., and Freeport McMoRan, Inc., which was also hurt by the weakness in metals as well as energy.

Away from the resources names, Endo International plc’s bonds and shares were in retreat for a second consecutive session Monday after the Irish drugmaker put out sharply lower full-year revenue and earnings projections.

Statistical market performance measures turned mixed on Monday after having been lower across the board for four consecutive sessions before that. Monday was the fourth mixed session in the last eight trading days.

NRG upsizes

Two issuers brought a combined three tranches and raised $1.7 billion during an active session in the primary market on Monday.

NRG Energy, Inc. priced an upsized $1 billion issue of 10-year senior notes (B1/BB) at par to yield 7¼%.

The issue size was increased from $700 million.

The yield printed on top of yield talk. Early guidance was 7¼% to 7½%.

Deutsche Bank was the lead for the debt refinancing and general corporate purposes deal.

Tesoro two-part drive-by

Tesoro Logistics LP and Tesoro Logistics Finance Corp. priced $700 million of senior notes (Ba3/BB).

The deal included a $250 million add-on to the 6 1/8% senior notes due Oct. 15, 2021, which launched and priced at 100.25 to yield 6.069%. The reoffer price came at the rich end of the 100.00 area price talk.

In addition the company priced an upsized $450 million issue of new eight-year senior notes at par to yield 6 3/8%. The tranche was upsized from $350 million. The yield printed at the tight end of yield talk in the 6½% area.

Citigroup was the left global coordinator. MUFG is the joint global coordinator. Barclays, Goldman Sachs, JP Morgan, Mizuho, Wells Fargo, BBVA, BofA Merrill Lynch, BNP, Credit Suisse, Deutsche Bank, RBC, SMBC, SunTrust, TD, UBS and US Bancorp were the joint bookrunners.

The overall transaction size was increased from $600 million.

The San Antonio-based owner and operator of crude oil and refined products logistics plans to use the proceeds to repay debt under both its revolver and its drop down credit facility and for general partnership purposes.

Performance Food roadshow

Performance Food Group, Inc. plans to start a roadshow on Tuesday for a $350 million offering of eight-year senior notes.

The deal is set to price later this week.

Credit Suisse, Barclays, Wells Fargo, BMO, Blackstone, JP Morgan and Morgan Stanley are the joint bookrunners.

The Richmond, Va.-based foodservice distributor plans to use the proceeds to refinance bank debt.

Barry Callebaut roadshow soon

In the European primary Barry Callebaut AG plans to start a roadshow on Wednesday for a €350 million offering of senior fixed-rate notes.

The notes will come with a maturity of eight years to 10 years.

Credit Suisse, ING, Rabobank and SG CIB are the joint lead managers and active bookrunners.

The Zurich-based chocolate-maker plans to use the proceeds to repay debt and for general corporate purposes.

WEPA starts roadshow

WEPA Hygieneprodukte GmbH started a roadshow on Monday in Frankfurt for a €450 million offering of eight-year senior secured notes (expected ratings B1/BB).

Joint bookrunner Deutsche Bank will bill and deliver. HSBC is also a joint bookrunner.

The notes come with three years of call protection.

The Amsberg, Germany-based producer and supplier of tissue products plans to use the proceeds to refinance debt and for general corporate purposes.

Tesoro Logistics trades up

Back in the dollar-denominated aftermarket, a trader said that the new Tesoro Logistics add-on to its existing $550 million of 6 1/8% notes due in October of 2021 traded at 100¾ bid, 101½ offered , up from the 100.25 issue price at which those additional notes came.

A little later on, a second trader said that the add-on had moved up to around the 101 1/8 bid level, on volume of more than $20 million.

He also saw the company’s new stand-alone 6 3/8% notes due 2024 having firmed to 101¼ bid, up from their par issue price, on volume of more than $34 million.

Another market source saw the latter bonds trading around in a 101 to 101¾ context.

NRG Energy improves

The day’s other new deal, from Princeton, N.J.-based wholesale power generating company NRG, was heard to have traded up to 100 5/8 bid when the bonds hit the aftermarket, versus their par issue price.

Volume topped the $41 million mark, putting the credit high up on the junk market’s Most Actives list.

U.S. Steel slides

Among recently priced issues, U.S. Steel’s 8 3/8% senior secured notes due 2021 lost more than 1 full point Monday, closing at 100¼ bid, a trader said, “on pretty good volume.”

He theorized that the slide in the heretofore strongly performing bonds “could have been pretty much a function of the heaviness in the commodities today.”

A second trader also saw the bonds down a point at 100¼, estimating volume in the credit at over $50 million.

At another desk, a trader who on Friday had quoted the bonds at 101¼ bid, 101¾ offered, saw them on Monday at par bid, 100¼ offered.

The Pittsburgh-based integrated steel manufacturer priced $980 million of those notes at par last Tuesday, after the two-day deal was upsized from an originally announced $500 million.

The new bonds almost immediately shot up to 101½ bid on heavy volume and remained at those lofty levels for the rest of last week, hitting a mid-week peak of a 101½ to 102 context before falling on Monday.

Energy names trade off

A market source noted that “oil was off by 1¼,” in explaining Monday’s lower levels for various oil and natural gas credits.

The benchmark U.S. crude grade, West Texas Intermediate for June delivery, was down $1.22 per barrel, settling at $43.44 on the New York Mercantile Exchange on Monday, its first loss after three straight gains that included Friday’s 34-cent rise.

The key international grade, Brent crude for July delivery, swooned by $1.74 per barrel in Monday dealings on the London ICE Futures Exchange, ending at $43.63 – its first loss after two straight gains, including Friday’s 36 cent rise.

The oil issues had surged on Thursday, with investor concerns about oversupply assuaged by news of the continuing wildfires in the oil-rich Canadian province of Alberta, which have reduced production there by an estimated 900,000 to 1 million barrels per day.

Then on Friday, they gave back much of the Thursday gains on profit-taking, despite firmer oil prices that session.

On Monday, traders the various energy names continuing to backtrack.

Chesapeake’s 8% notes due 2022 was about ½ point lower at 63¾ bid, with over $23 million traded.

California Resources’ 8% notes due 2022 lost more than 1.4 point, ending around 59¾ bid, with over $13 million traded.

Freeport McMoRan’s 3.55% notes due 2023 were ¼ point lower at 77 bid, with over $60 million traded.

Endo easing continues

Away from the resources names, traders saw Endo International’s issues continuing to trade off in the wake of the Dublin, Ireland-based drugmaker’s lower than expected guidance.

“The whole structure was off anywhere from 1 to 1½ points,” a trader said, “on top of Friday’s losses.”

He said the company’s 6% notes due 2023 “were active again, down another 1 point to 86 bid.

He saw its 5 3/8% notes due 2023 off 1½ points, ending just below par.

The company said last week that it lost $133.9 million, or 60 cents per share, for the first quarter, compared to a loss of $75.7 million, or 43 cents per share, in the year-earlier period.

Adjusted earnings were $1.08 per share, which was a few cents better than many analysts expected, however.

Endo reported revenue of $963.5 million, which was up from $714.1 million in revenue in the year-earlier period, but below estimates for revenue of $964.4 million.

Looking ahead, the company cut its full-year estimates to $4.50 to $4.80 per share for earnings, which was lower than $5.85 to $6.20 per share previously expected; and revenue was cut to $3.87 billion to $4.03 billion, which was down from $4.32 billion to $4.52 billion previously expected.

Analysts had been expecting earnings of $5.68 per share on revenue of $4.3 billion.

The company blamed its lowered forecast on increasing competition and regulatory delays.

Indicators turn mixed

Statistical market performance measures turned mixed on Monday after having been lower across the board for four consecutive sessions before that, which in turn followed three more mixed sessions. Monday was the fourth mixed session in the last eight trading days.

The KDP High Yield Daily index suffered its sixth straight loss on Monday, easing by 1 basis point to end at 67.07, after having retreated by 22 bps on Friday and 16 bps on Thursday. Those losses followed three consecutive gains before that. Monday was the index’s ninth loss in the last 12 sessions.

But its yield was unchanged on Monday at 6.35%, after having risen by 7 bps on both Thursday and Friday, its fourth straight widening and its fifth in the previous nine sessions.

The Markit Series 26 CDX North American High Yield index broke out of a four-session rut on Monday, gaining 7/32 point to close at 101¾ bid. On Friday, it had dropped by 5/32 point, its fourth successive loss and sixth loss in the previous seven sessions.

The Merrill Lynch North American High Yield Master II index meantime retreated by 0.021% on Monday, its fifth consecutive setback and sixth such downturn in the last seven sessions, including Friday’s 0.328% downturn.

Monday’s downside move cut the index’s year-to-date return to 6.393% from Friday’s 6.415% and from last Monday’s close of 7.398%, the peak level for the year so far.

© 2015 Prospect News.
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