NCR on tap; Sirius postpones offering; sell-off in oil patch continues; Endo active, mixed; Adient jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 6 – The domestic high-yield primary market saw another session on Tuesday with no new deal activity. However, one new deal did join the forward calendar.

NCR Corp. began marketing a $1 billion two-tranche offering of senior notes (expected ratings B2/BB) with pricing expected on Thursday.

While one deal joined the forward calendar, another withdrew.

Sirius Minerals plc postponed its $500 million offering of senior secured notes due 2027, citing market conditions.

Meanwhile, the secondary space firmed on Tuesday with several names rebounding after a dramatic sell-off on Monday.

However, the oil patch was not the benefactor of the rebound with several oil and gas names continuing to trade down as crude oil futures remained on a downward spiral.

Chesapeake Energy Corp.’s senior notes were also under pressure after a disappointing second quarter earnings report.

Endo International plc’s junk bonds were in focus on Tuesday with the notes mixed after the pharmaceutical company reported second-quarter earnings.

Adient plc’s 4 7/8% senior notes due 2026 jumped after better than expected earnings.

NCR brings $1 billion

NCR Corp., formerly known as National Cash Register, commenced marketing a $1 billion offering of senior notes (expected ratings B2/BB) in two tranches on Tuesday.

On offer are $500 million of eight-year notes with initial price talk in the high 5% area and $500 million of 10-year notes with initial price talk in the low 6% area.

The deal, in the market via left bookrunner Wells Fargo, is expected to price on Thursday.

Elsewhere on Tuesday, Sirius Minerals postponed its $500 million offering of senior secured notes due 2027, citing market conditions, and stating in a press release that it intends to return to the junk bond market for another try later in the present quarter.

Following the postponement, the company's stock fell nearly 30%.

The project financing junk bond deal failed to get traction at the initial price talk of 10% to 12%, and talk was hiked to 13½%, as the U.K.-based company is pressed for cash to finish construction of a polyhalite mine in Yorkshire, market sources say.

The trade war escalations that got underway last week and found renewed vigor as the present week got underway certainly created tough sledding in the new issue market.

Market conditions on Monday were unquestionably bad, a source remarked.

However, it was unclear that there was much of an audience for the Sirius Minerals deal, even at the higher price talk, the source added.

The oil patch

While the overall market rebounded on Tuesday, the sell-off in crude oil futures continued with several junk bonds in the oil patch continuing their downward spiral.

California Resources Corp.’s bellwether 8% senior notes due 2022 were again among the most active issues during Tuesday’s session.

The notes traded off another 3 points. They were down to 56½ bid, 57 offered early in the session and were seen changing hands at 55 7/8 in the late afternoon, sources said.

The bonds saw more than $33 million in reported volume during Tuesday’s session.

The notes were also active and losing ground on Monday with the notes trading off 5 points.

In addition to the continued sell-off in crude oil futures, Chesapeake Energy’s junk bonds were losing ground following a disappointing earnings report.

Chesapeake Energy’s 8% senior notes due 2025 were down 3 points on Tuesday to 76½, according to a market source.

The bonds saw more than $38 million in reported volume making them one of the most active issues in the secondary space.

Chesapeake’s 8% senior notes due 2027 were down 2 points to 71 with more than $31 million in reported volume. The notes shaved off about 3 points in active trading on Monday.

Chesapeake’s stock and bonds were under pressure following the oil company’s second-quarter earnings report, which was released prior to the market open on Tuesday.

Chesapeake missed analysts’ expectations with losses per share of 10 cents versus analyst expectations for losses of 7 cents and EBITDA of $612 million versus expectations for EBITDA of $617 million.

Crude oil futures settled at $53.63, a decrease of $1.06 or 1.94%, on Tuesday.

Endo active

Endo’s junk bonds were active but mixed in secondary trading on Tuesday after the pharmaceutical company reported earnings.

Endo’s 6% senior notes due 2025 gained ½ point on Tuesday to trade up to 59½ by the late afternoon, according to a market source.

More than $31 million of the bonds were on the tape.

The pharmaceutical company’s 7½% senior notes due 2027 were also up with the notes climbing 1¾ point to 92.

However, the 6% senior notes due 2023 dropped ¾ point to 62 in the late afternoon.

Endo reported second quarter earnings on Monday and beat analyst expectations on both the top and bottom line.

Endo reported earnings per share of 52 cents versus analyst expectations for earnings of 47 cents.

Revenue was $699.73 million versus analyst expectations for revenue of $694.6 million.

Adient jumps

Adient’s 4 7/8% senior notes due 2026 jumped on Tuesday following better than expected earnings results.

The 4 7/8% notes rose 4 points to 77¾ in active trading, according to a market source.

The automotive seating manufacturer’s junk bonds were on the rise after besting expectations with its third quarter earnings report.

Adient reported earnings per share of 38 cents versus analyst expectations for earnings of 31 cents.

The company reported adjusted EBITDA of $205 million.

The results signaled a turnaround for the company, according to a market source.

ETFs see big Monday outflows

High-yield ETFs sustained $1.02 billion of daily cash outflows on Monday, according to a market source.

It was the second consecutive session that saw the ETFs disgorging notable amounts of cash: Last Friday the junk ETFs sustained $961 million of outflows on the day, the source noted.

Meanwhile the actively managed high-yield funds, the asset managers, saw $160 million of inflows on Monday, the most recent session for which data was available at press time, the market source said.

With three of five sessions in the present reporting week in the tally, the combined high-yield funds are tracking $2.1 billion of outflows on the week that will conclude with Wednesday's close, the source commented.

Indexes mixed

Indexes were mixed on Tuesday after a brutal start to the week.

The KDP High Yield Daily index continued to lose ground. The index dropped 14 basis points to close Tuesday at 70.89 with the yield now 5.67%.

The index was down 51 bps on Monday.

The ICE BofAML US High Yield index rebounded slightly on Tuesday although it remained well below the threshold of 10% returns.

The index gained 20.9 bps with the year-to-date return now 9.731%. The index dropped 77.9 bps on Monday.

The CDX High Yield 30 index gained 37 bps to close Tuesday at 106.19. The index sank 93 bps on Monday.

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