Lamar drives by with 10-year, new bonds firm; market gyrates, ends mixed; SandRidge slides

By Paul Deckelman and Paul A. Harris

New York, Jan. 25 – The high yield primary sphere continued its recent burst of activity on Monday, pricing its third new deal in as many sessions, as Lamar Advertising Co. came to market with a quickly shopped $400 million offering of 10-year notes.

Traders said that the Baton Rouge, La.-based billboard company’s new issue firmed smartly when it hit the aftermarket, moving up between 1 and 2 points from its issue price.

They meanwhile saw continued firmness in the trading levels for two new deals done last week: packaged foods producer TreeHouse Foods Inc.’s $775 million of eight-year notes and specialty construction chemicals and building materials maker GCP Applied Technologies Inc.’ $525 million of seven-year paper, with the latter taking top honors as the day’s busiest issue in Junkbondland.

Away from the new deals, the market was mixed – early softness gave way to later firmness – which itself was undermined still later in the session as equities nosedived, in line with the latest falling crude oil prices.

The latter, though, did not have the broad negative impact seen last week.

While some energy credits, such as California Resources Corp., were lower, others, such as Oasis Petroleum Inc., managed to hold their own.

But Sand Ridge Energy Inc.’s bonds slid after the company said it had maxed out a credit line in order to shore up liquidity.

Statistical measures of junk market performance turned mixed on Monday, after having been higher across the board on Thursday and again on Friday, their second mixed session in the last four trading days.

Lamar Advertising drives by

The Monday session in the new issue market saw one deal price.

Lamar Advertising Co. sold a $400 million issue of 10-year senior notes (Ba1/BB-) at par to yield 5¾%.

The deal priced inside of the 6% initial guidance, the source said, adding that talk tightened through the day.

There was a great deal of reverse inquiry driving the deal, and the book ended up being multiple times oversubscribed, the source also said, and added that allocations were poor.

The new Lamar 5¾% notes due 2026 were 101¾ bid, 102 offered, shortly after terms circulated, that source added.

J.P. Morgan, Wells Fargo and SunTrust were the joint bookrunners for the drive-by deal.

The Baton Rouge, La.-based outdoor advertising company plans to use the proceeds to repay the $300 million term loan A-1 loan that it borrowed on Jan. 7, 2016 to fund the acquisition of certain assets of Clear Channel Outdoor Holdings, Inc., and to pay down its revolver.

GFL Environmental for Tuesday

GFL Environmental Corp. is on deck to price $250 million minimum of five-year senior notes on Tuesday.

The deal, which was announced on Monday, was scheduled to be marketed on an investor call set for late Monday morning.

It is ultimately expected to grow to $375 million, according to a trader who added that it appeared to be coming together at about a 10% yield.

Existing holders were already in for $200 million prior to Monday's close, the source said.

Credit Suisse, BMO and Barclays are the joint bookrunners.

The Vaughan, Ont.-based solid and liquid waste management company plans to use the proceeds to fund the acquisition of the Matrec solid waste division of TransForce Inc.

Recent issues hold gains

The traders saw generally firm levels for the two new deals that had priced at the tail end of last week.

One said that his shop had “been active in last week’s new names,” including GCP Applied Technologies Inc.’s 9½% notes due 2023.

He quoted the notes at 103 bid, 103¼ offered.

At another desk, a market source said that the bonds were up by 1/8 point on the day, at 103 1/8 bid, on market-leading volume of more than $34 million.

The Columbia, Md.-based producer of specialty construction chemicals, building materials and packaging technologies – being spun off by chemicals giant W.R. Grace & Co. – priced $525 million of the notes at par on Friday, the junk bond market’s first regularly scheduled forward calendar deal of the year.

The new bonds had firmed solidly to a 102¾ bid, 103¼ offered level in Friday’s aftermarket, before continuing to gain on Monday.

A trader meantime saw TreeHouse Foods’ 6% notes due 2024 on Monday at 102 bid, while a second had the notes 1/8 point higher, at 102¼ bid, 102¾ offered.

However, in contrast to the actively traded GCP issue, the new TreeHouse bonds only saw a handful of large-sized trades on Monday.

The Oak Brook, Ill.-based packaged food and beverage manufacturer priced $775 million of the notes at par in a quick-to-market transaction on Thursday – the biggest junk bond deal seen so far this year.

The bonds initially traded around 101½ bid when they were freed after pricing, but had moved as high as a 103 to 103½ bid context by Friday, before coming off those peaks and settling around 102 bid.

A trader said on Monday that “it’s nice to see some new issues getting done, despite the significant outflows [of investor cash from the junk market] that we have seen lately.”

He said that the deals were a sign that “strong BB credits,” like TreeHouse, “that are not in the energy space, are going to do well.”

An up-and-down day

Away from the new issues, the trader characterized Monday’s market as “an odd day.”

He said that it was “softer in the morning, then it rallied a little, and after that was a slow leak,” in line with cascading equity prices, which were pulled down by a slide in oil prices.

“We were weakening up later on, with stiff more for sale and guys hitting bids.”

At the end of the day, he said, “we saw better buyers – that was the flow of the market.”

Oil prices head south

In contrast to the surge in world crude oil prices seen on Thursday and again on Friday, crude dropped on Monday after Iraq’s oil minister predicted that the country expects to beat last year’s volume record and on other signs that the current market glut is not going away.

The March contract for the benchmark U.S. crude oil grade, West Texas Intermediate slid by $1.85 per barrel on Monday, to $30.34, after having jumped by $2.66 per barrel in Friday trading on the New York Mercantile Exchange, its second straight gain after a three-session losing streak that had seen the WTI price down in the upper 20s.

The March contract for the benchmark international grade, Brent crude, likewise declined by $1.68 per barrel on Monday, settling at $30.50; on Friday, Brent had rocketed up by $2.93 in trading on the London ICE Futures Exchange, on top of having soared by $1.37 per barrel on Thursday – also its first upturn after three straight days of losses.

Oil credits mixed

But the price downturn’s impact was not universally felt in the junk energy sector.

California Resources’ 8% notes due 2022 were down 2½ points on the day, at 39¾ bid, with over 414 million traded.

However, Oasis Petroleum’s 6 7/8% notes due 2022 rose ¼ point, to 52¼ bid, while Energy Transfer Equity LP’s 5 7/8% notes due 2024 rose by 1¼ point, to 72¼ bid, both on about $12 million of volume.

SandRidge ebbs

SandRidge Energy said Monday that it drew down $489 million from a credit line in order to shore up liquidity during a period of depressed commodity prices.

The draw gives the company $855 million in cash on hand, though it means it owes a total of $500 million on the facility.

All told, the Oklahoma City-based oil and gas producer has about $4 billion of debt.

In response to the news, investors pushed the company’s bonds down.

A trader saw the 8¾% notes due 2020 falling 4 points to 19. Another trader said the paper was “down a couple,” trading into the high-teens.

Last month, SandRidge’s stock was delisted from the New York Stock Exchange for its “abnormally low” stock price.

Indicators turn mixed

Statistical measures of junk market performance turned mixed on Monday, after having been higher across the board on Thursday and again on Friday, their second mixed session in the last four trading days.

The KDP High Yield Daily Index rose by 13 basis points on Monday to end at 62.57, its third straight gain and fourth such advance in the last 11 sessions; the index had also zoomed by 64 bps on Friday and 39 bps on Thursday as it snapped a seven-session losing streak.

Its yield, meantime, tightened 3 bps on Monday, its third consecutive narrowing; it had come in by 12 bps on Thursday and then by another 20 bps on Friday.

However, the Markit Series 25 CDX North American High Yield Index retreated by 7/16 point, its first loss after two straight gains and third loss in the last five sessions; it ended at 98 17/32 bid, 98 9/16 offered. On Friday, it had soared by 1 1/16 points, on top of Thursday’s ¼ point advance.

The Merrill Lynch North American High Yield Master II Index, though, remained positive, gaining 0.225% on Monday, its third straight gain after one loss and its fourth such upturn in the last six sessions. On Friday, the index saw its biggest one-day gain for the year so far, as it climbed by 0.984%.

Monday’s upturn cut the index’s year-to-date loss to 2.46% from on 2.679% on Friday and from 4.095% on Wednesday – its worst level for the year so far.

Stephanie N. Rotondo contributed to this review.

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