CBRE drives by with smallish add-on; Westmoreland terms appear; Hertz skids; oilers mixed

By Paul Deckelman and Paul A. Harris

New York, Dec. 9 – Primaryside activity in the high-yield market seemed to start its year-end wind-down on Tuesday, with just one smallish new deal heard by syndicate sources to have come to market during the session – a quickly-shopped $125 million add-on to commercial real estate company CBRE Group, Inc.’s existing 2025 notes.

That was well down from Monday’s session, when some $1.85 billion of new dollar-denominated, fully junk-rated paper had priced in three tranches, including an upsized $1.5 billion two-part offering of five- and seven-year notes from consumer lending provider OneMain Financial Holdings, Inc. and a downsized $350 million of seven-year secured notes from Westmoreland Coal Co. Terms on the latter deal, which had not been released to the market when it priced on Monday, circulated on Tuesday.

Both of those deals were among the more actively traded issues of the day on Tuesday.

The busiest name in Junkbondland, a market source said, was Hertz Corp., whose 2022 notes lost ground.

Once again, there was considerable activity in oil and natural gas exploration and production names, which have been under considerable pressure lately. But unlike the past few sessions, when everything was headed down, there were some upsiders on Tuesday, namely California Resources Corp.’s several issues of widely traded bonds.

But other sector names, such as Energy XXI Gulf Coast Inc. and Midstates Petroleum Co., remained on the slide, even though crude oil prices bounced back on Tuesday from the drubbing they had taken during Monday’s session.

Statistical indicators of junk market performance turned mixed on Tuesday, after having been lower on both Friday and Monday.

CBRE at the rich end

CBRE Group came with a drive-by on Tuesday, and it turned out to be the session's sole deal.

The commercial real estate services and investment priced a $125 million tack-on to its 5¼% senior notes due March 15, 2025 at 101.5 to yield 5.057%.

The reoffer price came at the rich end of the 101 to 101.5 price talk.

Credit Suisse Securities (USA) LLC was the bookrunner for the debt refinancing.

The original $300 million issue priced at par on Sept. 23, 2014.

Also early Tuesday, final terms surfaced on Westmoreland Coal's downsized $350 million issue of 8¾% seven-year senior secured first-lien notes (Caa1/B), which priced at 98.708 to yield 9% on Monday.

The debt refinancing deal, via left bookrunner BMO, was downsized from $400 million, and the yield printed 37.5 basis points beyond the wide end of yield talk in the 8½% area.

The calendar

New issue activity for 2014 has nearly run its course, market sources continued to advise on Tuesday.

One big deal remains on the calendar and could price as early as Wednesday.

Kindred Healthcare Inc. has been roadshowing a $1.35 billion two-part offering of senior notes (/B-/) backing its merger with Gentiva Health Services, Inc.

The deal features a tranche of eight-year notes and a tranche of 10-year notes, with tranche sizes remaining to be determined.

Formal price talk has yet to surface, a market source said late Tuesday. However the eight-year notes are whispered in the high 7% to 8% yield context, and the 10-year notes are whispered to come 25 basis points to 37.5 bps behind the eight-year notes.

Citigroup is the left bookrunner. J.P. Morgan, Guggenheim and Morgan Stanley are the joint bookrunners.

Also, Global Cash Access Holdings Inc. is in the market with a $700 million two-part offering of high-yield notes: $350 million of senior secured notes due March 15, 2021 (B1/B+) and a $350 million of senior unsecured notes due Jan. 15, 2022 (Caa1/CCC+).

BofA Merrill Lynch and Deutsche Bank are the joint bookrunners.

And in Europe, Siemens Audiology Solutions is roadshowing a €315 million offering of eight-year senior notes (B2) through Thursday via Deutsche Bank and Goldman Sachs.

Continued outflows, weakness

Meanwhile, the “big bellwether deal” that sellside sources began forecasting last week is being pushed into 2015, a syndicate banker said on Tuesday.

Without divulging the identity of the issuer, the source said that its bonds were off a point on Tuesday, with the rest of the market, and it did not make sense to go forward with the deal at this time.

Also, the technical backdrop remains poor, with dedicated high-yield funds continuing to see cash outflows, a trader said.

On Monday, the most recent day for which numbers were available at press time, high-yield ETFs saw $124 million of outflows, while actively managed funds saw 65 million of outflows.

New deals firm up

In the secondary arena, a trader saw CBRE’s 5¼% notes due 2025 at 102 bid, 102¾ offered.

That was up from the 101.5 level at which the Los Angeles-based commercial real estate firm had priced its $125 million add-on issue earlier in the session.

The trader also quoted Westmoreland Coal’s 8¾% senior secured first-lien notes due January 2022 at 99¼ bid, 99½ offered – up from the 98.708 level at which the Englewood, Colo.-based coal producer had priced its downsized $350 million issue on Monday.

A second trader said that he saw those bonds in a 99 bid context.

At another shop, a market source quoted the bonds at 99 3/8 bid, with volume busy at more than $18 million, putting it among the day’s most active issues.

Also up there were both tranches of OneMain Financial Holdings’ $1.5 billion two-part issue.

One of the traders said that the 6¾% notes due 2019 were trading at 100 3/8 bid going home, down 5/8 of a point from its peak level at 101 bid. Over $22 million of those bonds traded.

He saw the other half of that deal – the 7¼% notes due 2021 – trading at 100 5/8 bid, down 1/8 from its peak, with over $13 million of the new notes having changed hands.

A second trader pegged both tranches within a 100¼ bid, 100¾ offered context.

The Baltimore-based consumer lending company – the former CitiFinancial – priced $700 million of the 2019 notes and $800 million of the 2021 notes, both at par, on Monday as a regularly scheduled forward-calendar offering.

A trader said that if other recently priced issues were trading around, “they were trading very lightly, as oil names were once again the main focus.”

Energy issues mixed

The trader said that “oil caught a little bit of a bid” as crude-oil prices, which had been battered down on Monday to five-year lows, got some of that back on Tuesday, breaking out of a three-session slump.

Benchmark West Texas Intermediate crude was up by 77 cents, or 1.2%, settling at $63.82 per barrel.

With that kind of a tailwind, “we saw a bump in some names,” he said.

One of those energy credits doing better was California Resources’ 6% notes due 2024. The Los Angeles-based E&P company’s notes, which had fallen nearly 3 points in heavy trading on Monday, were up more than 1¼ points on Tuesday, to the 86½ bid area.

Another energy name coming off its recent lows was Cliffs Natural Resources Inc. The Cleveland-based coal and iron ore producer’s 4.8% notes due 2020 gained 1 1/8 points to close just over 60 bid, on volume of over $11 million. Its 5.90% notes due 2020 were up 4 points 63½ bid.

But for the most part, the energy bonds were continuing to take their lumps. Houston-based Energy XXI’s 7½% notes due 2021 slid by 5 points to end at 55¼ bid, with over $14 million of the bonds having traded, while its 9¼% notes due 2017 lost 4¾ points to close at 64¾ bid.

Midstates Petroleum’s 9¼% notes due 2021 fell by 4¾ points to 54 bid, on $23 million of volume.

Hertz is hurtin’

Away from the energy names, the most active high-yield credit on Tuesday was Hertz’s 6¼% notes due 2022, which lost 3/8 of a point to end at 100 3/8 bid, on turnover of more than $35 million.

Traders did not have an immediate explanation for the movement in the Naples, Fla.-based vehicle rental giant’s paper.

On Friday, Hertz filed an 8-K with the Securities and Exchange Commission in which it disclosed that along with its Hertz Vehicle Financing LLC wholly owned special purpose subsidiary, the company had entered into a waiver agreement with the trustee for the holders of $2.45 billion of medium-term asset-backed notes issued by the subsidiary.

The waiver was related to Hertz's failure to furnish certain financial statements within certain time periods set forth in the documentation of the subsidiary’s financing facilities. The waiver runs through Aug. 31, 2015.

Indicators end mixed

Statistical indicators of junk market performance turned mixed on Tuesday, after having been lower on both Friday and Monday.

The KDP High Yield Daily index plunged 35 basis points on Tuesday to end at 70.73, its third consecutive loss. It had lost 13 bps on Monday and had eased by 2 bps on Friday, its first loss after two straight gains.

The yield shot up by 11 bps, to 5.82%, its third straight widening. On Monday, it risen by 5 bps, after having gone up by 3 bps on Friday – its first widening after narrowing 2 bps in both of the previous two sessions.

But the Markit CDX North American High Yield Series 23 index was slightly higher after three straight losing sessions, rising by 1/32 of a point to finish at 106¼ bid, 106 9./32 offered. On Monday, it had fallen by 19/32.

However, the Merrill Lynch U.S. High Yield Master II index saw its third successive setback on Tuesday, retreating by 0.603%, on top of Monday’s 0.254% downturn.

The latest loss dropped its year-to-date return to 2.123% from Monday’s 2.742%.

Tuesday’s close was its lowest finish since Feb. 21, when it stood at 2.07%.

The year-to-date return also remained well below its peak level for the year of 5.847%, which was recorded on Sept. 1.

Several other index components notched new marks for the year. Its yield to worst rose to a second consecutive new high for the year at 6.663%, up from 6.478% on Monday.

The spread to worst rose to 515 bps over comparable Treasuries, its second consecutive new wide point of the year. On Monday, it had risen to 496 bps.

And its average price fell to 98.95249, its third straight new low for the year, from Monday’s 99.58192.

According to the Finra-Bloomberg Active US High Yield Bond index, junk market volume rose for the first time on Tuesday after four consecutive sessions on the slide. It totaled $4.306 billion, up from $3.023 billion at Monday’s close.

© 2015 Prospect News.
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