High-yield primary stays empty; telecom names boosted; First Quantum bonds rise on debt plan

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore. Oct. 6 – The high-yield bond market was again trending higher on Tuesday, according to market sources.

In particular, a trader said that anything telecom “did pretty good in general.” That included Frontier Communications Corp., Sprint Corp. and T-Mobile USA Inc.

Chemical companies were also on the rebound. That sector had been under pressure recently, which one trader attributed to Olin Corp.’s pricing of a $1.22 billion two-part notes offering last week.

“That really repriced the market,” he said.

Meanwhile, First Quantum Minerals Ltd. got a sizeable boost as investors responded to the company’s debt-reduction plan. The mining and metals company announced the plan, aimed at reducing debt by $1 billion, late Monday.

SunOpta sets talk

No new issues priced on Tuesday.

No new deals were announced.

News surfaced on the only high-yield offering currently on the road.

SunOpta Foods Inc. talked its $330 million offering of senior secured second-lien notes due 2022 (B3/B) at a to-be-determined discount to yield 10%.

The acquisition deal is expected to price Wednesday afternoon.

BMO Securities, Jefferies LLC and Rabobank are the joint bookrunners.

Itinere non-deal roadshow

In the European primary market, Madrid-based infrastructure management company Itinere Infraestructuras SA (expected ratings /BB-/BB) has planned meetings with fixed-income investors ahead of a potential euro-denominated notes offer.

Deutsche Bank is the global coordinator.

Mixed flows

The cash flows of the dedicated high-yield funds were mixed on Monday, the most recent session for which data was available at press time, a market source said.

High-yield exchange-traded funds were reported to have seen $49 million of inflows on the session; however, that number seemed extremely low to a trader who saw $3 billion of offers wanted in competition.

The ETF money is fast money and therefore a moving target, so a final number is difficult to pin down, the trader conceded.

Asset managers, meanwhile, sustained $220 million of outflows on Monday.

Good day for telecom

The firm tone of the market helped push telecommunications bonds back up, sources reported Tuesday.

A trader said Frontier Communications’ 11% notes due 2025 “traded up a storm,” rising half a point to par.

The paper hasn’t been seen at those levels since the deal priced on Sept. 11. A total of $3.6 billion of the 11% notes were issued, along with $1 billion of 8 7/8% notes due 2020 and $2 billion of 10½% notes due 2022.

Sprint paper was also gaining strength.

One trader said the 7 5/8% notes due 2025 were up the most, gaining 4 points to 84. The 7 1/8% notes due 2024 added 3 points, closing at 83¼.

“Those bonds keep moving up,” a second trader said, seeing the 7 7/8% notes due 2028 moving up to 87 from previous levels around 84½.

He added that the name was up 2 to 3 points across the board.

In T-Mobile debt, bonds were better, though not as much as Sprint was.

A trader called the 6 5/8% notes due 2023 up over half a point at 99 5 /8, while the 6 3/8% notes due 2025 improved 1½ points to 98½.

At another desk, the 6¼% notes due 2021 were deemed a point better at par ½ bid.

Even CenturyLink Inc.’s 5 3/8% notes due 2020 got in on the action, closing up almost half a point at 95.

Chemical names rally

The chemical space was also rebounding during Tuesday trading.

A trader saw Tronox Ltd.’s 6 3/8% notes due 2020 inched up to 59¾, while Huntsman Corp.’s 4 7/8% notes due 2020 jumped over 2 points to 91.

“That continues climbing up,” the trader said of the Huntsman issue, noting that the paper had been trading around 86 at Monday’s open but improved by at least 3 points in that session.

Another trader said Tronox’s debt was “better,” seeing the notes trade as low as 57¾ but going out around 61.

“So that’s up like 3 points intraday,” he said.

The second trader speculated that recent weakness among chemical companies was due to Olin’s pricing of a $1.22 billion two-part notes offering last week.

That deal included $720 million of 9¾% notes due 2023 and $500 million of 10% notes due 2025. The total deal came downsized, and the coupons were massively increased from initial talk.

With that deal, the entire chemical space got repriced, the trader said.

“So they are rebounding now,” he said.

First Quantum lauds debt plan

First Quantum Minerals announced a debt-reduction plan late Monday that aims to reduce overall debt by $1 billion by the end of the first quarter of 2016.

Come Tuesday trading, a trader said the company’s bonds were “up a bunch.”

He called the notes 5 to 6 points better on the day, pegging the 7% notes due 2021 at 60 and the 6¾% notes due 2020 at 70.

Both of those issues are Rule 144A.

“They announced plans for asset sales to reduce debt,” the trader explained. “So that’s what is driving that one.”

In its press release announcing the plan, the Vancouver, B.C.-based company said it was also looking at other strategic options that would help it reach its goal.

The company also said that it had inked a revised precious metal stream agreement with Franco-Nevada Corp., under which First Quantum expects to receive an initial contribution of between $330 million and $340 million during October. Additionally, First Quantum reduced its planned capital programs and realized $215 million from the settlement of the Eurasian Natural Resources Corp. plc promissory note with a further $85 million to be received in October.

Oil, gas bonds up

A hefty spike in domestic crude oil prices was mostly helpful to the oil and gas arena on Tuesday.

A trader saw Chesapeake Energy Corp.’s 5¾% notes due 2023 holding steady at 66¾. Another market source, however, called the 6 7/8% notes due 2022 up almost 2 points at 73½.

Another trader said the 5¾% notes ended “close to 67,” which he said was “up about a point.”

Chesapeake managed to end positive even as Moody’s Investors Service downgraded the company to Ba2 from Ba1. Moody’s cited concerns about cash flow, given the depressed prices of natural gas and oil.

Elsewhere in the sector, California Resources Corp.’s 6% notes due 2024 were called over 2 points better at 64¼.

Energy XXI Gulf Coast Inc.’s 11% notes due 2020 meantime gained “almost 4 [points],” a trader said, ending at 52½.

That trader said Penn Virginia Corp.’s 8½% notes due 2020 were “barely changed,” trading at 23¾. That was a gain of about a quarter-point, the trader said.

Penn Virginia announced late Monday that it had agreed to sell non-core assets in South Texas for $13 million. The buyer was not disclosed.

Domestic crude oil prices shot up nearly 5.25% on Tuesday as new data suggested that supplies would be tighter going into 2016. That viewpoint was coupled with increasing hopes that Russia and other big oil producers would be willing to curb their own production.

Market seen improving

There was once again strength in the high-yield space, though market indicators differed on how much.

The KDP High Yield Daily index rose to 66.22 from 65.91 as yields narrowed to 6.84% from 6.92%.

However, a market source called the CDX North American High Yield Series 25 index unchanged at 101.05 bid, 101.15 offered.

© 2015 Prospect News.
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