Morning Commentary: Buyout news pushes Callon Petroleum bonds up to 5 points higher

By Paul A. Harris

Portland, Ore., Jan. 4 – News that APA Corp. will acquire Callon Petroleum Corp. in a transaction valued at $4.5 billion sent Callon’s high-yield bonds 2 points to 4 points higher, generically, on Thursday morning, according to a bond trader.

The Callon Petroleum 7½% senior notes due June 2030 were 105½ bid, 106½ offered, up around 5½ points at mid-morning, the trader said.

APA, the holding company for Apache Corp., is set to acquire Callon in an all-stock deal slated to close in the second quarter of 2024.

Away from that situation, the broad high-yield bond market was unchanged to perhaps 1/8 of a point higher on the morning, the trader said.

Amid mixed trading in the major U.S. stock indexes at that time, with Treasury yields marginally higher, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.17%, or 13 cents, at $76.79.

The GTCR W-2 Merger Sub LLC (Worldpay) 7½% senior secured notes due January 2031, a large, liquid, post-Labor Day issue deemed useful in gauging present market sentiment, were unchanged on the morning at 104¼ bid, 104¾ offered, the trader said.

The $2.175 billion deal priced at par last September.

In the new issue market, terms circulated on the EnerSys $300 million 6 5/8% senior notes due January 2032 (Ba3/BB+), which priced at par, at the tight end of talk.

Demand for the paper was more than $600 million on Wednesday afternoon, market sources said.

Away from that deal the dollar-denominated primary market was quiet on Thursday.

Fund flows

High-yield ETFs sustained $281 million of daily cash outflows on Wednesday, according to a market sources.

Actively managed high-yield funds saw $99 million of inflows on the day.

As the market awaits news of the weekly cash flows of the various asset classes, expected Thursday afternoon from fund-tracker Refinitiv Lipper, the combined high-yield funds are tracking $1.04 billion of net outflows on the week to Wednesday’s close, as they anticipate sustaining their first weekly outflows in nine weeks, the market source said.

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