NRG Energy drive-by, EnQuest price to close $7.2 billion week; new Tullow issue trades busily

By Paul Deckelman and Paul A. Harris

New York, April 4 - The high-yield primary sphere ended the first trading week of April on Friday pretty much the same way it had begun the week, with a quick-to-market megadeal-sized transaction accounting for most of the days' new issuance.

Just as it had started out the week with Bombardier Inc.'s quickly shopped $1.8 billion two-part offering on Monday, the market ended the week with Princeton, N.J.-based wholesale power generation company NRG Energy, Inc.'s $1 billion drive-by issue of 10-year notes.

The day also saw British energy operator EnQuest plc do an upsized $650 million of eight-year notes as a regularly scheduled deal off the forward calendar. Both of the new deals were seen by traders having moved up modestly when they were freed for aftermarket activity.

The day's $1.65 billion in two tranches of new U.S. dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers lifted the week's new-issuance total to $7.21 billion in 14 tranches, down from the $8.13 billion in 17 tranches notched the previous week ended March 28.

It brought year-to-date new-issuance up to $73.54 billion in 155 tranches - although that seemingly busy pace still lagged the $93.69 billion that had come to market in 197 tranches by this time last year by 21.5%.

Among recently-priced issues, traders said that British energy concern Tullow Oil plc's eight-year notes, which priced on Thursday, were among the most actively traded junk deals.

Away from the new issues, traders said the secondary market seen easier, with many issues down a generic ¼ point or so, in line with a selloff in the equity markets triggered by the smaller than anticipated growth in employment during March as reported Friday morning by the Labor Department. However, they said that any retreat in junk was orderly, compared with the free-for-all seen in stocks.

Statistical market-performance measures remained mixed for a second consecutive session on Friday. The market measures turned mixed Thursday after having been higher across the board for the two previous sessions.

But they were up across the board versus their week-earlier levels for a third straight week.

NRG $1 billion drive-by

Primary market news volume remained vigorous on Friday, as two issuers priced single-tranche, dollar-denominated issues, raising a combined total of $1.65 billion.

NRG Energy priced a $1 billion issue of 10-year senior notes (B1/BB-) at par to yield 6¼% in a quick-to-market transaction.

The yield printed on top of yield talk.

Citigroup, BofA Merrill Lynch, Credit Suisse, J.P. Morgan, Mitsubishi, SMBC and RBS were the joint bookrunners for the debt refinancing.

EnQuest at the wide end

EnQuest priced an upsized $650 million issue of eight-year senior notes (B3/B) at par to yield 7%.

The deal was increased from $500 million.

The yield printed at the wide end of the 6¾% to 7% yield talk, and was conspicuous for having done so, according to a trader from a high-yield mutual fund.

"They obviously had a big enough book to upsize the deal," the source commented.

"But everything we saw this week came an 1/8 to 3/8 tighter than talk, so this one is an outlier, even considering the big upsize."

J.P. Morgan, Barclays, BNP, BofA Merrill Lynch, Credit Suisse and Goldman Sachs were the joint bookrunners for the general corporate purposes deal.

The London-based petroleum exploration and production company plans to use the proceeds for general corporate purposes.

Wind plans €3.75 billion

Looking to the week ahead, Wind Acquisition Finance SA began an international roadshow on Friday in New York for a €3.75 billion equivalent dual-tranche offering of seven-year notes.

The tranches are expected to be sized at €1.85 billion and $2.6 billion.

The deal is expected to price during the middle part of the week ahead.

Joint physical bookrunner Deutsche Bank will bill and deliver. Credit Suisse is also a joint physical bookrunner. BNP Paribas, Credit Agricole CIB and Banca IMI are joint global coordinators. Barclays, ING, SG CIB and UniCredit are joint lead bookrunners. Morgan Stanley and Natixis are joint bookrunners.

The Rome-based telecommunications company plans to use the proceeds to refinance its PIK notes maturing in 2017.

Atrium starts marketing Monday

Atrium Windows and Doors, Inc. plans to start a roadshow Monday in New Jersey for a $300 million offering of five-year senior secured notes.

The deal is set to price late in the week ahead.

Barclays and Deutsche Bank are the physical bookrunners for the debt refinancing deal.

In addition, the dollar-denominated calendar for the week ahead contains Signode Industrial Group's $750 million offering of eight-year senior notes (Caa1/CCC+) via Goldman Sachs, J.P. Morgan, Barclays, BofA Merrill Lynch, Citigroup and Credit Suisse.

The whisper is 6¾% to 7%, according to a buyside source who expects the deal to price on Monday.

And McDermott International Inc. will roadshow $500 million of seven-year senior secured second-lien notes (B1/BB) via Goldman Sachs in a deal expected to price before the end of the week.

Early guidance has the deal coming with a yield in the high 8% to 9% area context, a market source said.

Day's deals trade up

When the new NRG Energy 6¼% notes were freed for aftermarket dealings, a trader saw that paper trading at bid levels between par and 1001/2, up a little from the par level at which the same-session deal came to market.

A second trader quoted the power generation company's megadeal at 100¼ bid, while a third pegged the bonds at 100 3/8 bid, 100 7/8 offered.

A trader saw EnQuest's 7% notes at 101 3/8 bid, 101 5/8 offered - at least that's where the bonds were around 2:30 p.m. ET. "There's been nothing since then," he declared during an afternoon interview.

A market source at another desk saw the bonds firm to 1011/2, bid, 101 7/8 offered.

The bonds had priced at par earlier in the day.

Tullow trades busily

Among recently priced issues, a market source said that Tullow Oil's 6¼% notes due 2022 were among the most actively traded issues in Junkbondland on Friday. He said that over $19 million of those notes changed hands, with the bonds going home at 100½ bid, up some 3/8 point on the day.

The London-based oil and gas exploration and production company had priced $650 million of those notes on Thursday as a regularly scheduled forward calendar offering, bringing them to market at par after the deal had been upsized from an originally announced $500 million.

The bonds had finished around 100 1/8 bid in initial aftermarket activity after their pricing.

Among Thursday's other issues, a trader saw Beazer Homes USA, Inc.'s 5¾% notes due 2019 "right around par," while a second saw two-sided markets at par bid, 100 3/8 offered, which he called down 1/8 point on the day.

The Atlanta-based homebuilder's quick-to-market $325 million offering had priced at par after upsizing from $300 million originally, and had firmed slightly above its issue level when it moved into the secondary realm.

Michael Baker Holdings LLC's 8 7/8%/9 5/8% senior PIK toggle notes due 2019 gained ¼ point, a trader said, to go home at 101¼ bid, 102 offered.

The Moon Township, Pa.-based provider of high-end engineering, development, intelligence and technology solutions, along with its Michael Baker Finance Corp. funding subsidiary, had priced $150 million of those notes at 99 to yield 9.127% in a scheduled forward calendar offering on Thursday after the issue was upsized from $125 million originally.

The bonds had firmed to about 101 bid, 102 offered when they began trading around after pricing.

Traders meantime saw no real activity in Thursday's other deal - New York-based software provider Infor, Inc.'s quickly-shopped $750 million issue of seven-year senior contingent cash-pay notes due 2021. Those notes - brought to market via the company's Infor Software Parent, LLC and Infor Software Parent Inc. entities - had priced at par late in the session but saw no aftermarket activity.

Little jobless numbers impact

A trader said that while the equity markets slid badly after the Labor Department reported that 192,000 new jobs were created in March - somewhat below Wall Street's approximately 200,000-jobs consensus - and the nominal unemployment rate was unchanged at 6.7% it only had a limited impact on the junk market. "No one was running for the exits," he said.

He was also of the opinion that "the jobs numbers was not really responsible for what happened in the equity market, suggesting instead that "some kind of programmed trading" may have kicked in to first "annihilate" the Nasdaq and then bring the S&P 500 and the Dow Jones indexes down sharply as well.

A second trader opined that "stocks really grot crushed - but our market was not much lower, estimating that junk credits were down by around a generic ¼ point.

"We were a little heavy today," he said.

With stocks "having touched their highs" recently and now getting crushed, "I think you're going to see a little bit of a correction here."

He said that would likely translate to "a little bit of a softer tone [in the junk market] into next week. We'll see what happens.

"My guess is that our market probably follows through a little bit. I think the calendar is building a little bit and that's going to keep guys on the sidelines in terms of buying secondary stuff.

"The drift is probably lower - all other things being equal," he concluded.

Indicators mixed on day, up on week

Statistical junk performance indicators were mixed for a second straight session on Friday; they had turned mixed on Thursday, after having been higher over the two previous sessions.

However, they were up across the board compared with their levels the previous Friday for a third consecutive week.

The Markit Series 22 CDX North American High Yield Index dropped by ¼ point on Friday to end at 107 7/16 bid, 107 9/16 offered, after having been unchanged on Thursday. Before that, it had risen over the four prior sessions.

But the index was up from the 107 3/16 bid, 107¼ offered level at which it had closed to end the previous week on Friday, March 28.

The KDP High Yield Daily Index rose by 11 basis points Friday to close at 75.05, after having been unchanged on Thursday following two straight advances.

Its yield declined by 2 bps to 5.21%, after having widened out by 2 bps on Thursday.

Those levels compared favorably with the 74.91 index reading and 5.24% yield seen the previous Friday.

And the widely followed Merrill Lynch High Yield Master II Index posted its sixth straight advance, as it moved up 0.107%, on top of the 0.035% gain seen on Thursday.

The latest improvement lifted its year-to-date return to 3.238%, a sixth straight new peak level for the year so far, up from 3.127% on Thursday, the former peak level for 2014.

The index showed a gain for the week of 0.265%, its third straight weekly rise. It had risen by 0.212% the previous week, to lift the year-to-date return to 2.893%.

Its spread to worst meanwhile widened a little to 386 bps, versus Thursday's 383 bps over comparable Treasuries, its third straight new tight level for the year.

© 2015 Prospect News.
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