Gaming & Leisure prices; energy sector gains continue; Hertz drops; ABC, GFL Environmental improve

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 7 – The primary market saw a $1 billion dollar deal price on Monday in what was an otherwise quiet session.

Gaming & Leisure Properties, Inc. priced $1 billion of split-rated non-callable senior notes (Ba1/BBB-) in two tranches in a drive-by.

There is currently only one deal on the active forward calendar with Nemaska Lithium, Inc. expected to price a $300 million to $350 million offering on Friday.

New issuance in Junkbondland is off to a slow start in 2018 with year-to-date junk-rated dollar-denominated issuance lagging 2017 by 20%.

The European primary market was also quiet on Monday with the first Monday of May a bank holiday in the United Kingdom, sources said.

Meanwhile, it was a “ho-hum” day in the secondary space on Monday, a market source said, with trading volume relatively light as last week’s deals fell out of focus.

ABC Supply Co., Inc.’s 5 7/8% senior notes due 2026 (B3/B+) were the most actively traded of last week’s deals with $18 million bonds in play by late afternoon.

The notes improved on Monday and were trading above their issue price after struggling out of the gate.

While not active, GFL Environmental Inc.’s new 7% notes due 2026 (Caa1/B-) were up a little more than 1 point on Monday after a volatile session on Friday where the notes, which priced at par, traded as low as 98.5.

The gains of the energy sector continued on Monday with California Resources Corp.’s 8% senior notes due 2022 up another 2 points and EP Energy’s junk bonds up 1 to 1.5 points in active trading.

Hertz Corp.’s 7 5/8% senior notes due 2022 (B1/BB-) dropped 1 point soon after reporting earnings after the market close Monday.

Gaming & Leisure’s drive-by

Gaming & Leisure priced $1 billion of split-rated non-callable senior notes (Ba1/BBB-) in two tranches in a drive-by on Monday.

The debt refinancing deal featured $500 million of seven-year notes which priced at par to yield 5¼%. The yield printed at the tight end of both official talk and initial talk in the 5 3/8% area.

In addition, Gaming & Leisure priced $500 million of 10-year notes at par to yield 5¾%. The yield printed in the middle of both price talk and initial guidance in the 5¾% area.

Wells Fargo was the left bookrunner. Citizens, BofA Merrill Lynch, Fifth Third, SunTrust, JP Morgan, Credit Agricole and Barclays were the joint bookrunners.

The active calendar

At Monday's close, just one deal remained on the active forward calendar.

Nemaska Lithium is in the market with an offering of five-year senior secured notes expected to be sized from $300 million to $350 million.

The capital expenditures deal is expected to price on Friday.

Pareto Securities and Clarkson Platou Securities are managing the sale.

2018 issuance down 20%

The year 2018 is off to a comparatively slow start, sources say.

The numbers bear them out.

With year-to-date junk-rated, dollar-denominated issuance at $84.88 billion at last Friday's close, 2018 lags 2017's $105.84 billion, during the same interval, by 20%, according to Prospect News data.

As might be expected, deal volume is also significantly lower year-over-year. The 158 tranches that were priced by last Friday’s close is 18% below the 193 deals that were priced by the end of May 4, 2017.

The primary market will remain active and could even see a few big bursts of daily issuance in the run-up to Memorial Day, three weeks hence, sources say.

However, the expected weekly pace is in a comparatively modest $3 billion to $5 billion range, a debt capital markets banker said.

Last week’s deals

Trading activity surrounding last week’s deals was slow on Monday with trading volume in the secondary space relatively light across the board, sources said.

ABC Supply’s 5 7/8% senior notes due 2026 were the most actively traded of last week’s deals with $18 million bonds in play by late afternoon.

The notes improved on Monday. They were quoted at 99½ bid, par offered early in the session. Most trades were between par and par ¼, a market source said.

ABC priced a downsized $600 million issue of the 5 7/8% notes at par on May 1. The notes struggled out of the gate and were trading between 99 3/8 and 99 7/8 for most of last week.

GFL Environmental’s new 7% notes due 2026 were also slightly improved on Monday. The notes were at 99½ bid, par offered early in the session on Monday but few bonds traded, sources said.

The 7% notes were quoted at 99 3/8 bid, 99¾ offered on Friday.

GFL Environmental priced $400 million of the 7% notes at par in a quick-to-market trade on Thursday.

The notes were volatile in high-volume trading on Friday and were seen trading to a low of 98½ and a high of par ¼.

Energy sector gains

The energy sector’s gains in Junkbondland continued on Monday as the barrel price of West Texas intermediate crude oil for June delivery shot past $70.

California Resources 8% senior notes were the major volume movers of the secondary space on Monday with more than $31 million bonds traded by late afternoon.

The notes were up another 2 points after large gains last week, a market source said. They were seen at 90 bid, 90½ offered early Monday.

The notes were at 84½ bid, 85½ offered Thursday morning but jumped following a first-quarter earnings beat Thursday afternoon and a $1 jump in crude oil on Friday.

California Resources reported a loss per share of 18 cents for the first-quarter on Thursday, which beat analyst expectations for a loss per share of 67 cents by a wide margin.

Sources attributed the jump in the 8% notes to both the price of crude oil and the earnings beat.

EP Energy’s 8% senior notes due 2024 were also heavy volume movers on Monday with about $27 million bonds in play. The notes were up about 1 point to trade at 71.

While not as active, EP Energy’s 9 3/8% notes were up 1½ points to trade at 77½.

EP Energy will report its first quarter earnings after the market close Tuesday.

The price of crude oil shot past $70 a barrel on Monday. All eyes are on President Donald Trump’s pending decision on whether to pull out of the nuclear deal with Iran and reimpose economic sanctions, a market source said.

The rally of crude oil is expected to continue if sanctions are placed on Iran with the global oil supply decreasing. The decision is expected by Saturday.

While returns for the energy sector are still negative for the quarter, returns were up 0.92% last week, according to data compiled by Advantage Data.

Hertz earnings miss

Hertz saw its 7 5/8% senior notes due 2022 were down 1 point shortly after reporting first quarter earnings Monday afternoon.

The notes were quoted at par bid, 101 offered, a market source said.

Hertz reported a loss per share of $2.43 for the first quarter, which was almost double the $1.26 loss per share analysts had expected.

Indexes

The KDP High Yield index was again up on Monday after closing Friday with a gain.

The index was up 6 basis points to 70.55 with the yield now 5.83%. The index also closed Friday up 6 basis points after posting losses or remaining flat for most of the previous week.

The Merrill Lynch High Yield index jumped on Monday. The index was up 13.4 basis points, shaving the negative year-to-date return down to 0.188.

The index was also up on Friday with the year-to-date return negative 0.322% at last week’s close.

The CDX High Yield 30 index saw a modest increase on Monday. The index was up 5 bps at 106.823 bid, 106.903 offered early in the afternoon. The index was at 106.713 bid, 106.793 offered on Friday.

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