Michael Baker prices to cap $4.7 billion week; Canyon pulls deal; Penney pops on numbers

By Paul Deckelman and Paul A. Harris

New York, Nov. 10 – The high-yield market closed out the week on a quiet note on Friday as just one relatively smallish dollar-denominated deal was heard by syndicate sources to have priced – engineering firm Michael Baker International LLC’s $228 million secured notes offering.

That deal brought the week’s tally of new dollar-denominated and fully junk-rated deals up to $4.68 billion, off somewhat from the $6 billion-plus new deal pace seen over the past two weeks in Junkbondland.

But year-to-date issuance remains well above last year’s pace by a healthy double-digit percentage margin, according to data compiled by Prospect News.

Traders later saw the Michael Baker forward calendar deal trading right around or slightly above its modestly discounted issue price.

The traders also saw decent volume levels on some of Thursday’s new issues, including Titan International Inc., Platform Specialty Products Corp. and Precision Drilling Corp.

Syndicate sources meantime said that a further deal had been pulled from the forward calendar in response to continued weakening market conditions, this one from coal mining operator Canyon Resource Holdings LLC. Power generating company NRG Energy Inc. had pulled its planned offering late on Thursday.

Away from the new deals traders saw another mostly down market.

But several names recently under pressure were seen better on Friday, including J.C. Penny Co. Inc. The retailer’s lately beleaguered notes got a boost when quarterly numbers showed a smaller than expected loss and an unexpected same-store sales gain.

Sprint Corp. notes, recently in retreat after the failure of the wireless provider s merger talks with rival T-Mobile (US) Inc., were also seen rebounding on the day.

Statistical market performance measures were down for a fourth consecutive session on Friday.

The indicators were also lower across the board versus where they had finished last Friday, Nov. 3, when they had been mixed versus the week before.

Michael Baker prices secureds

In Friday’s primary market, Michael Baker International priced $227.5 million of 8¾% 5.25-year senior secured notes (Caa1/CCC+) at 99.4488 to yield 8 7/8%.

The yield printed at the wide end of yield talk that was set in the 8¾% area.

Jefferies was the lead left bookrunner for the debt refinancing deal. SunTrust and Citizens were the joint bookrunners.

Pulled deals

The last two sessions of the past week each saw the postponement of a deal.

On Thursday NRG Energy abandoned plans to sell $870 million of 10.25-year senior notes.

The company said in a news release that the action was in response to “broader market conditions.”

There was a deal at 6%, a trader who is active in the energy sector said on Friday morning. But he added that NRG intended to get it done at 5¾% and declined to meet the market’s price.

“In this market it’s a bold move,” said the trader, recounting the deal’s size and tenor, and noting that the difference was 25 basis points.

The company, which was in the market to fund a tender offer for its 6 5/8% senior notes due 2023, which it also abandoned on Thursday, might do better by waiting, the trader said, but added that a lower rate at a later time is by no means a certain outcome.

On Friday Canyon Resource Holdings withdrew its $375 million offering of five-year senior secured first-lien notes (B3/B), citing market conditions.

The notes were talked to yield 10¾% to 11%.

Noting the double-digit price talk on the Canyon Resource offer, the energy-focused trader remarked that the market for frothy deals has shrunk.

The week ahead

The active dollar-denominated calendar is marked up with offers set to clear in the final full week ahead of the Thanksgiving holiday weekend, which will get under way following an early close on Wednesday, Nov. 22.

SRC Energy Inc. plans to price a $550 million offering of eight-year senior notes (B3/B+) during the week ahead.

The deal is being whispered at 6% to 6¼%.

Denmark-based oilfield services provider Welltec A/S is roadshowing $340 million of five-year senior secured notes (expected ratings B2/B-) with initial price talk of 8¾% to 9%.

In addition, GNC Holdings, Inc. plans to sell $500 million of five-year senior secured notes in the week ahead.

Naviera Armas prices floater

In Friday’s euro-denominated new issue market, Spanish ferry operator Naviera Armas, SA priced a €300 million issue of Euribor plus 425 basis points seven-year floating-rate senior secured notes at par via Morgan Stanley.

Proceeds will be used to fund the acquisition of Trasmediterranea, SA and to refinance part of existing debt of Trasmediterranea.

Verisure roadshow

The euro market features at least one supersized offer in the week ahead.

Sweden-based Verisure began a roadshow on Friday in London’s West End for a €1,145,000,000 equivalent two-part offering of six-year senior notes (expected ratings Caa1/CCC+).

The deal is coming in the form of euro-denominated fixed-rate notes and Swedish kroner-denominated floating-rate notes. The notes in both tranches are being offered with two years of call protection.

Joint global coordinator and physical bookrunner Goldman Sachs will bill and deliver. Nordea is also a joint global coordinator and a physical bookrunner for the krona-denominated notes only.

BofA Merrill Lynch, JPMorgan, Morgan Stanley and Nomura are joint bookrunners.

And Volvo plans to being meeting with bond investors on Tuesday ahead of a possible benchmark euro-denominated Regulation S offering of fixed-rate notes.

Citigroup, Deutsche Bank, ING and JP Morgan are the arrangers.

Mixed Thursday flows

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

High-yield ETFs sustained $376 million of outflows on the day.

However actively managed funds saw $140 million of inflows on Thursday.

Bank loan funds were negative on the day, sustaining $116 million of outflows on Thursday. Of that amount $18 million flowed from bank loan ETFs, the trader said.

Primary issuance eases

Friday’s sole dollar-denominated junk deal, from Michael Baker International, brought the amount of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers up to $4.68 billion in 10 tranches, according data compiled by Prospect News.

That was down from the pace seen the previous week, ended Nov. 3, when $6.7 billion had priced in 12 tranches.

It was down as well from the $6.01 billion which priced in nine tranches the week before, ended Oct. 27.

The week’s new deals raised year-to-date issuance for 2017 to $241.56 billion in 446 tranches, running 21.6% ahead of the $198.54 billion which had priced in 307 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Michael Baker near issue

In the secondary market, traders said that the new Michael Baker 8¾% senior secured notes due March 2023 traded slightly above their 99.4488 issue price.

One trader saw the Pittsburgh-based engineering company’s new deal in a 99½ to 99¾ bid context.

A second saw that forward calendar deal finishing the day around 99½ bid.

One trader said that he had “not seen much volume” in the new credit.

Thursday deals seen active

Traders saw the new issues which had come to market on Thursday among Friday’s busier bonds.

The new Platform Specialty Products 5 7/8% notes due 2025 were moving around in a 99 3/8 to 100 3/8 bid range, one market source said.

Another trader saw them ending at 100 3/8 bid, with over $16 million of those notes changing hands by the close.

The West Palm Beach, Fla.-based specialty chemicals manufacturer had priced $550 million of the notes at 99.212 to yield 6% in a regularly scheduled offering.

Titan International’s 6½% senior secured notes due 2023 were seen going out at par, which a trader said was down ¾ point from the aftermarket highs those bonds had gone home at Thursday.

Volume was more than $15 million.

The Quincy, Ill.-based maker of wheels, tires and undercarriage assemblies for commercial vehicles and heavy equipment priced its $400 million scheduled forward calendar offering at par.

Even the standout performer among the Thursday deals – Precision Drilling’s 7 1/8% notes due January 2026 – retreated from its heft initial gains on Friday.

A trader located the Calgary, Alta.-based oilfield services provider’s new deal at 101¼ bid, calling that down 5/8 point on the day, on turnover of around $13 million.

The company had priced a scheduled $400 million offering of those 8.25-year notes at par and the new bonds had firmed to better than 101½ bid when they were freed for secondary trading later Thursday.

Greystar Real Estate Partners, LLC’s 5¾% senior secured notes due 2025 were finishing Friday in a 101 to 101½ bid context, a trader said, estimating volume in the issue at about $9 million.

The Plano, Texas-based owner, operator and developer of luxury apartment communities had priced its regularly scheduled $500 million deal at par on Thursday after upsizing that issue from an originally shopped $400 million.

Windstream struggles again

Among other recently priced names, a trader saw continued deterioration in Windstream Holdings’ 8 5/8% first-lien notes due 2025, quoting the issue falling below the 95 bid level on Friday into a 94¾ to 95½ bid range, with around $10 million of volume.

Windstream, a Little Rock, Ark.-based provider of wireline and broadband telecommunications service, priced $400 million of those notes at 99 on Monday, yielding 8.802%, after the deal was upsized from an originally announced $250 million.

The offering was structured as an add-on to a new series of 8 5/8% secured notes that Windstream plans to give to holders of some of its existing debt in an ongoing exchange offer.

Traders said that the issue struggled “right out of the chute” after pricing on Monday, falling below its issue price and then plunging more than 2 points on Tuesday in active trading down to the mid-96 level and still continuing to lose ground after that.

A trader meantime said that Windstream’s existing 6 3/8% notes due 2023 were off by ½ point on Friday, finishing at 68½ bid.

Energy names off

Away from deals related to the new-deal market, traders said that energy names were generally lower on Friday, in line with a renewed fall in world crude oil prices.

Los Angeles-based oil and natural gas exploration and production company California Resources Corp.’s bellwether 8% notes due 2022 eased by 1/8 point to 73 bid, with around $14 million having traded.

Another trader, though, saw them about unchanged in a 72¾ to 73¾ bid range.

Houston-based based EP Energy Corp.’s 8% notes due 2025 slid by 7/8 point to end at 70½ bid on volume of more than $11 million.

Also in the energy patch, Calgary, Alta.-based MEG Energy Corp.’s 7% notes due 2024 were seen by a market source down 1½ points on the day at 90¼ bid.

The issues softened as world crude oil prices were in retreat on Friday after having risen on Thursday for the first time after two consecutive losses before that.

West Texas Intermediate crude for December delivery, the benchmark U.S. crude oil grade, lost 43 cents per barrel in Friday trading on the New York Mercantile Exchange, settling in at $56.74.

The key international grade, North Sea Brent for January delivery, ended down 41 cents per barrel in London futures trading Friday, at $63.52 bid.

Penney paper pops after data

Some recently challenged names were seen on the upside on Friday.

A trader said that J.C. Penney “had some decent numbers out” and that pushed the Plano, Texas-based department store operator’s recently underperforming bonds up in Friday dealings.

He saw Penney’s 5.65% notes due 2020 jump 2¼ points on the day to end at 89¼ bid, on round-lot volume of around $6 million, plus numerous smaller odd-lot transactions as well.

Its 5 7/8% notes due 2023 were ¾ point better on the day, ending at 92¼ bid, with around $4 million traded.

The company’s long bond – its 7 5/8% notes due 2097 – gained more than a deuce on the day to end at 59¼ bid, “on a couple of trades,” the trader said.

Penney reported third-quarter results which included an unexpected 1.7% rise in same-store sales, that is, stores which have been open for at least a year, a key retailing industry performance metric. Heretofore, Penny had reported same-store sales declines over a number of quarters.

The company also said that its net loss widened to $128 million, or 41 cents per share, from year-ago red ink of $62 million, or 22 cents per share – but the third quarter loss was less than what analysts had been expecting.

J.C. Penney’s New York Stock Exchange-traded shares rose in tandem with its bonds, jumping by 42 cents, or 15% on the day, to close at $3.17.

Sprint runs up

Elsewhere, Sprint paper – which had retreated earlier in the week after the Overland Park, Kan.-based wireless operator announced that its lengthy recent talks with rival cellphone company T-Mobile had failed to result in any kind of strategic transaction between the two – was seen finishing the day better.

Its 6 7/8% notes due 2028 closed at a par bid, up ¼ point, with over $17 million traded.

Sprint’s 7 7/8% notes due 2023 did even better, up nearly ½ point on the day, ending just below the 107 bid level as more than $10 million of that issue changed hands.

Indicators off on day, week

Statistical market performance measures were down for a fourth consecutive session on Friday. They had turned lower all around on Tuesday and then stayed that way for the rest of the week after being mixed last Friday and again on Monday.

The indicators were also lower across the board versus where they had finished last Friday, Nov. 3, when they had been mixed versus the week before. It was the second lower week in the last three weeks.

The KDP High Yield Daily Index stumbled to its fourth consecutive loss on Friday, dropping by 8 basis points to close at 71.74. That loss followed a 25 bps nosedive on Thursday, when it had closed below the 72 mark for the first time since ending at 71.97 on Aug. 30. That big fall came on top of Wednesday’s 16 bps plunge and a 4 bps easing on Tuesday.

Its yield widened out for a fifth consecutive session, rising by 2 bps to 5.34%, after ballooning out by 9 bps on Thursday and moving up by 6 bps on Wednesday.

Those levels compare unfavorably to the 72.25 index reading and 5.13% yield seen last Friday.

The Markit CDX Series 29 High Yield Index saw its fourth loss in a row on Friday, retreating by around 3/32 point to finish at 107 13/32 bid, 107 7/16 offered, after having lost 5/16 point on Thursday, 3/16 point on Wednesday and nearly 9/32 point on Tuesday.

For the week, it was down from 108 1/8 bid, 108 5/32 offered last Friday.

And the Merrill Lynch North American High Yield Master II Index saw a seventh straight loss on Friday, easing by 0.005%. On Thursday, it had dropped by 0.376%, and by 0.338% on Wednesday.

The latest loss dropped the index’s year-to date return to 6.584% from Thursday’s 6.59% close. This week, the index was closing below the psychologically significant 7% mark for the first time since Sept. 28, when it finished at 6.954%.

The year-to-date return also remains well down from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

For the week, the index lost 0.798%, its first weekly loss after last week’s 0.062% gain, which had left the year-to-date return at 7.442% last Friday.

With 45 weeks in the books so far for 2017, the index has shown gains in 35 of those weeks and losses in the remaining 10 weeks.

© 2015 Prospect News.
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