Jones deal gets done, moves up from discount issue price; most issues better; Sprint, energy names gain

Paul Deckelman and Paul A. Harris

New York, Feb. 12 – The high-yield primary arena saw just a single new deal get done on Monday – oil and natural gas exploration and production company Jones Energy Holdings LLC’s $450 million of five-year secured notes, a scheduled forward calendar deal held over from late last week amid some changes in the offering documents and the price talk and as the issuer and investors waited for some of last week’s financial market volatility to dissipate.

When the transaction finally got done, the notes priced at a substantial discount to par – and traders said the new notes firmed solidly when they hit the aftermarket, although they did not initially report any kind of large volume.

They also said that volume remained subdued in the new deals that came Friday from Apex Tool Group, LLC and from Flexi-Van Leasing, Inc.

Elsewhere, market participants saw a mostly better tone to the market, with more names up than done, helped by a second day of decidedly stronger equities, following the major losses last week.

Oil and natural gas credits such as EP Energy Corp., Denbury Resources, Inc. and Whiting Petroleum Corp. were better in busy dealings.

And Sprint Corp.’s paper was also seen improved.

Statistical market performance measures turned higher across the board on Monday after having been mixed on Friday and lower all around on Thursday. It was the indicators’ first overall stronger session since Jan. 25.

Jones Energy finishes deal

In the Monday primary market Jones Energy Holdings, LLC and Jones Energy Finance Corp. priced a $450 million issue of 9¼% five-year senior secured first-lien notes (B2//B) at 97.526 to yield 9 7/8%.

The yield printed in the middle of the 9¾% to 10% yield talk. The reoffer price came cheap to discount talk of approximately two points. That final talk was revised from earlier official talk specifying a 9½% coupon at a discount of approximately two points. With revised price talk there were also revisions to the offering documents. Those revisions primarily bear upon collateral.

It was a tough deal in a tough market, sources said. However, concessions from the issuer on pricing as well as the covenant package ended up more than filling the order books on what ended up being a “clubby” deal, sources said.

The new Jones Energy 9¼% notes due 2023, which came at 97.526, were 99¾ bid, par offered at the Monday close, traders said.

Credit Suisse was the bookrunner.

Jones cleared the active forward calendar, heading into Tuesday, with another earnings blackout looming, sources said.

Notwithstanding that blackout, as well as rising Treasury yields and general capital markets volatility, the new issue market is expected to remain open and active, sources say.

Big Friday outflow from ETFs

High-yield ETFs sustained daily cash outflows of $1.02 billion on Friday, according to a bond trader who characterized it as one of the biggest daily outflows on record.

The junk ETFs were aggressive sellers on Friday, sources said.

Actively managed high-yield funds were also negative on Friday, sustaining $370 million of outflows on the day, the trader said.

Jones notes jump

In the secondary realm, traders saw the new Jones Energy 9¼% senior secured first-lien notes due 2023 having moved up smartly after pricing at a deeply discounted 97.526 – although there were no initial reports of any kind of substantial trading volume in the Austin, Texas-based E&P operator’s new issue.

One trader pegged the bonds in a 99 1/8-to-99 5/8 bid range, while a second saw the notes moving around between 99¼ and 99½.

At another desk, a market source saw the new deal get as good as 99½-to-99¾ offered.

Friday deals little traded

A trader said that Friday’s new issue were little traded on Monday.

He quoted Apex Tool Group’s 9% notes due 2023 at around 99 7/8 bid, but said that the issue “didn’t really trade.”

A second trader located the notes in a par-to-100 3/8 bid range.

Apex, a Sparks, Md.-based producer of power and hand tools, had priced its regularly scheduled $325 million notes offering at par on Friday; the bonds were initially seen in a 100¼-to-100½ bid range, though in light trading.

Meantime, the first trader said that he “didn’t really see” much activity in the new Flexi-Van Leasing 10% second-lien senior secured notes due 2023 on Monday.

The Kenilworth, N.J.-based provider of truck trailer chassis and other equipment for the intermodal cargo shipping industry had priced as scheduled $300 million offering of those notes on Friday at a deeply discounted 94.417 to yield 11½% – traders said that the new paper moved up to around a 98¾-to-99 bid context in initial aftermarket dealings Friday, with around $16 million having changed hands.

Energy issues mostly better

Away from the new or recently priced offerings, market sources said Monday that energy issues were better, in line with an overall rise in most junk credits.

A trader noted that Los Angeles-based sector benchmark issue California Resources Corp.’s 8% second-lien senior secured notes due 2022 “was moving points intra-day last week,” amid the junk market’s volatility.

On Monday, though, he said that “it was under wraps a little bit.”

He saw the 8s “up almost 1½ points to 79 5/8 – but not on huge volume.”

Houston-based oil and gas name EP Energy’s several issues were near the top of the day’s Most Actives list, with its 8% notes due 2025 seen ¼ point better, at 71¾ bid, with around $18 million traded.

The company’s 9 3/8% notes due 2024 were “marginally better,” a market source said, at just under 76½ bid, though on volume of more than $16 million.

Plano, Texas-based oiler Denbury Resources’ 9% notes due 2021 improved by 1 full point, to 100½ bid, a trader said, with around $12 million of turnover.

And Denver-based Whiting Petroleum’s 6 5/8% notes due 2026 did even better than that, moving up by a deuce on the day to 98½ bid, with over $11 million traded.

The sector was likely helped by the psychological relief generated by an upturn in crude oil prices – however small – its first such improvement after six consecutive losses.

The benchmark domestic crude grade, West Texas Intermediate for March delivery, edged up by 9 cents per barrel in New York Mercantile Exchange dealings on Monday, settling in at $59.29, in contrast with its $1.95 per barrel plunge on Friday.

Sprint runs up

Elsewhere, a trader said that “the Sprint structure was up ½ point,” noting that “that name had been kind of beat up last week, pretty much with everything else, but the entire structure traded pretty well today.”

The Overland, Park, Kans.-based wireless service provider’s 6% notes due 2022 were seen 65/8 point better on the day, at just under 99½ bid, with over $16 million having traded.

A dull, but better, day

Overall, a trader said that Monday was “kind of a little bit of a lackluster day.”

He said “things moved this morning a little bit, up, trending with equities,” which went on to rise solidly on the session for a second straight day following last week’s big losses – the Dow Jones Industrials jumped more than 400 points, or some 1.70% on the session.

But just as downside moves in junk had been mostly orderly last week while stocks were swooning left and right, he said that Monday’s high yield activity “was still kind of fairly orderly and muted as far as any strong moves to the upside.”

He allowed that “I think everybody’s still a little nervous here.”

Indicators turn higher

Statistical market performance measures turned higher across the board on Monday after having been mixed on Friday and lower all around on Thursday. It was the indicators’ first overall stronger session since Jan. 25.

The KDP High Yield Daily Index gained 6 basis points on Monday to end at 70.36 – its first advance after 11 consecutive losses, including Friday’s 54 bps freefall, the biggest of several recent double-digit declines.

Its yield came in by 1 bp to 5.77%, after having ballooned out by 17 bps on Friday, 10th straight widening out.

The Markit CDX Series 29 index posted its second successive gain, firming by almost 9/16 point on Monday to close at 106 17/32 bid, 106 9/16 offered. It had also edged up by about 1/32 point on Friday, after having fallen by 7/8 point on Thursday, its second straight downturn. It had dropped by almost 13/32 point Wednesday.

The Merrill Lynch High Yield Index improved by 0.328% on Monday, its first gain after two straight losses, including downturns of 0.672% on Friday and 0.504% on Thursday.

The gain cut the index’s year-to-date cumulative loss to 0.923% from 1.248% loss on Friday, its second straight new widest deficit level for the year.

Its peak cumulative gain for the year so far was 0.936%, established on Jan. 26.

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