Morning Commentary: Primary quiet, New American Energy bonds jump

By Paul Deckelman

New York, Nov. 20 – The high-yield primary market was quiet on Friday morning, following the flurry of mostly opportunistically timed drive-by offerings which had priced on Thursday, totaling $2.98 billion in six tranches.

An investor told Prospect News that “I have not seen any new deals announced today and do not expect any.”

A second market source characterized things at mid-morning in New York as “pretty quiet so far.”

American Energy bonds up

Several market sources noted strong levels in the new American Energy – Permian Basin LLC 13% first-lien senior secured notes due 2020, which priced at par late in the day on Thursday.

One heard the bonds quoted at 103 bid, while a second saw them straddling that level in a 102¾ to 103¼ context.

Another market source said there had been a couple of large trades late Thursday around 102¼ bid; when the bonds opened Friday, they got as good as 103 1/16 before coming off those highs to settle back closer to the 102 to 102½ area, on volume of more than $14 million.

The Oklahoma City-based oil and natural gas exploration and production company’s offering priced at par after being downsized to $530 million from an originally planned $560 million.

The deal had first surfaced fully a month ago in mid-October, when it was initially talked at a yield of 9%. But it did not price after the conclusion of its roadshow, instead just hanging around in forward-calendar limbo for literally weeks.

During the intervening time – which saw continued weakness in oil and gas prices, knocking energy credits ever-lower – investors pushed for, and ultimately got, considerably higher yield to compensate them for their risk.

Thursday deals doing well

Among the other new paper that priced on Thursday, a trader saw the new LifePoint Health Inc. 5 7/8% notes due 2023 actively traded on Friday morning, picking up where it had left off on Thursday, when the Brentwood, Tenn.-based health care services provider’s quickly shopped $500 million issue had been the busiest credit in Junkbondland, with over $80 million having changed hands by the close.

On Friday morning, nearly $20 million of the new notes were seen to have traded by mid-morning, moving up to around 100 3/8 bid, up ¼ point from Thursday’s finish.

LifePoint’s deal priced at par after having been upsized from an originally announced $300 million.

A trader saw Constellation Brands, Inc.’s 4¾% notes due 2025 on Friday morning in a 101 to 101½ bid context.

Another market source saw the bonds get as good as 101 5/8 bid, before coming down from that peak to around a 101 3/8 bid level, with over $20 million traded.

On Thursday, the Victor, N.Y.-based wine, beer and spirits producer, importer and distributor had priced $400 million of the notes at par in a quick-to-market transaction. They had moved up to close around 101¼ bid, on volume of over $38 million.

Equinix softens up

However, the traders saw Equinix Inc.’s new 5 7/8% notes due 2025 having come down from their Thursday closing level of around 101 1/8 bid. The Redwood City, Calif.-based interconnection and data center company priced $1.1 billion of the notes at par in a drive-by offering that was upsized from $1 billion, and more than $68 million of the new notes had initially traded in Thursday’s aftermarket.

On Friday morning, brisk activity continued with over $19 million trading by mid-morning – but at somewhat lower levels.

One trader quoted the notes having come down to 100 5/8 bid, while a second located them at 100¾ bid, down 3/8 point from Thursday’s close.

Energy issues show bounce

In the secondary market, energy names – hard hit during Thursday’s trading in response to continued sagging crude oil prices, now around $40 per barrel – were trying to come back on Friday morning.

Chesapeake Energy Corp.’s 6 5/8% notes due 2020 were quoted up 1 point at 50¼ bid.

The Oklahoma City-based oil and gas E&P company’s issue had fallen nearly 4 points on Thursday to end around the 49 bid level, with over $40 million having traded.

Houston-based Linn Energy LLC’s 7¾% notes due 2021 gained 1 point to 21 bid.

The KDP High Yield Daily index stood at 65.81 at mid-morning on Friday, off from Thursday’s close at 65.83. Its yield crept up 1 basis point to 6.90% from 6.89% late Thursday.

© 2015 Prospect News.
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