Primary falls quiet as Equinix shops euro deal, recent deals trade near issue price; Cal Res slides, Intelsat up

Paul Deckelman and Paul A. Harris

New York, Feb. 27 – Things were quiet in the high-yield market on Tuesday, with no new dollar-denominated and fully junk-rated transactions heard to have priced.

One factor helping to quiet the market was the ongoing J.P. Morgan Annual High-Yield And Leveraged Finance Conference going on this week in Florida, with many investment decision-makers focused on that event.

About the only feature on an otherwise dull primaryside was data management services company Equinix Inc. marketing a euro-denominated six-year offering that’s expected to price on Wednesday; the Silicon Valley company’s deal is the latest in a growing series of domestic issuers eschewing the dollar-denominated market in favor of better terms available with euro-denominated paper.

Traders meantime did not see much activity, either volume-wise or in terms of price movements, in recent new issues, which were seen mostly trading around the respective levels at which they had priced.

However, Sprint Corp.’s recent eight-year notes were seen a little higher, a trader said.

Away from the new deals, California Resources Corp.’s energy-sector benchmark issue was seen to have slid more than 2 points, against a backdrop of a sizable downturn in crude prices, the first after several strong upside sessions.

Intelsat SA’s paper firmed smartly after FCC chairman Ajit Pai made comments about changes to the country’s 5G network, seen as a positive for companies like the communications satellite company.

Statistical market performance measures turned mixed on Tuesday, after having been higher all around on Monday. The indicators had also been mixed on Friday, following successive days on the downside last Wednesday and Thursday.

Equinix brings €750 million

In an otherwise quiet primary market Equinix, Inc. was scheduled to shop a €750 million offering of six-year senior notes (expected ratings B1/BB+/BB) on a Tuesday conference call.

The deal is expected to price on Wednesday.

Joint global coordinator and joint bookrunner HSBC will bill and deliver. Barclays and ING are also joint global coordinators and joint active bookrunners.

BofA Merrill Lynch, Citigroup, Goldman Sachs, JP Morgan, MUFG, RBC, TD and Wells Fargo are joint bookrunners.

The Redwood City, Calif.-based provider of data management services plans to use the proceeds for general corporate purposes, which may include capital expenditures and working capital, and for potential acquisitions and strategic transactions.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Monday, according to the trader.

High-yield ETFs saw a healthy $428 million of inflows on the day.

However actively managed funds sustained $27 million of outflows on Monday, the trader said.

Little real activity

In the secondary arena, a trader said that there didn’t seem to be much going on.

He noted that many market participants were in Florida this week for the annual J.P. Morgan High Yield and Leveraged Finance Conference – always a well-attended junk market event.

“The conference has taken a lot of investors off the desk and out of pocket,” he said.

As for Tuesday’s market, he said that there “not really” much going on with recently priced new issues, either in terms of volume or price movements.

“None of those deals have really performed well,” he opined.

He said that for the most part, “it looked like they were all struggling to stay at deal price or below.”

For instance, he noted that the recent Pilgrim’s Pride Corp. two-part issue “was right around the deal price on both.”

The Greeley, Colo.-based poultry processor priced $500 million in add-ons to two of its existing series of notes last Wednesday, after that drive-by offering had been upsized from an originally announced $400 million.

It did a $250 million addition to its $500 million of existing ¾% notes due in March of 2025 that it had sold in 2015, with the tap pricing at 99.25 to yield 5.881%.

And it priced a $250 million add-on to its existing $600 million 5 7/8% notes due in September 2027 that it sold last fall. That addition priced at 97.25 to yield 6.26% – and the trader said “the bonds were still around that area.”

Sprint gains

However, he did see Sprint Corp.’s 7 5/8% notes due 2026 “actually a little bit better,” at 100½ bid on Tuesday, although a second market source called them down 1/8 point from late Monday levels.

The Overland Park, Kan.-based wireless operator had priced $1.5 billion of the notes at par last Tuesday in a quick-to-market offering that was upsized from $1 billion.

Those notes had mostly straddled that par issue price subsequently.

Cal Res in retreat

Away from the new deals, the first trader said that “we saw some good volume and price action today in the CRC [California Resources] 8s, kind of a beta name in the market, when the market starts to move.”

He saw the Los Angeles-based exploration and production company’s 8% second-lien secured notes due 2022 down 2½ points to 79¾ bid going home.

Crude prices meantime tumbled for the first time in three or four sessions, with April-contract West Texas Intermedia plunging by 9 cents a barrel on the NYMEX to end at $63.01, while Brent crude was down around the same amount in London futures dealings, settling at $66.63.

Intelsat active

A trader said that Intelsat’s paper “was pretty active today, up anywhere from 2 to 5 points.”

After reports confirmed that the chairman of the Federal Communications Commission, Ajit Pai, discussed plans to improve the speed of the U.S. 5G network, the Luxembourg-based satellite communications company’s paper traded up in high volume.

It was the second day the company’s notes have climbed, after Monday’s announcement of a $90 million loss for the fourth quarter and a $178.7 million loss for the year.

Pai announced plans to hold an auction for access to radio airwaves in the 24 and 28 gigahertz bands starting in November.

“The FCC head was talking about some gigahertz changes that could be made,” a trader said. “Those changes would be beneficial to Intelsat and other satellite names.”

The Intelsat Jackson SA 5½% notes due 2023 traded up 2¾ points to close at 83¾ bid. The 7¼% notes due 2022 rose more than 3 points to close at about 93¾ bid.

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday, after having been higher all around on Monday. The indicators had also been mixed on Friday, following successive days on the downside last Wednesday and Thursday.

The KDP High Yield Daily Index was up by 3 basis points on Tuesday to end at 70.80, its second straight gain after two consecutive losses before that. On Monday, it had jumped by 10 bps.

Its yield meanwhile came in by 2 bps to close at 5.62%, its second successive narrowing, matching Monday’s 2 bps tightening, which had followed two straight trading days of widening out.

However, the Markit CDX Series 29 High Yield Index suffered its first loss after 2 successive gains, retreating by ¼ point Tuesday to end at 107 bid, 107 1/32 offered. On Monday, it had pushed upwards by more than 11/32 point.

And the Merrill Lynch High Yield Index was also on the downside, easing by 0.036%, versus Monday’s 0.347% gain.

Tuesday’s setback widened the index’s year-to-date deficit to 0.272% from recent low 0.236% on Monday.

Those levels, though, remained well in from the 1.248% cumulative loss posted on Feb. 9, 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.

James McCandless contributed to this review

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