Esterline prices; energy sector lifted; Cliffs debt declines; funds see $856 million inflow

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., March 26 – Thursday's sole junk deal came from Esterline Corp., which priced €330 million of eight-year senior notes (Ba2/BB+) at par to yield 3 5/8%.

Pricing came at the tight end of yield talk in the 3¾% area.

Joint bookrunner BofA Merrill Lynch will bill and deliver for the debt refinancing deal. Wells Fargo Securities LLC was also a joint bookrunner.

The Friday session could see as many as seven tranches – including dollar-, euro- and sterling-denominated bonds – price before the weekend commences on the East Coast of the United States.

On the secondary side, the high-yield bond market improved even as the broader markets weakened on news that a Saudi Arabia-led coalition launched a bombing campaign against Houthi rebels in Yemen.

Given Yemen’s key role in the region as far as oil goes, oil prices jumped up, which gave the energy space a boost.

But even with the day’s gains, a trader said there “wasn’t a ton of stuff going on.” With the way the market performed Wednesday, he “would have thought our stuff would have been weaker than it was. I don’t know if guys were putting money to work and then just backed off because of the way technicals were looking.”

The trader further noted that there continued to be a focus on new issues.

Away from energy and new issues, Cliffs Natural Resources Inc. paper was coming in following the company’s successful pricing of a first-lien deal on Wednesday.

Busy Friday ahead

News on several expected and possible Friday deals surfaced on Thursday.

Schaeffler Finance BV talked a tranche of dollar-denominated eight-year senior secured notes to yield in the 4 7/8% area.

The tranche is expected to be sized at $500 million to $600 million.

It is part of a €1.5 billion equivalent three-part offering of senior secured notes (Ba2/BB) that also features euro-denominated five-year notes and euro-denominated 10-year notes.

Final sizes remain to be determined, but all three tranches are expected to come in benchmark sizes.

Joint bookrunner BofA Merrill Lynch will bill and deliver for the dollar-denominated notes. Joint bookrunner Deutsche Bank will bill and deliver for the euro-denominated notes.

Barclays, BayernLB, BNP, Citigroup, Commerzbank, HSBC, JPMorgan and UniCredit are also joint bookrunners.

GCI, Inc. talked its $450 million offering of 10-year senior notes (B3/B+) to yield in the 7% area.

Official talk came in on top of initial guidance, a trader said.

SunTrust is the left bookrunner. BofA Merrill Lynch and Credit Agricole are the joint bookrunners.

There are other possible Friday deals; however, there was no official talk available for them at press time on Thursday.

Sunoco LP is marketing $800 million of eight-year notes (Ba3/BB), which have been discussed in a low 6% yield context.

France-based Touax SCA is in the market with €200 million of five-year senior secured notes (B/BB-), which have been whispered at 7¾% to 8%.

And England's AA plc is scheduled to wrap up the roadshow for its £735 million offering of class B secured notes on Friday.

Strong inflows for ETFs

Net cash flows to the dedicated high-yield funds turned positive for the week to Wednesday's close, sources said.

The funds saw $856 million of net inflows, according to a weekly report from Lipper-AMG.

However, apparently only the high-yield ETFs took in cash, according to a buyside source, who added that the ETFs saw $1.05 billion of inflows during the period.

Meanwhile, bank loan funds saw $288 million of outflows for the week to Wednesday.

The high-yield weekly inflows followed two straight weeks of outflows.

In the previous week, to March 18, the dedicated high-yield funds saw $1 billion of outflows, again based on data reported by Lipper-AMG, sources said.

Market indexes, oil rise

High-yield bonds inched up Thursday, bucking the trend of the broader markets.

The KDP High Yield index moved up to 71.2 from 71.18. The yield held steady at 5.38%.

The North American Series 23 High Yield index gained over a tenth of a point to 107.76 bid, 107.88 offered, according to a market source.

Gains in the bond market followed gains in oil prices.

West Texas Intermediate crude rose 2.3% in early trades, moving above the $50.00 mark. At the close, the price increased even more, finishing up $2.09, or 4.25%, at $51.30 per barrel.

Brent crude meantime rose $2.57, or 4.55%, to $59.05.

With those increases, energy names were gaining ground.

SandRidge Energy Inc.’s 7½% notes due 2021 ended up nearly 2 points at 64½.

Linn Energy LLC’s 7¾% notes due 2021 closed up half a point at 81¼.

California Resources Corp.’s 6% notes due 2024 were also up, putting on almost a point to close at 88 3/8.

However, Transocean Ltd.’s debt did not fare as well as some of its sector peers.

The 6.8% notes due 2038 slipped a quarter-point to 72 1/8, while the 3.8% notes due 2022 weakened nearly a point to 73¾.

The 6 3/8% notes due 2021 held steady at 84¼.

New issue focus

Recent new deals continued to be in vogue, a high-yield trader said Thursday.

Consol Energy Inc.’s downsized $500 million of 8% senior notes due 2023 were pegged “right around new issue price” at 98½ to 98 5/8, the trader said.

The deal priced Wednesday at 98.552.

Also from Wednesday, Credit Acceptance Corp.’s $250 million of 7 3/8% notes due 2023 were quoted at 98¾ bid, 99 offered, down from the issue price of 99.266.

From Tuesday business, Whiting Petroleum Corp.’s $750 million of 6¼% non-callable senior notes due 2023 closed Thursday at 99 5/8 bid, 99 7/8 offered.

Cliffs’ debt subtly slides

After moving up in the previous session, Cliffs Natural Resources’ 5.95% notes due 2018 came in a little.

The debt had risen Wednesday as the Cleveland-based iron ore producer priced $540 million of 8¼% first-lien notes due 2020 at 93.243 to yield 10%.

One trader saw the 2018 paper fall to a 79 to 79½ context from levels around 80 on Wednesday. Another market source placed the issue at 79 3/8, off almost half a point.

Proceeds from the new deal will be used to pay off a revolving credit facility and for general corporate purposes.

On Thursday, Cliffs said that it was extending the expiration of its previously announced tender offer to 9 a.m. ET on Monday in order to coincide with the closing of a new asset-based credit facility and the first-lien notes. The tender had been scheduled to expire on Wednesday.

Elsewhere in the iron arena, Magnetation LLC’s 11% notes due 2018 regained a point after getting beat down earlier in the week, according to a trader.

He saw the notes ending at 46½, up from a 44 to 45 context previously.

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