Primary heats up with $1.4 billion day, new Concordia, Gulfport rise; funds gain $1.91 billion

By Paul Deckelman and Paul A. Harris

New York, Oct. 6 – The high-yield primary market turned things up a notch or two on Thursday, with four issuers pricing a total of $1.4 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers during the session, syndicate sources said.

That was nearly double the $750 million which had gotten done in single tranches on Wednesday, which in turn had followed two straight sessions during which no dollar-denominated junk bonds had priced.

Two of the day’s four deals were opportunistically timed and quickly shopped drive-by transactions, while the other two were regularly scheduled deals coming off the forward calendar after being marketed to investors via roadshows.

The big deal of the day was oil and natural gas operator Gulfport Energy Corp.’s quick-to-market $650 million of eight-year notes.

Traders saw those new bonds moving up solidly when they were freed for secondary dealings.

Canadian pharmaceutical company Concordia International Corp. did a regularly scheduled offering of $350 million 5.5-year secured notes, which firmed smartly in the aftermarket.

Also coming off the forward calendar was tobacco company Alliance One International Inc.’s $275 million of 4.5-year secured paper. Those bonds too were quoted higher afterward.

Rounding out the day’s action, gaming operator Pinnacle Entertainment, Inc. drove by with an upsized $125 million add-on to its existing 2024 notes.

Secondary traders meantime saw a fair amount of activity in Dynegy Inc.’s 8.25-year notes, which had priced on Wednesday.

Statistical market performance measures remained higher across the board on Thursday after having improved on Wednesday; they had been mixed on Monday and again on Tuesday. It was the third upside session for the indicators in the last five trading days.

Meanwhile, flows of investor cash into or out of high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – stayed in positive territory this week, posting their second straight large net inflow after two consecutive weekly net outflows.

Some $1.908 billion more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the reporting week ended Wednesday, which followed the $2.011 billion cash gain reported last Thursday for the seven-day period ended Sept. 28.

Gulfport Energy drives by

Gulfport Energy priced a $650 million issue of eight-year senior notes (B2/B) at par to yield 6% in a quick-to-market Thursday deal.

The yield printed on top of yield talk and at the tight end of the 6% to 6¼% initial guidance.

Credit Suisse and Scotia were the joint bookrunners.

The Oklahoma City-based oil and gas exploration and production company plans to use the proceeds to refinance its existing 7¾% notes due 2020 and for general corporate purposes.

Concordia International prices tight

Concordia International priced a $350 million issue of 5.5-year senior secured notes (B1/B) at par to yield 9%.

The yield printed at the tight end of the 9% to 9¼% yield talk.

It felt as if the deal was circled up well before price talk came out, a trader said, spotting the bonds at 101½ bid, 102 offered in subsequent trading.

Goldman Sachs ran the books.

The Oakville, Ont.-based company plans to use the proceeds for general corporate purposes, including cash management requirements, to fund the launch of pipeline products and for small regional product acquisitions.

Alliance One comes tight

Alliance One International priced a $275 million issue of 8½% 4.5-year senior secured first-lien notes (B1/CCC+) at 99.085 to yield 8¾%.

The yield printed at the tight end of the 8¾% to 9% yield talk. Early guidance was in the 9% area.

Deutsche Bank ran the books.

The Morrisville, N.C.-based leaf tobacco merchant plans to use a portion of the proceeds to pay off its revolver, with remaining proceeds to be used for general corporate purposes.

Pinnacle Entertainment upsizes

Pinnacle Entertainment priced an upsized $125 million add-on to its 5 5/8% senior notes due May 1, 2024 at 100.50 to yield 5.518%.

The issue size was increased from $100 million.

The reoffer price came at the rich end of the 100 to 100.5 price talk.

The deal was at 101 bid, 101½ offered shortly after terms circulated, a trader said.

JP Morgan, Goldman Sachs, BofA Merrill Lynch, Fifth Third Bank, US Bancorp, Credit Agricole, Wells Fargo and Deutsche Bank were the bookrunners.

The Las Vegas-based gaming company plans to use the proceeds, including those resulting from the $25 million upsizing of the deal, to pay down its revolver.

Talking the deals

Two deals are on deck for Friday in the dollar-denominated junk primary market.

CBS Radio Inc. downsized its offering of eight-year senior notes (B3/B-) to $400 million from $460 million, shifting $60 million of proceeds to its concurrent bank loan which raises its size to $1.06 billion from $1 billion, according to market sources.

Price talk on the notes is 7 3/8% to 7 5/8%.

And Virgin Australia Holdings Ltd. talked a to-be-announced amount of dollar-denominated five-year senior notes to yield 7¾% to 8%.

Gulfport gains in secondary

In the secondary market, the new Gulfport Energy 6% notes were seen having firmed from their par issue price.

Traders at four separate shops quoted that unscheduled bond deal as rising to around 101½ bid, 101¾ offered when it hit the aftermarket.

At another desk, the bonds were seen in a 101½ to 102 bid context.

New Concordia climbs

But the star performer of the day was Concordia International’s newly priced 9% first-lien senior secured notes due April 2022.

A trader saw those bonds at 103 bid, 103¾ offered, well up from their par issue price.

“It’s a small deal,” he pointed out, “$350 million – but I guess there was some interest in it.”

Several other traders saw the bonds gain handsomely at first, but then come off their initial peak levels.

One quoted the bonds trading between 103 and 104 bid but later said that they were “slightly lower than that now.”

Another saw them between 103¼ and 103¾, but also saw them eventually back off to a 102¾ to 103¼ bid context.

Existing Concordia paper punished

While the new issue was firming smartly and managing to hang on to most of its initial gains, it was quite another story for Concordia’s existing bonds, which dipped in the wake of the company’s new deal.

A trader said the 9½% notes due 2022 finished down a deuce on the day at 74¼, while the company’s 7% notes due 2023 dropped over 2 points to 68½.

Another trader placed the 9½% notes in the mid-70s. He also said there was a “bunch of trading” in the 7% notes, which he saw fall to 69 from a 70 to 71 context previously.

“They were off a little bit,” the trader said.

At another shop, the 7s were seen ending down 2¼ points on the day at 68½ bid. Activity was brisk, with over $19 million traded.

That weakness was a far cry from Wednesday, when the existing paper had pushed upward by multiple points, with the 9½% notes climbing some 2¼ points on the day, ending at 76¼ bid, with over $11 million of that paper having changed hands.

On Monday, it was reported that the pharmaceutical company was in talks for a potential equity stake. The discussions are being considered as an alternative since negotiations regarding a leveraged buyout have not gotten anywhere.

In September, Concordia bonds were put on the radar on word that the United Kingdom was proposing legislation that would curb hefty price increases on certain generic drugs. That resulted in a series of losses for the name. The paper was further pressured by a report by Goldman Sachs that opined that the U.K. legislation – and whatever fallout Concordia might face because of it – would make the company a less attractive buyout target.

Alliance One improves

Traders saw the new Alliance One International 8½% senior secured first-lien notes moving around at somewhat firmer levels after their pricing at 99.085, though on limited volume.

One saw the paper in a 99½ to par bid context.

Another pegged the new issue somewhere between par and 100½ bid.

Dynegy dominates actives list

Wednesday’s issue of 8% notes due January 2025 from Houston-based power generating company Dynegy was probably the most actively traded credit in Junkbondland on Thursday, a trader said, estimating volume in the deal at over $61 million.

He said the bonds ended the day unchanged from their par issue price.

A second trader agreed that the new Dynegy paper “racked up some pretty good volume.”

He saw the bonds trading between par and 100¼ bid in the morning, “and they finished up the day right around there as well.”

Dynegy priced $750 million of the notes at par in a quick-to-market deal that was upsized from an originally announced $500 million.

Energy names up

Away from the new deals, a trader said that energy-related names rose on the continued gain in world oil prices.

He saw Los Angeles-based oil and natural gas exploration and production operator California Resources Corp.’s 8% notes due 2022 “up close to 4 points” at 73 bid.

The sector’s rise coincided with a second straight day of gains on world crude markets, with the benchmark U.S. West Texas Intermediate grade for November delivery seen up 61 cents per barrel on the New York Mercantile Exchange, settling at $50.44, on top of a $1.14 per barrel jump recorded on Wednesday.

Indicators stay strong

Statistical market performance measures remained higher across the board on Thursday after having improved on Wednesday; they had been mixed on Monday and again on Tuesday. It was the third upside session for the indicators in the last five trading days.

The KDP High Yield Index rose by 15 basis points on Thursday to end at 71.37, its 14th straight gain after six consecutive losses. On Wednesday, the index had jumped by 22 bps.

The Markit Series 27 CDX Index improved by nearly 3/32 point on Thursday to close at 104 11/32 bid, 104 13/32 offered, its second straight upturn after two consecutive losses. On Wednesday, it had finished up more than 3/16 point.

And the Merrill Lynch High Yield Index moved up by 0.058% on Thursday, its seventh consecutive gain after two losses. On Wednesday, the index had gained 0.131%.

Thursday’s advance raised the index’s year-to-date return to 15.794%.

That established a sixth straight new peak level from the year, up from the former mark of 15.727%, which had been set Wednesday.

It was the index’s highest close since Dec. 31, 2009, when it had closed out that year at 57.512%.

-Stephanie N. Rotondo contributed to this review

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