Primary is quiet to close out $2.5 billion week; new NGL, Aecom, bonds active, Gastar gains

By Paul Deckelman and Paul A. Harris

New York, Feb. 17– The high-yield primary market was quiet on Friday as the junk world headed into the Presidents Day holiday weekend.

Syndicate sources said that there were no pricings of U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers during the session, down from the $500 million that priced in a single tranche on Thursday, according to data compiled by Prospect News.

Friday’s new issuance – or, more properly, the lack of same – left the week’s total issuance of new bonds right where it had finished on Thursday, at $2.51 billion in three tranches. That was well down from the $8.94 billion of new paper which gotten done in 19 tranches the previous week, ended Feb. 10, the heaviest new-issuance week Junkbondland has so far this year, the data indicated.

Among specific issues, Thursday’s new issue from NGL Energy Partners LP and Wednesday’s offering from Aecom were the busiest high-yield issues of the day. Traders saw them little changed from where they had finished on Thursday.

There was also a fair amount of activity in last week’s deal from Halcon Resources Corp, which moved lower on the day.

Away from the new deals, traders saw Gastar Exploration Inc.’s bonds firm in active trading on the news that the energy company had obtained $425 million in new funding from Ares Capital Management LP.

Statistical market performance measures turned lower on Friday after being mixed for two sessions and previously higher for four straight trading days before that.

The indicators were meantime mixed on the week versus where they had finished last Friday, their second straight mixed week and third mixed week in the last six weeks.

No primary news, no calendar

The primary market failed to generate any news on Friday heading into the three-day Presidents Day weekend in the United States.

As of the Friday close the active new deal calendar was empty.

The week ahead is a question mark, sources say.

A lot of market participants, especially in Massachusetts and New York, are tacking vacation time onto the three-day weekend in order to take advantage of school spring breaks, thus preparing to head out on week-long family holidays, sources say.

Should the yield on the 10-year Treasury continue the decline that got underway in the middle of the past week, falling, say, to below 2.35%, speculative-grade issuers with the highest junk credit ratings – issuers more sensitive to spreads – will likely appear, a trader said on Friday.

Ten-year government paper was yielding 2.42% at Friday’s close, the source added.

Mixed Thursday flows

Cash flows for dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $206 million of inflows on the day.

Actively managed funds, however, sustained $47 million of outflows on Thursday.

The daily flows data trails a report on Thursday afternoon from Lipper US Fund flows that dedicated high-yield bond funds saw $158 million of net inflows for the week to Wednesday’s close.

Meanwhile the phenomenal cash flows into dedicated bank loan funds – $6.6 billion of net inflows in the year to Feb. 15 – continued apace on Thursday.

The loan funds saw $176 million of inflows on the day.

A much quieter week

The lack of any new deals pricing on Friday left the week’s new-issuance statistics right where they had been at the close of trading on Thursday with $2.51 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers pricing in three tranches, according to data compiled by Prospect News.

That was well down from the $8.94 billion which had priced in an eye-popping 19 tranches the week before, ended Feb. 10. That week had been the heaviest new-issuance week so far this year. It also was the

biggest new-issuance seen week in Junkbondland since the week ended Dec. 9, 2016, when $9.60 billion of new paper had debuted in 16 tranches.

This week’s primary activity brought year-to-date issuance for 2017 up to $38.41 billion in 69 tranches, more than triple the $11.65 billion in 20 tranches at the same point on the 2016 calendar, the Prospect News data indicated.

Recent deals trade actively

Among specific issues, traders said that Thursday’s new issue from NGL Energy Partners and Wednesday’s offering from Aecom were the busiest high-yield names of the day.

A trader said that the new NGL 6 1/8% notes due 2025 was “the most active issue of the day,” with over $25 million changing hands.

He saw those new bonds “just hanging around the par level.”

A second trader likewise quoted them in a 99¾ to 100 1/8 bid context, while a third pegged them at 100 1/8 bid, which he called a 1/16 point gain.

NGL, a Tulsa, Okla.-based vertically integrated limited partnership, priced its $500 million of 6 1/8% notes due 2025 at par, marketing it to investors via a conference call. The offering was upsized from $450 million.

The new bonds had edged up to 100 3/16 bid when they were freed for aftermarket dealings later Thursday with over $13 million moving around during the session.

The new Aercom 5 1/8% notes due 2027 were also high up on the day’s Most Actives list, with a market source seeing more than $24 million traded. He saw the notes down ¼ point at 100 3/8 bid.

A second trader located the bonds between 100¼ and 100½ bid.

The Los Angeles-based engineering company priced its quick-to-market $1 billion issue at par on Wednesday after upsized it from an originally announced $750 million.

The new bonds moved up to 100½ bid in initial aftermarket trading of more than $20 million on Wednesday and then stayed around that level on Thursday on volume of over $80 million.

Halcon in retreat

Last week’s new issue from Halcon Resources was also one of the more active bonds in a relatively quiet pre-holiday session.

A trader saw those 6¾% notes due 2025 at 98 15/16 bid,, calling them off by 9/16 point on the day. Turnover on the notes was more than $10 million.

A second trader saw them at 98½ bid, 99 offered, calling them down ¼ point on the day.

Halcon, a Houston-based independent oil and natural gas exploration and production company, priced $850 million of the notes at par in a quick-to-market transaction on Feb. 9. The deal was upsized from $700 million.

The notes struggled to maintain that issue price level when they first hit the aftermarket and stayed at or below par subsequently.

Gastar gains on financing

Away from the new issues, a trader said that Gastar Exploration’s 8 5/8% notes due 2018 “got a little bump” on the news that the Houston-based oil and gas operator had lined up a total of $425 million of financing from Ares Capital Management.

He saw the notes up 2 points on the session at 102½ bid.

A second trader also saw the bonds at that level, seeing a nearly 2 point gain on volume of more than $22 million.

Gastar’s funding deal consists of a $250 million secured term loan due 2022 and $125 million in secured convertible notes also due 2022. Ares will additionally purchase $50 million in common stock.

The term loan will bear interest at 8.5% per annum, payable quarterly.

Gastar plans to use the proceeds from the loan, the convertibles and the equity placement to fully repay and redeem Gastar’s existing $70.4 million revolving credit facility and its $325 million of 8 5/8% senior secured notes due May 2018.

Indicators turn lower

Statistical market performance measures turned lower on Friday after having been mixed for two sessions and higher for four straight trading days before that.

The indicators were meantime mixed on the week versus where they had finished last Friday, their second straight mixed week and third mixed week in the last six weeks.

The KDP High Yield Index eased by 1 basis point on Friday to end at 72.34, its first loss after six straight gains, including Thursday’s 5 bps rise.

Its yield was unchanged on the day, after having come in by 1 bp to 5.06% the previous day. It was the second unchanged session in the last three sessions.

However, those levels compared favorably with the 72.23 index reading and 5.08% yield seen last Friday.

The Markit CDX Series 27 High Yield Index was on the downside for a third session in a row Friday, ending off by 1/32 point at 107 7/165 bid, 107 15/32 offered, on top of Thursday’s 7/32 point downturn.

That was about unchanged from last Friday’s level.

The Merrill Lynch High Yield Index lost 0.027% Friday; it had been unchanged on the day on Thursday after five straight sessions before that on the upside.

The latest loss cut its year-to-date return to 2.097% from Wednesday’s and Thursday’s close at 2.124%.

For the week, the index was up 0.197%, its fourth straight weekly gain. The previous week, it had been up 0.101%.

© 2015 Prospect News.
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