Upsized GFL add-on drives by; new Virgin, Pinnacle deals active; energy names keep firming

By Paul Deckelman and Paul A. Harris

New York, April 13 – The high-yield primary market dialed back its activity levels a little on Wednesday, pricing just one smallish offering after two consecutive sessions and four sessions out of the last five topping the $1 billion mark daily.

Canadian solid and liquid waste management company GFL Environmental Inc. priced an upsized and quickly shopped $200 million add-on to its existing 2021 bonds.

Traders did not immediately report any aftermarket activity in the new issue.

However, they did see considerable trading in Tuesday’s new issues from gaming operator Pinnacle Entertainment, Inc. and telecommunications and broadband service provider Virgin Media Inc. The Virgin bonds were seen to have added to the 1-point gains they saw after pricing on Tuesday, while the PNK notes stayed right around their issue price.

There was also considerable trading activity, mostly to the upside, among such recently priced names as Numericable-SFR SA, Western Digital Corp. and Gaming & Leisure Properties, Inc.

Away from the new deals, oil and natural gas names such as Whiting Petroleum Corp., Chesapeake Energy Corp. and California Resources Corp. remained on a tear, up by multiple points in busy trading for yet another session despite a downturn in world crude oil prices.

Statistical market performance measures were higher across the board for a fourth straight session on Wednesday, their fifth rise in the last six trading days.

GFL upsizes

The only news in the dollar-denominated primary market came in the form of a drive-by deal from GFL Environmental, which priced an upsized $200 million tack-on to its 9 7/8% senior notes due Feb. 1, 2021 (B3/B) at 103.25 to yield 8.838%.

The tack-on size was increased from $150 million.

The reoffer price came on top of official price talk as well as early guidance.

Credit Suisse Securities (USA) LLC, BMO Securities and Barclays were the joint bookrunners for the debt refinancing deal.

Other issuers could materialize during the final two sessions of the week, sources say.

SunOpta Foods Inc. is expected to soon show up with a $300 million offering of senior secured second-lien notes due 2023, a deal that was announced Tuesday and could roll out as early as Thursday morning, a market source said.

Last October the company postponed a $330 million offering of seven-year senior secured second-lien notes (B3/B) due to market conditions.

As previously reported, the deal at that time was talked to price at a discount and to yield 10%.

BMO Securities, Jefferies LLC and Rabobank were the joint bookrunners for the October offering.

Arrow Global FRN

In the European primary market Arrow Global Finance plc set an investor meeting in London on Thursday to roll out a €225 million offering of seven-year senior secured floating-rate notes.

The acquisition financing deal is also expected to price on Thursday.

Global coordinator and physical bookrunner Goldman Sachs International will bill and deliver. JPMorgan and HSBC are also global coordinators and physical bookrunners.

Look for new issue business in Europe to pick up substantially in the week ahead, a London-based debt capital markets banker advised. The banker added that none of the expected junk offerings figures to be conspicuously large.

Mixed cash flows

The cash flows of the dedicated high-yield bond funds were mixed on Tuesday, the most recent session for which data was available at press time, a portfolio manager said.

High-yield exchange-traded funds saw $116 million of inflows on the day.

However, actively managed funds sustained $30 million of outflows on Tuesday.

Dedicated bank loan funds were also negative on the day, with $15 million of outflows, the source said.

New GFL not immediately seen

In the secondary arena, traders did not immediately report any aftermarket activity in the new GFL Environmental 9 7/8% add-on issue.

They cited the relative lateness of the hour at which the Vaughn, Ont.-based solid and liquid waste management company’s deal had come to market.

Tuesday deals trade actively

However, there was more than enough trading activity seen in the two issues that had priced during Tuesday’s session.

A market source said that Virgin Media’s 5½% senior secured notes due 2026 racked up volume of more than $53 million in Wednesday’s dealings.

That was on top of the more than $63 million of those notes that had changed hands late in the day on Tuesday, when the New York-based provider of telecommunications services in the United Kingdom had priced its $750 million quick-to-market offering at par via its Virgin Media Secured Finance plc subsidiary. The deal was upsized from $500 million.

Those bonds had gone home on Tuesday having firmed to around 101 1/8 bid.

Wednesday’s action opened in a 100 7/8-to-101¼ morning bid context.

During the afternoon, a trader said that he saw “a lot” of the notes trading around the 101 level.

A second trader pegged the bonds between 100½ and 101 bid, while at another shop a trader late in the day saw the notes at 101 3/16 bid, calling that a slight gain on the session.

While the Virgin bonds were trading at a robust premium to their par issue price, a trader said that the new Pinnacle Entertainment 5 5/8% notes due 2024 “seemed to struggle a little bit,” ending the day in a par-to-100¼ bid context.

More than $47 million of the notes were traded Wednesday, on top of the over $68 million of activity seen late in the day on Tuesday after the Las Vegas-based company had priced its $375 million of bonds at par through subsidiary PNK Entertainment, Inc. That regularly scheduled forward calendar deal was upsized from an originally announced $300 million.

The notes were seen finishing the day on Tuesday right at their par issue price and were seen by several market sources trading at or just slightly above that level on Wednesday.

Recent deals active

Other recently priced offerings were also seen trading actively on Wednesday.

French telecommunications operator Numericable’s 7 3/8% notes due 2026 topped the Junkbondland Most Actives List on Wednesday, with over $57 million having changed hands, a market source said.

He quoted the notes going home at 102¼ bid, calling that a gain of about ¾ point on the session.

There was sizable activity in Western Digital’s big two-part offering that had priced at the end of March.

The Irvine, Calif.-based computer hard-disk drive manufacturer’s 10½% notes due 2024 were seen ½ point better at 99 7/8 bid, with over $34 million traded, while its 7 3/8% senior secured notes due 2023 ended the session at 102¼ bid, up ¼ point on the day, with almost $19 million of turnover.

Monday’s offering of 5 3/8% notes due 2026 from Las Vegas-based gaming REIT Gaming and Leisure Properties firmed to 103 bid, a ¼ point gain, with about $14 million traded.

Energy names improve again

Away from the new or recently priced issues, energy names, which have firmed over the past several sessions on expectations that international oil producers will agree to cut their crude output, moved up smartly again on Wednesday, even though oil prices retreated from Tuesday’s hefty gains.

Whiting Petroleum’s 5 7/8% notes due 2021 tacked on another 6¼ points to end at 77¼ bid, with over $22 million traded.

California Resources’ 8% notes due 2022 gained 5½ point on the session, closing at 54½ bid, with over $16 million traded.

And Chesapeake Energy’s 8% notes due 2022 gained more than 1 point, finishing at 62 bid, with over $23 million of those bonds changing hands.

Besides the recent oil price surge, Chesapeake has risen the last several sessions after the Oklahoma City-based oiler announced that it had amended its credit facility to keep its $4 billion borrowing base intact and to lighten its covenant restrictions.

Indicators stay higher

Statistical market performance measures were higher across the board for a fourth straight session on Wednesday, their fifth rise in the last six trading days.

The KDP High Yield Daily index jumped by 32 basis points on Wednesday to end at 66.48, its fourth straight rise. It had zoomed by 24 bps on Tuesday.

Its yield, meantime, tightened by 11 bps, finishing at 6.47%. The yield had been unchanged on Tuesday after having come in by 1 bp on Monday.

The Markit Series 26 CDX North American High Yield index advanced by almost 1/8 point Wednesday, going out at 102 21/32 bid, 102 23/32 offered. It was the index’s fourth straight gain; on Tuesday, it had risen by 11/32 bid.

And the Merrill Lynch North American High Yield Master II index made it four gains in a row on Wednesday as it improved by 0.693%, on top of Tuesday’s 0.361% rise.

That lifted its year-to-date return to 5.042%, its third consecutive new peak level of the year, surpassing the old mark of 4.32% that had been set on Tuesday.

It was not only the index’s first time above the psychologically significant 5% total return mark this year but also the first time the index had finished above 5% since Sept. 19, 2014, when it had closed at 5.21%.

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