Morning Commentary: H&E Equipment brings $750 million drive-by; Alta Mesa trades sharply higher

By Paul A. Harris

Portland, Ore., Aug. 17 – Amid low, late-summer liquidity, trading in high-yield bonds was name-specific on Thursday morning, a trader said.

Bonds of Alta Mesa Holdings, LP were sharply higher at mid-morning on news that Silver Run Acquisition Corp. II announced it has entered into definitive agreements to combine with Alta Mesa and Kingfisher Midstream, LLC to create a new public company to be named Alta Mesa Resources, Inc., focused on the Stack play in the Anadarko Basin.

The Alta Mesa Holding 8 7/8% senior notes due Dec. 15, 2024 – Alta Mesa's sole outstanding issue – were 108 bid, 108¼ offered at mid-morning, up from 104 bid on Wednesday, a trader said.

Among recent issues, new add-on notes to Solera, LLC's 10½% senior notes due March 1, 2024 (Caa1/CCC+) continued to trade at a premium to new issue on Thursday.

The add-on notes were 114.25 bid, 114.5 offered at mid-morning, the trader said.

The $275 million tap priced at 113.5 on Wednesday, playing to an order book that was more than three times oversubscribed, according to an investor who played the deal.

Elsewhere the travails of Staples Inc.'s recently priced 8½% eight-year senior notes (B3/B-) continued into Thursday.

The notes saw a bid as high as 99 1/8, a trader said.

The $1 billion issue priced at par on Monday, downsized from $1.3 billion, after having been previously decreased from $1.6 billion.

Ever since they hit the secondary market the Staples bonds have traded heavily, sources say.

H&E Equipment driving by

In the primary market, H&E Equipment Services, Inc. plans to price a $750 million offering of eight-year senior notes (B3/BB-) in a quick-to-market Thursday trade helmed by bookrunner Wells Fargo Securities LLC.

The Baton Rouge, La.-based heavy equipment manufacturing and services company plans to take out its 7% senior notes due 2022 and pay down its ABL facility.

The new deal surfaces on the heels the H&E Equipment Services' bid for Neff Corp. falling to a competing bid from United Rentals Inc.

H&E Equipment had in place an $825 million senior unsecured bridge loan to help fund that acquisition of Neff for $1.2 billion, including about $690 million in debt currently on Neff's balance sheet.

The high-yield bond market had anticipated an $825 million bond offering to replace the bridge loan. (See related stories in this issue).

Only one other deal remains on the active forward calendar.

Enova International Inc. is marketing $250 million of seven-year senior notes (Caa1/B-) via Jefferies LLC.

As the market awaits official talk, initial guidance is in the 8½% area, an investor said, adding that the deal is expected to price during the present week.

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