Domestic primary dormant; Altice in focus; Ferroglobe tanks; energy names under pressure

By Abigail W. Adams

Portland, Me., Nov. 27 – The domestic primary market remained dormant on Tuesday with the forward calendar vacant.

However, the European primary market saw one small add-on deal join the forward calendar.

Algeco Global Finance plc plans to price a €125 million tap of its fixed- and floating-rate notes due 2023 on Wednesday, according to a market source.

The small deal is “better than nothing,” a market source said. Few deals are expected to surface in the European primary market through the end of the year, a London-based source said.

While primary market activity was expected to pick up throughout the course of the week, there were no signs of it during Tuesday’s session.

Meanwhile, the secondary space opened Tuesday on soft footing with the market down about 1/8 point, according to a market source.

Altice SA’s junk bonds remained in focus in the secondary space.

While the company’s 7¾% senior notes due 2022 were largely flat in active trading, Altice France SA’s junk bonds were trading down.

Ferroglobe plc 9 3/8% senior notes due 2022 tanked after a third-quarter earnings miss with the notes dropping more than 10 points.

While Ferroglobe marked the largest decline during Tuesday’s session, names in the energy sector remained under pressure.

California Resources Corp.’s 8% senior secured second-lien notes due December 2022 were again major volume movers in the secondary space with the notes giving back its minor gains from Monday.

DCP Midstream LLC’s 5.85% senior notes due 2043 dropped 6 points on Tuesday with crude oil futures again dragging down the secondary space.

Algeco tap on tap

Algeco Global plans to price a €125 million tap of its fixed- and floating-rate notes due 2023 on Wednesday, according to a market source.

Goldman Sachs International is bookrunner for the Rule 144A and Regulation S offering, which consists of a €100 million tap of 6½% senior secured fixed rate notes due 2023 and a €25 million tap of senior secured floating-rate notes due 2023.

The deal was marketed via an investor conference call.

Algeco initially priced a €600 million issue of the 6½% senior notes on Feb. 6, 2018 at 97.921 to yield 7%.

The company priced a €150 million issue of the floating-rate notes at 98 with a coupon of Euribor plus 625 basis points.

The pipeline

Algeco Global’s add-on is the only reported deal in the domestic and European primary market.

Few deals are expected to surface in the European primary market through the end of the year, a London-based source said.

With Brexit, Italy and a host of other factors, “it’s a very choppy backdrop” for new deal activity, the source said.

The domestic primary market remained quiet on Tuesday with the forward calendar vacant.

Sources were pessimistic about the prospects for new deal activity over the coming week.

Credit spreads continued to widen, especially with Treasuries tightening on Tuesday, a source said.

Between the outflows and widening credit spreads, market conditions are still not conducive to new deal activity, the source said.

Altice in focus

Altice’s junk bonds remained in focus on Tuesday although attention shifted to subsidiary Altice France’s issuances.

Altice’s 7¾% senior notes due 2022 were previously the volume movers in the secondary space. While still active on Tuesday, trading of the issue paled in comparison to Altice France’s junk bonds.

The 7¾% notes closed Tuesday largely unchanged at 90½, a market source said.

About $13 million of the bonds were on the tape by the late afternoon.

Altice France’s 8 1/8% senior notes due 2027 were trading down in high volume activity.

The notes were volatile during Tuesday’s session.

The notes were up 1 point early in the day but closed the day down ¼ point at 95 3/8, according to a market source.

With more than $51 million of the bonds on the tape in the late afternoon, the 8 1/8% notes were the most actively traded in the secondary space.

Altice France priced a $1.75 billion tranche of the 8 1/8% notes at par in July.

Altice France’s 7 3/8% senior notes due 2026 also slid in active trading.

The notes were down 5/8 point to close the day at 93, a market source said.

About $17 million of the bonds had changed hands by the late afternoon.

Altice junk bonds have been major volume movers in the secondary space since the company reported earnings last week.

Ferroglobe tanks

Ferroglobe’s 9 3/8% senior notes due 2022 made some people cry on Tuesday, a market source said.

The notes tanked, dropping more than 10 points in active trading after a large third-quarter earnings miss.

The notes closed Tuesday at 89¾. They were trading at par ¼ on Monday, a market source said.

More than $14 million of the bonds were on the tape by the late afternoon.

Ferroglobe reported third-quarter earnings per share of 0 versus analyst expectations of earnings per share of 15 cents.

The company also missed on the top line with revenue of $526.8 million versus analyst expectations for $564 million.

Energy under pressure

The energy sector remained under pressure on Tuesday with crude oil futures again on the decline.

California Resources’ 8% senior notes due 2022 were again one of the most actively traded issues in the secondary space with the notes giving up their slight gains from Monday’s session.

The 8% notes were quoted at 78¾ bid, 79¼ offered on Tuesday. They closed the day down ½ point at 78 7/8, according to a market source.

More than $37 million of the bonds were on the tape by the late afternoon.

The notes gave back their minor gain on Monday, which some sources felt was not much of a gain.

“You’d think with stock having an up day,” the bonds would have gained more, a market source said. “Not dropping was their gain.”

After a reprieve on Monday, which saw crude oil futures climb, the barrel price of WTI crude oil for January delivery saw a slight dip on Tuesday.

Crude oil futures settled at $51.56 on Tuesday, a decrease of 4 cents.

Crude oil futures continued to lead the high-yield market lower, a market source said.

DCP Midstream’s 5.85% senior notes due 2043 dropped 6 points on Tuesday. The notes traded down to 82 in light volume, a market source said. They were previously trading between 88 and 89.

Indexes mixed

After starting the week on strong footing, indexes were mixed on Tuesday with two posting losses and one gains after all saw losses the previous week.

The KDP High Yield Daily index was down 4 basis points to close Tuesday at 68.10 with the yield now 6.67%.

The index gained 2 bps on Monday after a 32 bps drop on the week last week.

The index was down 78 bps on the week during the previous week.

The ICE BofAML US High Yield index dropped 18.6 bps on Tuesday with the year-to-date return now negative 0.542. The index gained 12.5 bps on Monday.

The index was down 26.5 bps on the week last week after a 130.6 bps drop the prior week.

Returns entered into negative territory for the first time since June on Nov. 15.

The CDX High Yield 30 index gained 15 bps to close Tuesday at 103.78. The index was up 20.12 bps on Monday after a 74 bps drop on the week last week.

The index was down 137 bps the previous week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.