Primary looks to new year; Travelport gains on buyout; Altice drops; energy weakens

By Abigail W. Adams and Paul A. Harris

Portland, Me., Dec. 10 – Quiet continued to reign in the domestic primary market on Monday with no deals expected to come to market before the close of the year.

Market players are now looking to 2019 with a modest pipeline of deals expected in the first quarter.

The volatility that has sidelined the primary market continued on Monday, sources said.

The market in general was down about ¼ point as equities saw a volatile session and crude oil futures declined after a rally at last week’s close.

Triple C credits continued to take the brunt of the pressure with the market sentiment remaining risk off, a source said.

Travelport Corporate Finance plc’s 6% senior notes due 2026 dominated trading activity in the secondary space with the notes trading up to the investor put triggered upon a change of control.

Altice SA’s junk bonds also saw heavy trading volume during Monday’s session with the notes dropping after a downgrade from Moody’s Investors Services.

After a brief reprieve, the sell-off in crude oil futures continued on Monday with futures giving back their gains from Friday.

California Resources Corp.’s 8% senior notes due 2022 remained volume movers on Monday with the notes also giving back some of their gains from Friday.

Dead-quiet December continues

On Monday the lights remained out in the primary market, which is expected to remain closed until the new year, positioning December 2018 to possibly be the first December in at least a decade to pass without a single new issue clearing the market.

Average December issuance, going back to and including 2010, is $15.44 billion, according to Prospect News data.

Market watchers are now training their eyes on January, at which time a buildup of investor cash needing to be put to work and a modest pipeline of committed financing deals should combine to pry open the doors of the high-yield new issue market, a syndicate banker said on Monday.

Opportunistic issuers who can wait to hit the market will certainly do so until the beginning of the year.

Issuers may even wait for some time after the start of the new year for some signal that an efficient execution in the primary market is a probable outcome, the banker said.

That signal might come in the form of a deal from a familiar high-quality issuer in the early part of 2019, the source added.

Meanwhile, there is no evidence that those in the relatively thin pipeline of committed financings must go before 2019, sources say.

Travelport’s buyout

Travelport’s 6% senior notes due 2026 dominated trading activity in the secondary space after the company announced it would go private in a $4.4 billion buyout.

The 6% notes were quoted at par ¾ bid, 101¼ offered on Monday and were largely wrapped around 101 in high-volume activity, sources said.

With more than $53 million of the bonds on the tape, Travelport’s 6% senior notes were the most actively traded issue of Monday’s session.

The notes were up about 1 point from their previous level of 99¼ bid, par ¼ offered.

The notes traded up to the put option triggered by a change of control event, a market source said.

The option gives holders the right to require the company to repurchase the notes at 101, the source said.

Travelport announced Monday that Siris Capital Group and Elliott Management would lead a consortium of investors who will buy the firm in a $4.4 billion deal.

The deal will offer $15.75 per share for the UK-based tech company and is subject to shareholder approval.

There is a go-shop period until late January where Travelport may solicit competing offers, Reuters reported. The deal is expected to close in the first half of 2019.

Altice in focus

Altice’s junk bonds dropped in high-volume trading on Monday after Moody’s Investors Services downgraded Altice units in response to its earnings reports.

Altice’s 7¾% senior notes due 2022 and Altice’s 7 5/8% senior notes due 2025 dropped about 2 points after being knocked down to triple C status, according to a market source.

The 7¾% senior notes traded down to 93 on Monday with more than $39 million of the bonds on the tape by the late afternoon.

The 7 5/8% senior notes traded down to 78½ with about $19 million of the bonds on the tape.

The notes saw nearly three times their average trading volume on Monday with selling pressure driving the notes down, a market source said.

Moody’s announced on Friday it was lowering Altice Luxembourg’s senior unsecured bond rating to Caa1 from B3, due to its expectation for declining revenue and EBITDA, Prospect News reported.

The 7¾% notes due 2022 have been active since Altice Europe released earnings in late November.

The notes have been volatile since its earnings, initially posting gains which were soon followed by losses.

However, the notes rose to trade around 95 at the end of November, which is where they remained until Monday’s sell-off, after Altice France announced it would sell a stake in its fiber optic cable business.

Energy gives back gains

After a brief reprieve on Friday, the sell-off in crude oil futures continued on Monday with the energy sector giving back some of its gains from Friday.

California Resources’ 8% senior notes due 2022 remained a major volume mover in the secondary space with the notes down about 2 points on Monday.

The notes were quoted at 74½ bid, 75½ offered on Monday. They were largely trading around 74¾ with more than $16 million of the bonds on the tape.

The notes rose 3 points to 76½ bid, 77½ offered on Friday.

Crude oil futures also gave back the gains seen on Friday as U.S.-China trade tensions and fears of a supply glut continued to rattle markets.

The barrel price of WTI crude oil futures for January delivery settled Monday at $51, a decrease of $1.61 or 3.1%.

Big Friday outflows

The daily cash flows of the dedicated high-yield bond funds were decidedly negative on Friday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $314 million of outflows on the day.

Actively managed high-yield funds saw $475 million of outflows on Friday, the trader said.

Year-to-date cash flows of the combined high-yield bond funds stood at a whopping negative-$37.6 billion, for 2018 to Friday's close, the source added.

Indexes drop

Indexes started the week with losses after all posted losses on the week last week.

The KDP High Yield Daily index was down 8 bps to close Monday at 68.14 with the yield now 6.64%.

The index was down 15 bps on the week last week.

The CDX High Yield 30 index dropped 14 bps to close Monday at 103.06. The index saw a 127 bps drop on the week last week.

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