Pricing lull continues while SFX slates; recent XPO issue keeps firming in line with overall market

By Paul Deckelman and Paul A. Harris

New York, Aug. 19 – The high-yield pricing machine remained in idle on Tuesday, its second consecutive session without a pricing, amid expectations by participants that not much, if anything, would be coming to market anytime soon.

The only news emanating from the new-deal sphere came from SFX Entertainment, Inc., the New York-based global producer of live events and digital entertainment content, which announced plans for an add-on to its existing 2019 second-lien notes. When that deal may come to market and how big it will be is anybody’s guess, however.

Among recently priced offerings, XPO Logistics Inc.’s new 2019 notes continued to push higher, climbing well above the 103 bid level.

Several other deals that have lately come to market, including NCSG Crane & Heavy Haul Corp., were also seen at solidly firmer levels, in line the generally stronger overall junk bond market.

Away from the new-deal arena, NII Holdings Inc.’s bonds, which over the past two sessions had been solidly rebounding from recent lows that were sparked by bankruptcy fears about the international wireless company, were seen once more headed for the downside.

Statistical market performance measures were unchanged to mostly higher on Tuesday, after having been mixed on Monday.

SFX plans 9 5/8% notes tap

SFX Entertainment announced that it plans to place an add-on to its 9 5/8% second-lien senior secured notes due Feb. 1, 2019 (existing ratings Caa1/B-), subject to market conditions.

The announcement made neither mention of the proposed size nor the timing of the deal, syndicate names or uses of proceeds.

The original $220 million issue priced at par on Jan. 31, 2014 in a deal, which came to market via bookrunners Barclays, Deutsche Bank Securities Inc., Jefferies LLC and UBS Investment Bank.

Meanwhile, news on the funds-flows front remains persuasively positive, market sources say.

On Monday, the most recent day for which information was available, actively managed high-yield funds saw $270 million of inflows while high-yield exchange traded funds saw $118 million of inflows.

Thus far in the week dedicated high-yield funds have seen about $1 billion of inflows, said the source, who related information contained in a report by JP Morgan.

XPO firming continues

In the secondary market, traders saw continued small gains in the new XPO Logistics 7 7/8% notes due 2019 that priced on Thursday.

A market source pegged the bonds at 103½ bid, 104 offered, calling that up ¼ of a point from Monday’s closing levels.

Later in the session, another trader also said that the bonds traded between 103½ and 104, on volume of about $5 million or $6 million.

A market source who saw the bonds hit somewhat lower levels in late trading on Monday, even down to101 5/8 bid – well down from recent levels at 103 – saw the bonds rally from that nadir on Tuesday, ending 2 points higher on the day at 103 5/8 bid, with over $7 million having changed hands.

The Greenwich, Conn.-based transportation logistics company priced $500 million at par in a regularly scheduled forward calendar deal last Thursday. After that, the new bonds were heard to have firmed smartly, quickly moving up to the 103 bid and above level and staying there.

Recent deals also rising

Among other recently priced deals, Gulfport Energy Corp.’s 7¾% notes due 2020 were up 1/8 of a point for a second straight session on at 107 ½ bid, 108 offered.

The Oklahoma City-based oil and natural gas exploration and production company’s quick-to-market $300 million add-on to its existing issue had priced last Wednesday at 106 to yield 6.106%, after having been upsized from an originally announced $250 million. The bonds had firmed to the 107 area when they began trading around on Thursday.

Intrepid Aviation Group Holdings, LLC’s 6 7/8% notes due 2019 were seen unchanged on the day for a second straight session, at 102¼ bid, 102¾ offered.

The Stamford, Conn.-based commercial airline leasing company priced $215 million of the notes on Aug. 8 as an add-on to its existing bonds, pricing them at 102 to yield 6.356%, after upsizing the issue from $150 million. They had gained ¼ of a point on Friday, a trader said.

American Eagle Energy Corp.’s 11% senior secured notes due 2019 were likewise unchanged at 99½ bid, 100½ offered on Tuesday, after having gained 3/8 of a point on Monday.

The Denver-based E&P company had priced its $175 million forward calendar deal last Wednesday at 99.059, to yield 11¼%.

NCSG Crane & Heavy Haul Corp.’s 9½% senior secured second-lien notes due 2019 were quoted by a trader on Tuesday as having pushed up to 102¼ bid, 103¼ offered.

That was up by ¼ of a point on the session.

The Edmonton, Alberta-based provider of crane rental and heavy-haul services priced $305 million of the notes at par on Aug. 8, after slightly downsizing the transaction from an originally planned $310 million.

NII rebound ends

Away from the new deals, a trader saw NII Holdings’ 7 5/8% notes due 2021 down 1 point at 16 bid, on volume of over $22 million, one of the busiest junk issues.

He also saw its 7 5/8% notes due 2019 unchanged at 69 bid, with over $14 million of volume.

Those bonds had gotten badly beaten up last week, after the Reston, Va.-based provider of “Nextel” wireless service to customers in Mexico and elsewhere in Latin America warned that it would probably have to file for bankruptcy – but they had been recovering from their perhaps oversold levels on Friday and again on Monday.

Dollar General nears junk

Dollar General Corp.’s bonds remained busy on Tuesday, a day after the Goodlettsville, Tenn.-based discount store chain operator announced that it was mounting a bid to buy Family Dollar Stores, Inc. in a $9.7 billion all-cash transaction to be financed by $12.3 billion of new notes and bank loans. If its effort succeeds, it would have snatched Family Dollar away from another sector peer Dollar Tree, Inc.

The company’s existing bonds traded down several points in heavy trading on Monday at the prospect. The major ratings agencies put Dollar General under review for a possible downgrade of its precariously investment-grade ratings back to Junkbondland, where it had been until it was upgraded in the spring of 2013, since the transaction would more than double its leverage to about 5 times from current levels in the mid-2s.

And that downside movement continued on Tuesday, with a trader seeing the company’s 3¼% notes due 2023 down another point, at 90 bid, on volume of $49 million, although he also saw its 4¼% notes due 2017 up ¼ of a point at 104 3/8 bid, with $25 million having traded.

“They’re on the highway headed for junk,” he said. “They’re not there yet – maybe an exit or two away – but the off ramp beckons ahead.”

Junk quietly firmer

Overall, a trader opined, “I’d say the market is firmer on very low volume. Definitely, after the recent sell-offs of the past two weeks, it’s come back quite nicely.

But he said that the low level of activity also played a part.

“Hardly anybody is selling into a market that’s rallying, so [...] bids are chasing paper and there’s not a lot up for sale,” he added.

Market indicators stay strong

Statistical indicators of junk market performance were mostly higher for a second straight session on Tuesday, after having turned mixed on Friday. The indicators have now been on the high side in four out of the last five sessions.

The KDP High Yield Daily index posted its 11th straight gain on Tuesday, jumping by 13 basis points to end at 74.05 – its first time back above the 74 mark since July 25, when the index also read 74.05. It had been up by 9 bps in each of the two previous sessions.

The yield meanwhile tightened for an 11th straight session, coming in by 5 bps to finish at 5.09%. It had been down by 3 bps on Monday, after having declined by 7 bps in each of the three previous sessions.

The Markit CDX Series 22 index was virtually unchanged at 107 31/32 bid, 108 1/32 offered, after having gained 3/8 on Monday.

The widely followed Merrill Lynch High Yield Master II index meanwhile moved up for a seventh straight session on Tuesday, gaining 0.111%, on top of Monday’s 0.167% improvement.

The latest upturn lifted the index’s year-to-date return to 5.525% from Monday’s 5.408%, although it still remained down from the 5.751% return recorded on July 7, the peak level so far for 2014.

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