December opens with no pricings, but Ball, Synovus deals on tap; market firms; Frontier gains

By Paul Deckelman and Paul A. Harris

New York, Dec. 1 – It was the late Frank Sinatra who famously sang in his nostalgic hit “September Song” that “the days dwindle down to a precious few.”

The high-yield market rounded the final turn and headed into the 2015 homestretch on Tuesday, opening the last month of the year pretty much the same way that it had closed out November the day before – relatively quietly, with no new deals seen having crossed the finish line.

However, as had been the case on Monday, there were developments percolating beneath the surface of the primary that pointed to a potentially busy time over the next couple of weeks, at least until the traditional year-end lull in the action finally sets in.

Syndicate sources were expecting a Wednesday pricing for container giant Ball Corp.’s big three-part dollar- and euro-denominated offering consisting of €1.5 billion equivalent of five-year and eight-year notes.

They anticipate Synovus Financial Corp.’s $150 million offering of 10-year subordinated notes getting done during the session, with midstream company NGL Energy Partners LP’s $300 million of five-year notes also seen as possible.

Golf course operator ClubCorp Holdings, Inc. was said to have hit the road to market its planned $400 million eight-year offering.

Away from the new-deal arena, traders said that the secondary market had an overall firmer tone, following the lead of stocks.

Among the gainers were Frontier Communications Corp. as well as some credits that have recently been under pressure such as TerraForm Power Inc., Intelsat SA and iHeart Media Inc.

Statistical measures of junk market performance were higher across the board for a second consecutive session on Tuesday, their fourth higher session in the last five trading days. The indicators had turned northward on Monday after having been mixed on Friday.

Ball Corp. on deck

The first December session in the high-yield primary market put up a goose egg in terms of issuance.

The post-Thanksgiving new issue market passed two sessions with no junk deals pricing as of Tuesday's close.

Wednesday should be different, sources say.

Ball talked a proposed dollar-denominated tranche of five-year notes to yield in the 4½% area.

Talk for the two euro-denominated tranches of the overall €1.5 billion equivalent three-part offering of non-callable senior notes (Ba1/BB+/BB+) is expected to be announced early Wednesday morning.

The deal includes euro-denominated five-year notes that are in the market with early guidance of 4% and euro-denominated eight-year notes with early guidance of 4½%.

Tranche sizes remain to be determined, but the ultimate split is expected to be fifty-fifty dollars and euros across all tranches.

Global books close at 9:30 a.m. ET on Wednesday, and the deal is set to price later on Wednesday.

Joint bookrunner Goldman Sachs & Co. will bill and deliver for the acquisition deal.

Deutsche Bank Securities Inc., BofA Merrill Lynch, KeyBanc Capital Markets, Mizuho and Rabo are also joint bookrunners.

Synovus guidance 5½% to 6%

Synovus Financial talked its $150 million offering of fixed-to-floating-rate subordinated notes due Dec. 15, 2025 (/BB-/BB+) to yield 5½% to 6%.

The deal size may grow.

The offering, in the market via Sandler O’Neill, LP, is likely to price on Wednesday morning.

Elsewhere, NGL Energy Partners is in the market with a $300 million offering of five-year senior notes (B2/BB-/BB-).

No official price talk had circulated as of Tuesday's close, sources said.

Initial guidance was in the 9% area, market sources said on Monday. However, the deal is unlikely to clear at that level, a trader said on Tuesday.

That's because the NGL Energy Partners LP/NGL Energy Finance Corp. 5 1/8% senior notes due July 15, 2019 traded on Monday with a yield above 10%, said the trader who also professed the expectation that the new NGL deal will ultimately print with a yield between 10% and 11%.

ClubCorp roadshow

ClubCorp Holdings began a roadshow on Tuesday in New York for a $400 million offering of eight-year senior notes (B-).

An investor call is scheduled to take place on Wednesday.

Early whisper has the deal coming with a yield in the high 7% context, according to an investor.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Wells Fargo Securities LLC, Deutsche Bank and Goldman Sachs are the joint bookrunners.

The Dallas-based company plans to use the proceeds for general corporate purposes, including debt bank debt repayment, and for acquisitions.

Mixed flows

The cash flows of the dedicated high-yield funds were mixed on Monday, the most recent session for which data was available at press time, an investor said.

High yield exchange-traded funds saw very light inflows of $1 million on the day.

Actively managed funds saw $40 million of outflows on Monday.

Dedicated bank loan funds, meanwhile, saw $85 million outflows.

Tone ‘pretty good’

A secondary market trader meantime opined that “overall, the market had a pretty good tone.

“If things continue, we’ll see inflows week-to-week.”

He said that the market’s improved tone “was following stocks.”

Equities improved across the board on Tuesday, posting their strongest gains in two weeks despite downbeat U.S. manufacturing data.

The bellwether Dow Jones industrial average – which on Monday had declined by nearly ½ point, its second straight downturn – shot up by 168.43 points, or 0.95%, on Tuesday to end at 17,888.35, with other major stock indexes following suit.

Frontier bonds firmer

The trader said that “some of the go-go names were better.”

He mentioned Frontier Communications, whose 11% notes due 2025 rose by 1 3/8 points to end at 99 5/8 bid.

More than $20 million of the Stamford, Conn.-based wireline telecommunications provider’s notes changed hands, putting them well up on the junk market’s Most Actives list.

Frontier’s 10½% notes due 2022 rose by 1 1/8 point on the day to go home at 100 3/8 bid, a market source said, seeing more than $13 million of the notes having traded.

TerraForm trades up

Perhaps the day’s biggest winner in Junkbondland was TerraForm Power.

The Bethesda, Md.-based alternative energy company’s 6 1/8% notes due 2025 were seen by a market source having shot up by more than 7 points on Tuesday to 78¾ bid, on volume of more than $11 million.

Its 5 7/8% notes due 2023 were even busier, with over $19 million having changed hands as the bonds rose to 80 bid, up 5 3/8 points on the day.

TerraForm Power’s Bethesda-based sister company TerraForm Global, Inc.’s 9¾% notes due 2022 firmed by 2½ points, ending at 76¼ bid, on turnover of more than $11 million.

The two companies’ bonds and shares, along with the shares and convertible notes of their parent company, SunEdison, Inc., had fallen badly in mid-November on the news that several hedge funds had either dumped or at least planned to cut their SunEdison stakes after the Maryland Heights, Mo.-based company’s disappointing third-quarter results.

TerraForm Power’s 5 7/8% notes had been trading as high as 92¾ bid as recently as Nov. 10 but traded as low as 69¾ by mid-November before coming back to their present levels, still well below where they had been a month ago.

Its 6 1/8% notes likewise had traded above 90 as recently as Nov. 9 but had fallen as low as 65¾ bid by the middle of the month before getting back up to their current levels.

TerraForm Global’s 9¾% notes followed a similar trajectory, plunging from around 90 bid on Nov. 10 to just under 72 bid by 10 days later and then working their way back up to present levels.

The notes, as well as the two companies’ shares, were helped by investor reaction to two pieces of news.

Hedge fund manager David Tepper, whose Appaloosa Management holds both equity and debt of TerraForm, fired off a letter to SunEdison’s board of directors charging that some of the parent company’s recent actions were holding back TerraForm’s value – raising investor hopes that such concerns voiced by an important shareholder might bring some changes.

He said that SunEdison’s recent “strategic focus around acquiring projects” offers “little apparent benefit” for its stakeholders.

The TerraForm bonds and shares also benefitted as Oppenheimer & Co. analyst Colin Rusch on Monday upgraded the shares to an “outperform,” saying they were undervalued and have considerable potential upside.

Recent laggards improve

Elsewhere, credits that have recently had a rocky road were seen doing better on Tuesday.

These included Luxembourg-based satellite communications company Intelsat’s 7¾% notes due 2021, which gained 5¼ points to 45¾ bid, a source said, on volume of more than $18 million.

San Antonio, Texas-based broadcaster iHeart’s 10% notes due 2018 gained more than 4 points on the day to move above 42 bid, with more than $16 million traded.

Indicators’ improvement continues

Statistical measures of junk market performance were higher across the board for a second consecutive session on Tuesday, their fourth higher session in the last five trading days. The indicators had turned northward on Monday after having been mixed on Friday.

The KDP High Yield Daily index gained 10 basis points on Tuesday to end at 65.85, their second straight gain and third advance in the last four sessions. On Monday, the index had risen by 9 bps, in contrast to Friday’s 4-bps fall.

Its yield came in by 4 bps on Tuesday to end at 6.88% after having been unchanged on Friday and again on Monday. The yield had last narrowed by 3 bps on Wednesday and was not published on Thursday in observance of the Thanksgiving Day holiday.

The Markit Series 25 CDX North American High Yield index jumped by 11/16 point on Tuesday to go out at 102 25/32 bid, 102 13/16 offered. It was the index’s fourth straight rise, including its 1/16-point gain on Monday.

And the Merrill Lynch North American Master II High Yield index advanced by 0.233% on Tuesday, its second straight improvement and its fourth in the last five trading days. It had risen by 0.165% on Monday, its first gain after Friday’s 0.001% loss.

The index’s year-to-date loss narrowed to 1.89% from 2.118% on Monday – the first time the cumulative loss was back under 2% since Nov. 19, when it closed at negative 1.919%.

Those year-to-date losses still remain well above the index’s worst 2015 cumulative setback of 3.069%, recorded on Oct. 2.

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