Dollar primary market quiets down; new Cliffs bonds busy, easier; Chemours jumps on legal settlement

By Paul Deckelman and Paul A. Harris

New York, Feb. 13 – The domestic high yield primary market quieted down on Monday following last week’s new-issuance binge – the heaviest new-deal week seen so far this year, weighing in at nearly $8.9 billion in 18 tranches.

No new U.S. dollar-denominated and fully junk-rated issues from domestic or industrialized-country borrowers were heard to have priced during the session, versus $500 million which had gotten done in one tranche on Friday.

Syndicate sources said that there weren’t even any new-deal announcements and only a relatively thin forward calendar being actively marketed.

The sources did hear some new-deal news out of Europe in non-dollar names, including a Swiss franc-denominated pricing from Switzerland-based travel-services provider gategroup and a sterling-denominated deal being marketed by British financial services company Jerrold Holdings Ltd.

In the secondary market, traders saw heavy volume in Friday’s new offering from iron-ore producer Cliffs Natural Resources Inc., with that eight-year issue heard to have eased on the session.

There was also active trading in recently priced issues from oil and natural gas operator Halcon Resources Corp. and packaged food products manufacturer Post Holdings Inc.

Away from the new-deal realm, Chemours Co. LLC’s two issues of bonds jumped in very active trading on the news that it and chemicals giant DuPont, its former corporate parent, reached a final settlement of several thousand personal-injury lawsuit claims relating to exposure to a toxic chemical at a former DuPont West Virginia production plant.

Statistical market performance measures posted their third consecutive stronger session on Monday, and their sixth such higher session in the last nine trading days; they had rebounded on Thursday, turning higher across the board after having been lower all around on Wednesday and mixed for two straight sessions before that, and then held those gains on Friday and again on Monday.

gategroup prices CHF 300 million

All of Monday's primary market action – and there wasn't much – took place in Europe.

Switzerland-based gategroup priced a CHF 300 million issue of five-year bonds at par to yield 3%.

The yield printed on top of revised yield talk in the 3% area. Initial talk was 3% to 3¼%.

BNP Paribas, Credit Suisse and UBS managed the sale.

Much of the debt refinancing deal, which was first announced on Feb. 1, appeared to go to local investors in Switzerland, a London-based sellside source said.

Jerrold starts Tuesday

Jerrold Holdings Ltd. plans to start a roadshow on Tuesday for a £200 million offering of seven-year senior secured notes (//expected BB-).

Credit Suisse is leading the general corporate purposes deal.

The issuing entity will be financing subsidiary Jerrold FinCo plc.

Thin calendar

The active forward calendar finished the Monday session much the way it finished on Friday: Ultra-thin.

Aside from Jerrold there is just one deal.

Gateway Casinos & Entertainment Ltd. has been roadshowing a $225 million offering of seven-year second priority senior secured notes (Caa1/CCC+), and is expected to price it in the middle the week.

Nor was there much buzz in the market about imminent deals.

We could be entering a quiet period, a trader said.

Or they could bring eight deals tomorrow.

One sellside source made reference to earnings blackout season.

Nothing in particular would seem to be constraining issuance, sources say, noting that the buyside has cash to put to work.

In any case, heading into mid-February the $35.8 billion of 2017 year-to-date issuance represents the biggest dollar amount that the market generated in the year to mid-February in the past four years, according to Prospect News data.

It totally eclipses the $11.3 billion that priced in 2016 to mid-February and is on a par with the years 2015 ($35.6 billion) and 2014 ($32.9 billion), to mid-February.

It's a solid pace, although well short of the record for year-to-mid-February issuance, $42.5 billion seen in 2013, which was just slightly above the $42.3 billion in 2012, the record-setting year in which the market would eventually generate a blistering $325 billion of issuance.

Friday inflows

The cash flows of the dedicated high-yield bond funds were positive on Friday, the most recent session for which data was available at press time.

High-yield ETFs saw $119 million of inflows on the day.

Actively managed funds saw $25 million of inflows on Friday.

Combine the high-yield fund flows for Friday fell well short of Friday cash inflows to the dedicated bank loan funds: $205 million.

Cliffs volume climbs

In the secondary arena, the new Cliffs Natural Resources 5¾% notes due 2025 shot to the top of the day’s Most Actives list with over $68 million having changed hands, about double the volume seen on Friday when the bonds moved into the aftermarket, posting modest gains after that $500 million quick-to-market deal had priced at par.

But while the Cleveland-based iron ore producer’s new paper traded in a 100 3/8 to 100 5/8 bid context in busy morning action, by the end of the day, traders saw those bonds having come off those peaks.

One saw them “last trading into a par bid,” while a second pegged them going home at 99¾ bid, calling that a ½-point loss on the day.

At another shop, a trader quoted the notes at 99¾ bid, 100 1/8 offered.

Halcon holds steady

Elsewhere among the recently priced issues, trader saw Halcon Resources’ 6¾% notes due 2025 essentially holding steady, with a market source calling the Houston-based oil and natural gas exploration and production company’s bonds unchanged on the day at par bid, on volume of around $16 million

“That’s the only one that’s not really doing much,” said a second trader, who saw the bonds offered at 100¼ bid early in the session but then saw them below that level later on.

He saw the credit going out “wrapped around par,” quoting them in a 99¾ to100¼ bid context.

Halcon had priced $850 million of those notes at par on Thursday, after that quickly shopped offering had been upsized from $700 million originally.

More than $56 million had traded in initial aftermarket dealings on Thursday and another $40 million on Friday, a market source said, but the bonds were little changed, remaining at or slightly below their issue price.

Two of the standout performers from last week’s big crop of new deals continued to trade well above their respective issue levels on Monday, but on only limited volume.

A trader saw “just a couple of small trades” in the new Block Communications Inc. 6 7/8% notes due 2025, seeing them around the same neighborhood they occupied on Friday, between 103¼ and 103¾ bid. The Toledo, Ohio-based diversified media company had priced $500 million of those notes at par in an unscheduled deal on Thursday after upsizing the offering from an originally announced $350 million; they had immediately leaped above the 102 mark when they began trading later that same session and had firmed higher to above the 103 bid range on Friday.

He also saw only “a couple of trades” in Ferroglobe plc’s 9 3/8% notes due 2022, but saw the bonds having pushed up to between 104¾ and 105 bid.

The London-based provider of silicon metals and specialty alloys had priced $350 million of the notes in a regularly scheduled forward calendar offering on Thursday; they initially traded around 102 bid and jumped to around the 104 bid level in Friday’s dealings.

Post continues to pop

Going back a little further, a trader saw Post Holdings’ 5½% notes due 2025 up by more than 5/16 point on the session Monday, ending at just under 102 bid, on volume of more than $16 million.

Post, a St. Louis-based producer of packaged consumer foods such as breakfast cereals, dried pasta, nuts and snack foods, had priced $1 billion of those notes at par last Monday, along with $750 million of 5¾% notes due 2027, after that quick-to-market offering was enlarged from an originally announced $1.5 billion size.

Chemours climbs on settlement

Away from the new deals, the news that Chemours and its former corporate parent, chemicals giant E.I. DuPont de Nemours, had settled several thousand personal injury lawsuits brought in the Ohio courts, arising out of alleged chemical contamination at one of DuPont’s former plants, gave the Wilmington, Del.-spinoff a boost, with its 6 5/8% notes due 2023 finishing up 4 1/8 point on the day at 105 5/8 bid, with over $39 million traded and its 7% notes due 2025 doing even better, gaining 6 points on the session to end at just over 108 bid, on volume of more than $35 million.

Indicators remain strong

Statistical market performance measures posted their third consecutive stronger session on Monday and their sixth such higher session in the last nine trading days; they had rebounded on Thursday, turning higher across the board after having been lower all around on Wednesday and mixed for two straight sessions before that, and then held those gains on Friday and again on Monday.

The KDP High Yield index rose by 3 basis points on Monday to end at 72.26, its third straight gain and its eighth rise in the last nine sessions. It was also up by 6 bps on Friday.

Its yield was unchanged at 5.08%, its second such unchanged finish in the last three sessions, after having come in by 2 bps on Friday.

The Markit CDX Series 27 High Yield index posted its third consecutive gain, and its sixth upturn in the last nine sessions; it improved by nearly ¼ point to close at 107 5/8 bid, 107¾ offered, after edging up by 1/32 point on Friday.

And the Merrill Lynch High Yield index also ended higher for a third session in a row, gaining 0.121%, on top of Friday’s 0.076% rise. It was the index’s eighth gain in the last nine sessions – a winning streak interrupted only by a 0.106% downturn last Wednesday, its first loss after five straight advances.

Monday’s upturn raised the index’s year-to-date return to 2.019%, versus 1.818% on Friday.

The latest gain marked its first close above the psychologically significant 2% level so far this year and a set a new peak for the year, eclipsing the old zenith of 1.916% set last Tuesday.

© 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.