Covey Park caps $2.3 billion week, Eagle terms heard; new Covey, Eagle jump in active trading

By Paul Deckelman and Paul A. Harris

New York, April 28 – The high-yield primary market saw new issuance continue along at a relaxed pace on Friday.

As was the case during the first three days of the week, Friday saw just a single transaction price, as oil and natural gas exploration and production company Covey Park Energy LLC and its Covey Park Energy Finance Corp. subsidiary priced a regularly scheduled $450 million offering of eight-year notes.

Secondary market traders said the new bonds were the most actively traded credit in Junkbondland and firmed smartly from their par issue price.

They also saw a second consecutive session of active trading at higher levels in the new five-year PIK toggle notes issued by Pharmaceutical Product Development, LLC through its Eagle Holding Co. II LLC entity. That $550 million forward calendar deal actually priced on Thursday and began trading around at that time, but terms did not circulate until Friday morning.

Those two deals, along with the issues which came earlier in the week, generated a total of $2.27 of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers, according to data compiled by Prospect News. That was down from the $4.45 billion which had gotten done in 10 tranches last week, ended April 21.

Statistical market performance measures were better for a second consecutive session on Friday.

The indicators were meanwhile higher all around versus where they had finished last Friday, when they had been mixed.

Covey Park prices tight

Covey Park Energy priced Friday’s sole deal, a $450 million issue of eight-year senior notes (B3/B) that came at par to yield 7½%.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

Talk moved out from 7¼%, according to a trader who added that the book was heard to be okay on Friday morning.

Goldman Sachs was the left bookrunner. Wells Fargo, Capital One, Deutsche Bank, BMO, Citigroup and BofA Merrill Lynch were joint bookrunners.

Eagle sees big demand

In a deal said to signify a broad appetite for risk, Pharmaceutical Product Development priced a $550 million issue of five-year PIK toggle holdco notes (Caa1/CCC+) via its Eagle Holding Co. II LLC unit at par to yield 7 5/8% late Thursday.

The yield printed in the middle of the 7½% to 7¾% guidance.

The order book was 4.5 to 5 times oversubscribed, according a trader.

JP Morgan, Goldman Sachs, Barclays, UBS and Jefferies were the joint bookrunners for the PIK toggle holdco recapitalization deal.

Inflows

Dedicated high-yield bond funds saw solid daily inflows on Thursday, the most recent session for which data was available, a trader said.

High-yield ETFs saw $199 million of inflows on the day.

Actively managed funds saw $120 million of inflows.

A big appetite for risk demonstrated by recent marquee deals notwithstanding, some accounts are heard to be sitting on slightly more than normal amounts of cash, a sellside source said on Friday.

With earnings season afoot, look for the week ahead to generate a muted amount of new issue business in the dollar-denominated high-yield market, source said Friday.

A less busy week

Friday’s solitary deal from Covey Park Energy brought the week’s total of new dollar-denominated and fully junk-rated paper from domestic and industrialized-country borrowers up to $2.27 billion in six tranches, according to data compiled by Prospect News.

That was down from the $4.45 billion which priced in 10 tranches last week, ended April 21.

The week’s issuance, in turn, closed out a month of April which saw $15.78 billion get done in 35 tranches, according to the data.

That was down by nearly two-thirds from the $43.13 billion which came to market in 73 tranches during the month of March, the most active new issuance month so far this year.

It was also down from the $26.63 billion priced in 27 tranches during April 2016.

For the year so far, new issuance stands at $100.71 billion in 185 tranches, up considerably from the $60.4 billion which had priced in 80 tranches by this point on the 2016 calendar, the data indicated.

Full-year issuance in 2016 finished at $226.78 billion in 359 tranches –which ran 12.9% behind the $260.02 billion which had gotten done in 408 tranches in 2015.

Covey Park climbs in secondary

In the secondary arena, traders saw Covey Park Energy’s new 7½% notes pushing higher in very active initial trading after the Dallas-based oil and gas E&P company’s deal priced.

A market source said that more than $43 million of those bonds traded, easily topping the day’s high yield Most Actives list. He saw the bonds having gotten as good as 101½ bid, well up from their par issue price.

A second trader said that the bonds moved around between 100 1/8 and 101 7/8 bid.

However, he added, most trades in the afternoon” centered in a range of 100½ to 101 7/8.

Yet another trader pegged the issue around 101½ bid, 102 offered.

Eagle Holding soars

A trader said that the new 7 7/8% PIK toggle notes due 2022 issued by Pharmaceutical Product Development’s entity Eagle Holding Co. II traded up 3/8 point on the day to 102 bid on “pretty heavy volume.”

All told, more than $32 million of those notes changed hands.

A market source at another desk saw them rising by 5/16 point on the day to just under the 102 bid level.

A second source located the bonds in a 101 7/8 to 102 5/8 bid context.

That was well up from the par level at which the Wilmington, N.C.-based provider of contract research services to the pharmaceutical industry priced its deal on Thursday, although the terms of the transaction did not really hit the market till Friday.

Another trader noted that the bonds came to market early enough in the day Thursday for some aftermarket action, rising by 1 5/8 point, with over $38 million traded that day.

Indicators stay strong

Statistical market performance measures were better for a second consecutive session on Friday. They had turned higher on Thursday after being mixed on Wednesday and higher across the board on Monday and Tuesday.

The indicators were meanwhile higher all around versus where they had finished last Friday, April 21, when they had been mixed.

The KDP High Yield Daily Index rose by 3 basis points on Friday to end at 72.19, its sixth consecutive gain after seven losses in a row. On Thursday, it had risen by 2 bps on top of Wednesday’s 10 bps jump and Tuesday’s 9 bps surge.

Its yield came in by 3 bps on Friday to 5.12%, its sixth straight tightening. It had also come in by 1 bp on Thursday and by 3 bps on Wednesday.

Those levels compared favorably with the 71.87 index reading and 5.26% yield seen last Friday, April 21.

The Markit CDX Series 28 Index edged up by around 1/16 point on the session to 105 5/8 bid, 107 11/16 offered. On Thursday, it was unchanged after easing by around 1/16 point on Wednesday. That followed Tuesday’s gain of 5/16 point.

The index was up from last Friday’s 106 13/16 bid, 106 27/32 offered close.

The Merrill Lynch North American High Yield Index rose for an eighth consecutive session on Friday, gaining 0.111%, on top of Thursday’s 0.11% advance and Wednesday’s 0.122% upturn.

Friday’s improvement lifted the index’s year-to-date return to 3.836%, its fifth straight new year-to-date high point, surpassing the previous 2017 peak of 3.721% set on Thursday.

For the week, the index rose by 0.641%, its fifth consecutive week-over-week gain. It had been up by 0.182% the previous week, when the year-to-date return stood at 3.175%.

With 17 weeks in the books for 2017, the index has risen in 14 weeks and has declined in three weeks.

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