QEP drives by, firms; delayed Windstream also prices; Sprint dives as merger dies; energy surge continues

By Paul Deckelman

New York, Nov. 6 – The high-yield primary market saw a pair of new U.S. dollar-denominated deals price on Monday – one a new drive-by offering, the other an upsized version of a deal delayed since last week.

Oil and natural gas exploration and production operator QEP Resources Inc. brought a quickly shopped $500 million issue of 8.25-year notes to market.

Traders said those new notes firmed smartly in very busy trading when they hit the aftermarket.

Telecommunications services provider Windstream Holdings, Inc. finally priced its planned issue of eight-year notes, which were marketed to potential investors last week, raising expectations that the deal might price either last Thursday or Friday.

When the deal finally did get done, syndicate sources said that it was upsized to $400 million and priced at a discount to par.

Traders saw the notes stay around their issue price.

The dollar market also saw a pair of prospective deals join the forward calendar, as dry-bulk shipping company Navios Maritime Holdings Inc. and Pentagon contractor Kratos Defense & Security Solutions Inc. each announced upcoming new offerings.

In the secondary market, there was brisk trading activity in last week’s new issues from the likes of Acrisure Inc. and Navistar International Corp., but not much price movement.

Away from the new deals Sprint Corp. bonds nosedived across its capital structure in very active trading, on the news that the wireless communications provider’s merger talks with sector peer T-Mobile came to an abrupt – but not unexpected – end, with no deal accomplished.

Energy names like California Resources Corp., Denbury Resources Inc. and Sanchez Energy Corp. continued to ride the crest of surging world crude oil prices, which rose for a third consecutive session on Monday/

Statistical market performance measures were mixed for a second straight session on Monday. They had turned mixed on Friday, after having fallen across the board on Thursday. Before that, the indicators had been mixed over the previous four sessions as well.

QEP drives by

The big deal of the day in the primary arena came from QEP Resources, Inc., which priced a quickly shopped $500 million of senior notes due March 1, 2026 (Ba3/BB+/BB), high-yield syndicate sources said Monday.

Those 8.25-year notes priced at par to yield 5 5/8%, tighter than price talk of a yield around 5¾%.

The Securities and Exchange Commission-registered offering was brought to market via left lead book runner Wells Fargo Securities LLC, with BMO Capital Markets Corp., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, MUFG Securities Americans, Inc. and U.S. Bancorp Investments, Inc. also acting as joint bookrunners.

Fifth Third Securities Inc., SMBC Nikko Capital Markets Ltd., TD Securities (USA) LLC, Goldman Sachs & Co. and PNC Capital Markets LLC will be co-managers on the deal.

QEP, a Denver-based independent oil and natural gas exploration and production company, plans to use the new-deal proceeds to fund its planned make-whole call of its existing $134 million of 6.8% senior unsecured notes due 2018 and the priority-acceptance “waterfall” tender offer for its 2020 and 2021 unsecured notes.

QEP separately announced on Monday that it would tender for up to $361 million principal amount of the 2020 and 2021 notes, with the $136 million of outstanding 6.80% 2020 notes having first priority and its $625 million of 6 7/8% notes due 2021 having second priority.

Windstream issue – finally – prices

The day’s other dollar denominated deal came from Little Rock, Ark.-based telecommunications company Windstream Holdings Inc., which priced $400 million of 8 5/8% senior first-lien notes due 2025 (B2/BB-/BB+) on Monday.

That issue was upsized from an originally announced $250 million.

The notes priced at 99 – in line with their price talk – to yield 8.802%.

The notes were originally marketed to investors via a conference call last Thursday, with initial expectations that the deal might price either last Thursday, or at the latest, on Friday – but it did not get done at that time and was instead floated off till Monday, when it finally did price in its upsized form.

The Rule 144A/Regulation S for life transaction was brought to market via left lead bookrunner Citigroup, with BNP Paribas Securities Corp., Bank of America Merrill Lynch, J.P. Morgan, MUFG and SunTrust Robinson Humphrey, Inc. also acting as bookrunners.

The company said in a regulatory filing that the new notes will be issued by its Windstream Services, LLC and Windstream Finance Corp. subsidiaries as additional notes under an indenture covering the new 8 5/8% senior first-lien notes due 2025, which Windstream expects to issue under the terms of an exchange offer that the company made to the holders of its existing 2020 and 2021 notes.

Windstream plans to use the add-on deal proceeds to pay revolving credit facility debt.

Navios hits the road

The forward calendar fattened with the addition of a planned offering of $300 million senior secured notes due 2022 by Navios Maritime Holdings Inc. and its Navios Maritime Finance II (US) Inc. funding subsidiary.

The junk bond syndicate sources heard that the company is scheduled to begin a roadshow starting on Tuesday for that planned offering.

On tap for Tuesday is a group lunch in New York and an investor call both scheduled for 12 noon ET, with the roadshow then moving to Boston on Wednesday for a group breakfast meeting there at 8 a.m. ET.

After that, pricing on the issue is expected later in the week.

The sources said that the Rule 144A/Regulation S for life issue will be brought to market via joint bookrunners Morgan Stanley & Co., J.P. Morgan and BofA Merrill Lynch, with Goldman Sachs acting as a co-manager on the deal.

Navios Maritime, a Monte Carlo, Monaco-based global shipping company specializing in the transportation of dry bulk commodities such as iron ore, coal and grain, plans to use the new-deal proceeds to refinance its existing 8 1/8% senior notes due 2019 and to pay related fees and expenses.

Kratos coming with deal

Kratos Defense & Security Solutions, Inc., a San Diego-based defense contractor, unveiled plans for a $300 million issue of senior secured notes due 2025.

Proceeds from the Rule 144A and Regulation S transaction will be used to retire all of the company’s outstanding existing 7% senior secured notes due 2019 and to pay related fees and expenses.

New QEP issue improves

When the new QEP Resources 5 5/8% notes due 2026 were freed for trading, they firmed smartly, market participants said.

One initially saw the bonds come out of the gate at around 100½ after pricing at par.

But a short time later, those bonds had moved up solidly, with one trader seeing them “trading pretty well” at 102¼ bid.

At another desk, a trader pegged the new issue in a 102-to-102¼ bid trading range, while a third saw them finishing as high as 102½ bid.

More than $48 million of those notes changed hands, landing high up on the day’s Most Actives list.

Windstream hangs around issue price

A trader saw the day’s other pricing – Windstream Holdings’ 8 5/8% first-lien senior notes due 2025 – staying “pretty much around issue” in a 98½-to-99 bid context, versus the 99 level at which the notes had priced.

At another shop, a market source located the new deal at 99, unchanged from its pricing level, with about $15 million having traded on the session.

A trader said that “you’re not going to see Windstream trade very much,” seeing the bonds as just a smallish tap on what the company expects to be the bonds it will issue as part of its aforementioned exchange offer for existing paper.

Acrisure, Navistar active, steady

Looking back a little, Friday’s new issue from Caledonia, Mich.-based insurance brokerage company Acrisure traded briskly, but didn’t seem to be going anywhere.

A trader said those bonds “started out a little weak, trading below par,” but added that by the end of the day, they had come back and had managed to edge up to around 100 1/8 bid.

A second trader also saw the note there going home, calling it a gain of 1/8 point on the day, with over $28 million of volume.

Acrisure priced $925 million of those notes at par in a regularly scheduled forward calendar offering, enlarged from an originally planned $725 million.

Another recently priced issue seen trading around on Monday was Navistar International’s 6 5/8% notes due 20256 5/8% notes due 2025.

A trader saw those notes “about unchanged” at 101½ bid, on “decent volume” of around $18 million.

Lisle, Ill.-based truck, bus, military vehicle and heavy automotive engine manufacturer Navistar priced $1.1 billion of those notes at par in a quick-to-market transaction on Thursday.

Sprint slides as talks end

Away from the new issues, players said that Sprint Corp.’s various bonds “got knocked around,” as one put it, after the Overland Park, Kan.-based wireless company said that its merger talks with sector peer T-Mobile had ended with no such combination achieved.

Sprint said the talks had faltered as the two companies failed to reach agreement on pricings and valuations of their various assets.

The two companies “were unable to find mutually acceptable terms,” they said in a joint statement.

“Sprint was down 4 or 5 points across the [capital] structure,” one of the traders said, while noting that T-Mobile’s junk bonds were unchanged.

“Sprint was the one that took it on the chin,” he said.

Another trader saw Sprint’s 6 7/8% notes due 2028 down 5 points on the day, to 103¼ bid, on turnover of more than $44 million.

He said its 7 7/8% notes due 2023 lost 3½ points to end at 109¼ bid, while its 8¾% notes due 2032 plummeted by 6 points on the session to around 117 bid.

“Sprint got hit early and often,” he said.

Oil names jump as crude prices soar

A trader said that the oil names “were clearly outperforming the rest of the market,” fueled by a surge in crude oil prices that carried the U.S benchmark grade West Texas Intermediate for December above the $57 per barrel mark.

That shot benchmark issuer California Resources’ 8% notes due 2022 up 2½ points on the day to close at 72 bid, with over $68 million traded, clearly the most of any single credit on the day, a trader pointed out.

A trader said the Los Angeles-based exploration and development company’s paper “went up a few points during the day” – and then went up “a few points more” in after-hours trading estimating a finish around 74 bid.

Among other sector names getting a boost were Plano, Texas-based Denbury Resources’ 5½% notes due 2022, which gained 2½ points to end at 69½ bid, with over $21 million traded.

Houston-based Sanchez Energy’s 6 1/8% notes due 2023 firmed by almost 3 points on the day to 89¼ bid, on “good volume; “ of about $18 million.

The bonds rose as oil saw its third straight gain, with WTI up $1.71 per barrel in New York trading at $57.35, while North Sea Brent crude zoomed to $64.27 a barrel in London, up $2.20 on the session.

Prices jumped amid speculation that OPEC and non-OPEC oil ministers will agree to extend an output cut program when they meet on Nov. 30.

They got a further boost from new data showing a decline oil drilling activity in the U.S., as oilfield services firm Baker Hughes reported that the number of active U.S. rigs drilling for oil fell by eight to 729 last week.

Indicators mixed

Statistical market performance measures were mixed for a second straight session on Monday. They had turned mixed on Friday, after having fallen across the board on Thursday. Before that, the indicators had been mixed over the previous four sessions as well.

For a second straight session, the KDP High Yield Daily Index gained 2 basis points on Monday, matching Friday’s advance and ending at 72.27, after having lost 3 bps on Thursday.

The Markit CDX Series 29 High Yield Index rose by 1/8 pint on Monday to 108¼ bid, 108 9/32 offered its first gain after three straight downside sessions.

But the Merrill Lynch North American High Yield Master II Index saw a third straight loss, easing by 0.003% on Monday, on top of Friday’s 0.016% retreat, after having declined by 0.54% Thursday.

Monday’s loss dropped the index’s year-to-date return to 7.439% from 7.442% on Friday and down as well from the 7.636% cumulative return posted on Oct. 24 – the peak YTD return for 2017 so far.

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