Algeco Scotsman, EnVen deals price, move up; junk market tone improves as stocks gyrate higher

Paul Deckelman and Paul A. Harris

New York, Feb. 6 – It was another wild day in the financial markets on Tuesday, with equities continuing to gyrate and high-yield going along for the ride.

But in contrast to the wholesale carnage seen on Wall Street on Friday and again on Monday, with stock indexes viciously hammered down by hundreds of points each day, that market seemed to have recovered at least some of its lost ground, ending higher on the day – with junk traders observing that high-yield’s tone also seemed somewhat improved.

However, they were quick to point out that while junk had booked losses over the previous two sessions, the selling had been orderly and far from the sell-offs seen on the equities side of the fence.

Primaryside sources saw two new deals get done on Tuesday as regularly scheduled forward calendar offerings.

Portable storage container and pre-fabricated structure provider Algeco Scotsman priced a pair of dollar-denominated tranches as part of a four-part dollar and euro deal; the $825 million dollar portion of that transaction consisted of $520 million 8% senior secured notes and $305 million of 10% senior unsecured notes, both due 2023.

Both tranches priced at a steep discount to par and were seen having moved up when they hit the aftermarket, with the secured notes more actively traded than the unsecured paper.

Oil and natural gas exploration and production company EnVen Energy Corp. did a $325 million five-year secured deal; traders said those new notes firmed smartly when they hit the aftermarket, although volume was very limited.

Looking ahead, the syndicate sources were anticipating a likely Wednesday pricing from E&P operator Sanchez Energy Corp., bringing a $400 million offering of five-year senior secured first-lien notes to market.

Also in the energy space, TransMontaigne Partners LP, a refined petroleum products marketing and distribution company, could conceivably price its $300 million offering of eight-year notes after order books close on Wednesday afternoon.

Statistical market performance measures turned mixed on Tuesday after having been down across the board on Thursday, Friday and again on Monday. The indicators had also been mixed last Wednesday.

Algeco Scotsman dual-currency deal prices

In Tuesday's primary market Algeco Scotsman priced $825 million and €750 million face amounts of high-yield bonds in four tranches.

The deal included three tranches of five-year senior secured notes (B2/B-/B+) from Algeco Scotsman Global Finance plc:

• €600 million of 6½% fixed-rate notes priced at 97.921 to yield 7%;

• $520 million of 8% fixed-rate notes priced at 97.997 to yield 8½%; and

• €150 million of Euribor plus 625 basis points floating-rate notes that priced at 98.00.

Algeco Scotsman Global Finance 2 plc priced $305 million of 10% senior unsecured notes due March 15, 2023 (Caa1/CCC/CCC+) at 94.008 to yield 11½%.

In a restructuring, a proposed tranche of euro-denominated unsecured fixed-rate notes was abandoned.

BofA Merrill Lynch, Deutsche Bank, Goldman Sachs, Barclays, Credit Suisse and ING were the joint global coordinators.

Proceeds, together with proceeds from an equity contribution, borrowings under a new ABL facility and cash on hand, will be used, among other things, to repay debt, including all debt outstanding under Algeco Scotsman’s existing ABL facilities agreement, existing senior secured notes and existing senior unsecured notes.

EnVen secured offering prices

EnVen Energy Corp. was heard to have priced $325 million of five-year senior secured second-lien notes (Caa1/BB-) at par to yield 11%.

High yield market sources said that price talk on the Houston-based independent oil and natural gas exploration and production company’s offering had envisioned a yield of 11% to 11¼%. That was wider than the initial guidance on the deal late last week, which had been in the 9½%-to-10% area.

The notes are actually to be issued by the company’s wholly owned Energy Ventures GoM LLC financing subsidiary, with that entity’s wholly owned subsidiary, EnVen Finance Corp., as co-issuer.

The Rule 144A/Regulation S transaction, which was formally announced by EnVen on Jan. 30, was brought to market via bookrunner J.P. Morgan Securities LLC.

The company plans to use the proceeds from the issue to pay off Energy Ventures GoM’s revolving credit facility and second-lien term loan, with any remaining proceeds to be used for general corporate purposes.

Sanchez Energy on deck

Looking to the Wednesday session Sanchez Energy Corp. plans to price a $400 million offering of five-year senior secured first lien notes (expected ratings B1/BB-).

The debt refinancing deal was scheduled to roll out on a Tuesday conference call with investors and is in the market with initial guidance in the high 7% area, sources say.

Citigroup is the left joint global coordinator. JP Morgan and RBC are also joint global coordinators.

TrasMontaigne talk 6% to 6¼%

TransMontaigne Partners LP and Finance-Co. talked a $300 million offering of eight-year senior notes (B2/BB-/BB) to yield 6¼% to 6½%.

Books are scheduled to close at 1 p.m. ET Wednesday.

Joint bookrunner RBC will bill and deliver. BofA Merrill Lynch, Citigroup, Credit Suisse, MUFG and Wells Fargo are also joint bookrunners.

Mixed Monday flows

Amid the capital markets volatility on Monday high-yield ETFs actually saw cash flows that were substantially positive, $108 million of inflows, an investor said.

Asset managers were negative on the day, sustaining $120 million of outflows on Monday.

Dedicated bank loan funds, which saw $180 million of inflows on Monday, have been positive every day of the past two weeks, the investor remarked.

Algeco offering trades up

In the secondary market, traders saw some upside movement in both tranches of Algeco Scotsman’s new two-part issue.

A trader pegged its 8% senior secured notes due 2023 at 99 5/16 bid, estimating volume in the new deal at around $21 million, putting the Baltimore-based modular structure and portable storage container’s issue high up on the day’s Most Actives list.

A second trader saw those bonds doing better than that, locating them around 99¾ bid going home.

At another desk, a market source said that those bonds – which had priced at a substantially discounted 97.997 – had pushed up into a bid range of 99¼ and 100 5/16 bid.

However, he said that he had actually seen “only one print above par – the bulk of the trading was below par, mostly in the 99ish area.”

The other half of that deal – the company’s 10% senior unsecured notes due 2023 – were quoted by a trader in a 95-to-96½ bid context, up from its deeply discounted 94.008 pricing level.

However, he said that only around $3 million of the notes had traded on the session.

Existing Algeco firmer

A trader said that the company’s existing 10¾% notes due 2019 – one of the pieces of debt scheduled to be repaid using some of the new-deal proceeds – were better on the day, ending at just under 103 bid.

A second market source, seeing that paper in that same area, said the bonds were up a little more than ¼ point on the session, with more than $16 million seen having changed hands.

EnVen issue improves

Traders said that the day’s other new deal – oil and gas producer EnVen Energy’s 11% senior secured second-lien notes due 2023 – notched some handsome gains when those notes began trading around after having priced at par.

“That actually traded up quite a bit,” one of the traders said, seeing the notes moving around between 101¾ and 103 bid.

Towards the end of the day, he saw that range narrow to 102 5/8-to-102 7/8 bid.

He saw about $10 million of those notes having traded.

Traders at two other desks both located the notes around the 102 7/8 level late in the session.

Berry, Rockpoint little changed

Going back a little further, a trader saw little or no real activity in either of the new issues that had priced on Friday.

He said that Berry Petroleum Co., LLC’s 7% notes due 2026 were unchanged around the par bid level, on “not much volume.”

He meantime saw Rockpoint Gas Storage Canada Ltd.’s 7% senior secured first-lien notes due 2023 also about unchanged at 99¼ bid, on “light volume.”

Bakersfield, Calif.-based oil and gas E&P operator Berry had priced $400 million of its notes at par Friday in a regularly scheduled transaction, after the issue size was increased from an originally announced $350 million.

While the new notes had moved up after that to somewhere between 100 3/8 and 100 7/8 bid on about $15 million of initial secondary dealings, they had fallen back to around par on Monday and stayed there on Tuesday.

Calgary, Alta.-based natural gas and natural gas liquids storage company Rockpoint had priced its $400 million regularly scheduled offering on Friday at a deeply discounted 97.368 to yield 7 5/8%; they had shot up to around the 99 7/8 bid level in heavy initial dealings of more than $75 million, dropping down to around a 99-to-99 3/8 bid range on considerably less volume on Monday and staying there on Tuesday.

Junk improves along with equities

Overall, traders saw a somewhat better tone in the high yield market on Tuesday, as Junkbondland seemed to have taken its cue from stocks, which also improved after two of the worst sessions in recent memory on Friday and again on Monday.

The bellwether Dow Jones Industrial Average – which swooned by nearly 666 points on Friday on investor fears of potentially higher interest rates and then went to an absolute freefall on Monday, plunging by nearly 1,200 points – gyrated around on Tuesday, falling and then rising and then falling again until it finally went home up by some 567.02 points, or 2.33%, ending the day at 24,912.77.

One of the junk traders noted that roller-coaster ride, observing that “it wasn’t until the end of the day today that we saw kind of a bounce – the [stock] market was all over the place – it was up 300 [points] this morning out of the gate, it was down, it was back up, it was down. So yeah, there were a lot of gyrations throughout the day.”

He suggested that “it seemed there were buy programs later in the afternoon, so that kind of took equities [up], and it took high yield with it.”

He noted that the widely followed high yield CDX index closed at the high of just under 107.30, after having closes Tuesday night at 106.92, “so definitely, there were some fluctuations throughout the day” in the junk precincts as well as the badly oversold equities.

He said that “there was [high-yield] ETF selling today for sure.”

Although he saw some buying towards the end of the day by those ETF funds, “there was still a bias toward selling,” he said.

But he pointed out that while stocks were rising and falling at a dizzying pace over the past several sessions, junk bonds “haven’t ridden the same [roller-coaster] – equities traded much higher than high-yield did, so there was a lot more room for equities to come off than junk.”

He said that high-yield “didn’t run as high, and it didn’t come down as low.”

Accordingly, “there was a little bit more order in the movements that we saw over the past two days.”

At another desk, a second trader theorized that the past several days’ movements in the financial markets “is more about the risk premium and uncertainty, so it is more psychological and perception of the riskiness than what’s [actually] happening.”

Noting that stocks had rebounded by more than 500 points Tuesday, he declared “it’s a positive thing, then.

“So I guess all of the lemmings won’t jump off the cliff.”

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday after having been down across the board on Thursday, Friday and again on Monday. The indicators had also been mixed last Wednesday.

The KDP High Yield Daily Index continued to get hammered for an eighth consecutive session, falling by 15 basis points on Tuesday to end at 70.94. It had also nosedived by 26 bps on Monday, and had swooned by 17 bps on Friday, after having ended down by 5 bps on both last Wednesday and again on Thursday.

Its yield rose by 3 bps to 5.57%, its seventh straight widening. Its yield had ballooned out by 8 bps on both Friday and again on Monday, following smaller rises last Wednesday and Thursday.

But the Markit CDX Series 29 index pushed upwards by almost 1/8 point on Tuesday to close at 107¼ bid, 107 9/32 offered, after having fallen over three successive sessions before that. It had tumbled by more than ½ point on Monday, had plummeted by more than 5/8 point on Friday and had closed down ¼ point on Thursday.

However, the Merrill Lynch High Yield Index stayed on the downside for a fourth session in a row, sliding by another 0.356%, on top of Monday’s 0.222% setback.

Tuesday’s loss pushed the index’s year-to-date return further into the red, with a cumulative deficit of 0.399% – a new negative peak level – after having ended down 0.042% on the year so far on Monday. Monday’s close marked the first time the index had ended in negative territory for the first time this year – in fact, it was the first the index was showing a negative cumulative return since March 1, 2016, when it had closed with a 0.296% year-to-date loss; the index was never in the red for all of 2017.

Those negative levels are down from the index’s most recent positive year-to-date return of 0.181%, seen on Friday. And the current levels are well down from its 0.936% finish on Jan. 26, which had been the third consecutive new peak YTD level for the year so far.

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