Morning Commentary: McDermott on deck, mulls deep discount; Compass Diversified, Comstock eye deals

By Paul A. Harris

Portland, Ore., April 2 – A downsized bond offering from McDermott International Inc. commanded a sizable share of the market buzz on Monday morning.

Latest pricing on the deal has it coming with as much as 6 points of original issue discount and an 11%-handle yield, sources say.

Pricing is expected on Monday.

The $1.3 billion offering of senior notes (B2/B-), downsized from $1.5 billion, had been expected to price last week but was pushed into the April 2 week.

Talk widened dramatically. Initial guidance was 8 3/8% to 8½%. Official price talk in the 10½% area surfaced late last week.

Barclays is the lead on the bonds, which are coming in connection with the merger of McDermott and Chicago Bridge and Iron (CB&I). Proceeds will be used to repay debt at both entities and for general corporate purposes.

Compass Diversified new deal

Elsewhere Compass Diversified Holdings, LLC initiated plans to price $400 million of eight-year senior notes late in the April 2 week.

Initial talk has deal coming to yield 7¼% to 7½%.

BofA Merrill Lynch is the lead on the debt refinancing deal.

And Comstock Resources, Inc. announced in a Monday press release that it plans to offer $600 million of senior notes.

The deal is part of a comprehensive refinancing undertaken by the Frisco, Texas-based independent oil and gas exploration and development company.

Junk opens flat

The high-yield bond market was trading flat as the first session of April got underway, according to traders.

Amid weaker equity prices bonds were basically unchanged on the morning, with the only headline news stirring the market being a surprise bankruptcy filing from FirstEnergy Solutions, a trader said (see related story in this issue).

The SPDR Blmbg Barclays High Yield Bd ETF (JNK) was down a dime, or 0.28%, at $35.60 per share at mid-morning.

Crude oil prices were also off substantially.

The barrel price of West Texas Intermediate crude oil for May 2018 delivery was down $1.81, or 2.79%, at $63.13 at mid-morning.

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