PetSmart mixed; Anadarko, Tesla move lower; CalRes rises; market eyes China negotiations

By James McCandless and Paul A. Harris

San Antonio, May 6 – Sunday night tweets from U.S. President Donald Trump, stating he would levy tariffs on almost all goods imported from China starting Friday, scattered investors in Europe and the United States and sent the major stock indexes sharply lower in the early going on Monday, as the high-yield secondary saw mixed movement with focus drawn to oil and retail.

PetSmart, Inc.’s notes finished mixed as the company prepares an initial public offering for e-commerce segment Chewy.com.

In energy, Anadarko Petroleum Corp.’s issues were slightly lower after receiving a tweaked takeover bid from Occidental Petroleum.

Sector peer California Resources Corp.’s paper rose in the wake of its earnings release.

Meanwhile, Tesla, Inc.’s notes declined after a major short seller criticized chief executive officer Elon Musk at a conference.

Although stocks recovered a substantial amount of the post-tweet losses by the Monday close, any prospective junk issuer that might have been waiting in the wings in the early morning certainly had cause to reconsider, a syndicate banker said following the session's close.

With China poised to send a trade delegation to Washington D.C., to engage in negotiations with the Trump Administration, the market will be watching for developments surrounding those negotiations, the banker said.

In particular people will be watching the size of the Chinese delegation, in the wake of Trump's tweets, and whether Vice Premier Liu He, shows up to lead the group, as had been anticipated prior to the Sunday night tariff threat.

If stability returns to the markets on Tuesday there are a couple of drive-by deals expected to materialize through the course of the week, the syndicate banker said.

Active calendar

Although the Monday session failed to generate new issue news, the May 6 week got underway with an active calendar of moderate size.

All of it is expected to clear the market before Friday's close.

Ausdrill Finance Pty Ltd. of Australia is selling $500 million seven-year senior notes (Ba2/BB). Early price indications are in the high 6% area.

MGM China Holdings Ltd., a Macau-based subsidiary of MGM Resorts International, is selling $1.25 billion of senior notes (Ba3/BB-) in two tranches: five-year non-call-two notes with initial talk in the 5½% area and seven-year non-call-three notes with initial talk in the 6% area.

VistaJet Malta Finance plc was scheduled to start a roadshow for its $525 million offering of five-year senior notes. Initial guidance is 9%, a trader said.

Meanwhile Pharmaceutical Product Development, LLC (PPD) is expected to roll out a $900 million offering of unsecured notes during the week ahead, an investor said.

JP Morgan will lead the deal, and the use of proceeds includes a dividend, the investor added.

PetSmart mixed

In retail, PetSmart’s notes closed the session mixed, traders said.

The 8 7/8% notes due 2025 added ½ point to close at 93 bid. The 5 7/8% notes due 2025, while slipping to 92¾ bid, finished level at 93 bid.

The Phoenix-based pet supplies chain is preparing a $100 million initial public offering for e-commerce segment Chewy.com.

Despite that, the company plans to retain majority ownership.

The business was the subject of a drawn out legal dispute between the name and its creditors after a large portion of Chewy.com was transferred to private equity.

“They’ve been doing a lot of work to get the creditors back into their corner,” a trader said.

A loan amendment approved last month meant that in return for creditors dropping litigation, the company would limit the amount of new debt it could take on.

Anadarko lower

Meanwhile, in the energy space, Anadarko’s issues finished slightly lower, market sources said.

The 6.6% notes due 2046 lost ¾ point to close at 132 bid.

Late Sunday, the Woodlands, Texas-based oil and gas producer received an updated $38 billion bid from Occidental Petroleum.

The deal comes with the added provision that if Anadarko agreed to the deal, the takeover would not be submitted for a vote to Occidental’s shareholders.

After the close on Monday, the company’s board of directors announced that it is backing Occidental’s takeover bid over a preexisting $33 billion bid from Chevron.

Chevron has four days to decide if it wants to resubmit an offer.

Cal Res up

Sector peer California Resources’ paper were rising, traders said.

The 6% paper due 2024 tacked on ¾ point to close at 67¼ bid. The 8% paper due 2022 improved by 2¼ points to close at 79¼ bid.

The Los Angeles-based independent oil and gas producer’s structure has been improving after reporting first-quarter earnings after the close on Thursday.

Earnings were pegged at 63 cents per share profit, outpacing analyst predictions of a 50 cents per share profit.

Revenues for the quarter were also well received at $690 million.

Tesla off

Elsewhere, Tesla’s notes were negative, market sources said.

The 5.3% notes due 2025 dropped 1 point to close at 86¼ bid.

On Monday, the Palo Alto, Calif.-based electric carmaker’s structure declined after a major short seller criticized founder and chief executive officer Elon Musk at a conference.

Greenlight Capital president David Einhorn said that Musk’s promises on self-driving vehicles would not be realized.

Mixed Friday flows

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

High-yield ETFs saw $80 million of inflows on the day.

However actively managed funds sustained $27 million of outflows on Friday, according to the trader.

Indexes

Two indexes finished the first day of the new week negative.

The KDP High Yield Daily index lost 6 basis points to 70.34 at the beginning of the week with the yield now at 5.8%.

The index has been mixed of late, rising 11 bps on Friday, losing 10 bps on Thursday and remaining fixed on Wednesday.

The ICE BofAML US High Yield index declined by 13 bps with the year-to-date return at 8.763%.

The index has also been volatile, gaining 14.7 bps on Friday, losing 19.7 bps on Thursday and improving by 5.1 bps on Wednesday.

© 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.