NCR prices; Clear Channel on tap; Frontier plunges; sell-off in oil patch continues

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 7 – Although market volatility has muted new issue activity, the primary market continued to generate news on Wednesday with one deal pricing and one more joining the forward calendar.

NCR Corp. priced $1 billion of senior notes (B2/BB) in two tranches.

Clear Channel Outdoor Holdings, Inc. disclosed plans to price $1.26 billion of eight-year senior secured notes (expected ratings Caa2/B-) before the end of the week.

Clear Channel joins NCR Corp. and US Farathane, LLC on the active forward calendar.

Official talk circulated on NCR’s $1 billion two-part offering of senior notes (B2/BB) with pricing expected on Thursday.

US Farathane is expected to price on Friday.

In the European primary market, Zurich-based Swissport Financial SARL is marketing a €780 million two-tranche offering via a roadshow which is scheduled to wrap up on Thursday.

Meanwhile, the secondary space was again soft on Wednesday with a risk off attitude pervading the market, sources said.

Focus was on the deluge of earnings reports coming in from high-yield issuers.

Frontier Communications Corp.’s junk bonds plunged in high-volume activity after the struggling telecom reported second quarter earnings.

Oil and gas names continued their downward momentum with crude oil futures extending their rout to another session.

New issue news

NCR Corp. priced $1 billion of senior notes (B2/BB) in two tranches on Wednesday.

The debt refinancing deal included a $500 million tranche of eight-year notes which priced at par to yield 5¾%, in the middle of yield talk in the 5¾% area, and tight to earlier guidance in the high 5% area.

It also included a $500 million tranche of 10-year notes which priced at par to yield 6 1/8%, in the middle of yield talk in the 6 1/8% area, and in line with earlier guidance in the low 6% area.

Wells Fargo was the left bookrunner.

Meanwhile, Clear Channel Outdoor Holdings disclosed plans to price $1.26 billion of eight-year senior secured notes (expected ratings Caa2/B-) before the end of the week.

Initial talk has the debt refinancing deal coming to yield in the mid-5% area.

The active dollar-denominated calendar also includes US Farathane’s $600 million offering of five-year secured notes guided in the mid-8% area.

The European new issue market also remains marginally active amid the volatility.

Zurich-based Swissport Financial SARL is marketing €780 million of notes in two tranches: €500 million five-year senior secured notes (B2/B-) and €280 million 5.5-year senior unsecured notes.

The roadshow is scheduled to wrap up on Thursday.

The damage

As a measure of damage that the high-yield asset class sustained during recent volatility, high-yield bonds widened by 37 basis points during Monday's market rout, a source recounted.

It was the third largest daily widening in the past decade and the biggest since the 39 bps widening that took place on June 24, 2016.

In the month of August to Tuesday's close, junk has posted a negative-1.01% return.

However, year-to-date returns remain solid and impressive at 9.21%, the source added.

Frontier plunges

Frontier Communications’ junk bonds plunged in high-volume activity on Wednesday after the struggling telecom reported second-quarter earnings.

Frontier’s 10½% senior notes due 2022 dropped 6½ points during Wednesday’s session. The notes traded down to 51.

They were on a 60 handle on Tuesday.

The 11% senior notes due 2025 dropped almost 8 points to close Wednesday at 50¼. They were trading on a 58 handle prior to Frontier’s Tuesday evening earnings announcement.

Frontier’s 7 5/8% senior notes due 2024 dropped 4¼ points to 50.

While Frontier’s second-quarter EBITDA of $882 million was slightly better than analyst expectations for EBITDA of $863 million, the company cut its guidance for 2019.

Frontier now expects EBITDA of $3.35 billion to $3.42 billion for the fiscal year.

The company also reported an increase in its loss of broadband subscribers, according to a market source.

Frontier did not host a Q&A during its earnings conference call.

The company’s capital structure also traded off after the announcement in July that it would not hold the Q&A session when it announced its earnings.

Oil patch sell-off continues

The sell-off in the oil patch continued on Wednesday.

California Resources Corp.’s bellwether 8% senior notes due 2022 dropped another 4 points to close the day at 52½.

The notes have fallen almost 10 points on the week.

Chesapeake Energy Corp.’s senior notes also continued their downward spiral. Chesapeake’s 8% senior notes due 2025 traded down 2¼ point to close the day at 74¼.

The notes were down 5 points on the week.

The 8% senior notes due 2027 traded down 2½ points to close the day at 69. The notes dropped 10 points on the week.

Crude oil futures continued their decline and dropped to the lowest level since January during Wednesday’s session.

The barrel price of WTI crude oil futures fell to settle at $52.31, a decrease of $1.32, or 2.46%.

In addition to trade war tensions and concerns over global growth, the sell-off in crude oil on Wednesday was fueled by a surprise rise in crude oil stockpiles with a supply glut joining the list of concerns causing investors to flee.

Outflows for asset managers

Actively managed high-yield funds, the asset managers, saw a whopping $1.3 billion of daily outflows on Tuesday, the most recent session for which data was available at press time, a trader said.

However, high-yield ETFs were positive on the day, posting $66 million of inflows on Tuesday, the source added.

With four of the present week's five sessions in the tally, the combined funds were tracking $3.4 billion of outflows, the trader said.

On Thursday afternoon, Lipper US Fund Flows is expected to report high yield fund flows for the week to Wednesday's close.

The Wednesday numbers remained to be determined at press time.

Indexes drop

After a mixed day on Tuesday, indexes were again trading down on Wednesday.

The KDP High Yield Daily index dropped another 22 bps to close the day at 70.67 with the yield now 5.72%.

The index dropped 14 bps on Tuesday and 51 bps on Monday.

The ICE BofAML US High Yield index dropped 28.9 bps with the year-to-date return now 9.442%.

The index gained 20.9 bps on Tuesday after dropping 77.9 bps on Monday, when it slid below the threshold of 10% returns.

The CDX High Yield 30 index shaved off 10 bps to close Wednesday at 106.10. The index gained 37 bps on Tuesday after sinking 93 bps on Monday.

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