Baytex Energy prices; Cleveland-Cliffs, Valaris improve; Consolidated Communications jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 13 – A pair of Canadian energy companies issued U.S. dollar-denominated junk bonds during the Thursday session.

At the conclusion of a brief roadshow, Baytex Energy Corp. priced an upsized $800 million issue (from $750 million) of 8½% seven-year senior notes (B1/BB-/BB-) at 98.709 to yield 8¾%.

The issue price came slightly cheap to discount talk of about one point. The yield came at the tight end of the 8¾% to 9% yield talk.

Baytex Energy brought the offering on the back of deal-size reverse inquiry, a trader said.

Timing was accelerated. Baytex had previously been expected to remain in the market until Friday.

Meanwhile, Conuma Resources Ltd. priced a $250 million issue of 13 1/8% five-year senior secured notes (Caa1/CCC+) at 97.00 to yield 13.974%.

No formal price talk was circulated, according to a trader who added that the deal was priced not long after being announced to the broad market on Thursday afternoon.

In the wake of those two executions, the active new issue calendar stood empty at Thursday's close.

Look for the primary market to pick up, a bond trader said on Thursday, adding that late in the April 10 week junk bond issuance is lagging pre-Easter forecasts.

Meanwhile, it was a strong day in the secondary space with the cash bond market adding 3/8 to ½ point on the back of fresh macro data that continued to point to waning inflation, a source said.

The Producer Price Index report, which decreased by 0.5% as opposed to the 0% forecast, sparked buyers to return to the space with the market holding its gains throughout the session.

The data came on the heels of the March Consumer Price Index report, which came largely in line with expectations.

While credit markets initially responded favorably to the report on Wednesday, the market weakened in response to Fed minute notes that showed growing consensus from Fed officials that the banking crises will cause a recession by the year’s end.

With major macro data in the rearview, attention will soon shift to earnings as market players attempt to gauge the future direction of the economy.

Earnings commentary from regional banks will be in particular focus, a source said.

The secondary space remained active, although the majority of deals to price throughout the course of the week largely found their levels.

Cleveland-Cliffs Inc.’s 6¾% senior guaranteed notes due 2030 (Ba3/BB-/BB-) improved in heavy volume alongside the broader market. However, the notes remained on a 99-handle.

Valaris Ltd.’s 8 3/8% senior secured second-lien notes due 2030 (B2/BB/BB-), the laggard of last week’s deals, continued to rebound with the notes now trading at a premium to their issue price.

Topical news pushed Consolidated Communications Inc.’s senior notes into the spotlight with the notes making large gains on a buyout offer.

Meanwhile, high-yield mutual funds and exchange-traded funds saw nominal inflows with $235 million entering the space in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow Report Newsline.

Cleveland-Cliffs

Cleveland-Cliffs 6¾% senior guaranteed notes due 2030 were nominally improved on Thursday as the broader market rallied, although the notes remained on a 99-handle.

The 6¾% notes rose ¼ point to trade in the 99¼ to 99¾ context, a source said.

There was $34 million in reported volume.

Cleveland-Cliffs priced a $750 million issue of the 6¾% notes at par on Tuesday.

However, the notes struggled out of the gate and closed the previous session in the 99 to 99½ context.

Valaris recovers

Valaris’ 8 3/8% senior secured second-lien notes due 2030 continued to recover after a lackluster start in the secondary space with the notes now trading at a premium to their issue price.

The 8 3/8% notes added ¼ point with most prints in the par ¼ to par ½ context, a source said.

There was $13 million in reported volume.

Valaris’ 8 3/8% notes saw a lackluster start in the secondary space after the $700 million issue priced at par on April 4.

The notes opened Monday on a 99-handle but have gained strength throughout the week.

Consolidated jumps

Consolidated Communications’ senior notes made strong gains after a majority shareholder proposed a buyout offer.

Consolidated’s 5% senior secured notes due 2028 (B3/B-) jumped 4 points to trade in the 74 to 75 context, a source said.

The yield narrowed to 11 1/8%.

Consolidated’s 6½% senior secured notes due 2028 (B3/B-) also climbed 4 points to a 78-handle.

The notes were changing hands in the 78 to 78½ context heading into the market close.

The yield was about 12%.

There was $13 million in reported volume.

The notes jumped after major shareholder Searchlight Capital Partners, together with British Columbia Investment Management Corp., submitted a buyout offer for the remaining outstanding shares of the company at $4 per share.

While the offer does not trigger a change-of-control put, the deal would be a credit positive for the ailing telecommunications company, a source said.

Searchlight has committed to complete Consolidated’s fiber buildout and create positive free cash flow.

Indexes

The KDP High Yield Daily index gained 18 points to close Thursday at 52.09 with the yield 6.99%.

The index gained 16 points on Wednesday and 8 points on Tuesday after falling 9 points on Monday.

The ICE BofAML US High Yield index gained 40.3 basis points with the year-to-date return now 4.64%.

The index gained 25.4 bps on Wednesday, 26.3 bps on Tuesday and 2.8 bps on Monday.

The CDX High Yield 30 index gained 67 bps to close Thursday at 101.49.

The index fell 27 bps on Wednesday after gaining 32 bps on Tuesday and 33 bps on Monday.

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