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Morning Commentary: Hovnanian launches $840 million offering; Halcon bonds jump on asset sale news
By Paul A. Harris
Portland, Ore., July 11 – High-yield bonds opened the Tuesday session unchanged, away from the energy sector, a trader said.
Bonds of Halcon Resources Corp. jumped in price on news that the company has entered into an agreement to sell assets in the Williston Basin to an affiliate of Bruin E&P Partners, pending consents from greater than 50% of the holders of the Halcon 6¾% notes due 2025.
The company also said it will offer to purchase up to 50% of the 6¾% notes at 103, upon closing of the asset sale, sending the price of that paper skyward: they were 101½ bid, 102 offered on Tuesday morning, up from the high 80s on Monday, the trader said.
Hovnanian brings deal
In the primary market Hovnanian Enterprises, Inc. is expected to price up to $840 million of senior secured notes in tranches of five-year notes and seven-year notes on Thursday.
Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC are the joint bookrunners for the deal, which is being conducted on the investment-grade syndicate desk.
The Red Bank, N.J.-based homebuilder plans to use the proceeds to fund the purchase of $75 million 10% senior secured second-lien notes due 2018, $145 million 9 1/8% senior secured second-lien notes due 2020 and $577 million 7¼% senior secured first-lien notes due 2020, all issued by K. Hovnanian.
Hovnanian takes a position on an extremely thin active dollar-denominated forward calendar.
The only other deal is a dollar tranche from British performance automobile manufacturer McLaren Automotive, which is making its market debut with a £525 million equivalent two-part (dollars and pounds) offering of five-year senior secured notes.
The dollar tranche appears to be shaping up with a size around $300 million, and with yield guidance of 5¾% to 6%, the trader said, adding that the deal is expected to price later this week.
Monday outflows
The daily cash flows of the dedicated high-yield bond funds were negative on Monday, the trader said.
High-yield ETFs sustained $55 million of outflows on the day.
Outflows from the actively managed funds were much more substantial on Monday: negative $265 million.
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