Morning Commentary: Forward calendar shrinks to one in domestic market; HC2 widens talk

By Abigail W. Adams

Portland, Me., Oct. 31 – Volatile market conditions continued to take a toll on new issue activity in the domestic high-yield primary market with the forward calendar whittling down to one potential issuer.

GEP Haynesville LLC has postponed its $600 million offering of five-year senior notes (B3/B), according to a market source.

The offering from the Woodlands, Texas-based oil and gas producer was initially scheduled to price on Oct. 26 with initial talk for a yield of 8½% to 8¾%.

Talk was heard to have widened to a coupon of 9% with a discounted offering price.

The past week has been brutal for the energy sector with the barrel price of West Texas Intermediate crude oil dropping more than 5% on the week.

Crude oil futures continued their slide early Wednesday even as the overall tone of the market was seen as slightly improved.

The barrel price of WTI crude oil was down about 20 cents, or 0.30%, early in Wednesday’s session.

HC2 Holdings, Inc. remains in the market with its $535 million offering of senior secured notes. However, price talk “blew out,” a market source said.

The deal is now whispered to come with a coupon of 10% and a discounted offering price for a yield of 12½% to 13%.

Initial guidance had the deal coming with a yield in the low-to-mid 9% area, a source said.

The deal is still in the market with timing for its pricing pending, a source said.

“They have to get it done,” another source said.

With proceeds to be used to refinance the company’s 11% secured notes due Dec. 1, 2019, there is some deal risk, a source said.

However, the 11% notes were trading largely flat as HC2 Holdings markets its new offering.

While the domestic primary market grapples with market conditions, the European primary market has a sterling-denominated offering in the works.

Heathrow Finance plc plans to price a benchmark offering of sterling-denominated senior secured bearer bonds due March 1, 2024 in a Wednesday drive-by with initial price talk in the 4 7/8% area (expected Ba3//BB+), according to a market source.

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