Teekay, Chaparral price; PHI downsizes; California Resources active; Hertz ‘sloppy’

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 26 – The new issue news flow remained brisk on Tuesday, as the market endeavors to clear $6.1 billion equivalent of announced business – dollar deals and euro deals – ahead of the coming weekend.

Teekay Offshore Partners LP priced a twice-upsized $700 million issue of five-year senior notes (Caa2/B/B) at par to yield 8½%.

Chaparral Energy Inc. priced a $300 million issue of five-year senior notes (Caa1/B-) at par to yield 8¾%.

The new paper was active in the secondary space after breaking for trade with both issues seen well above par, sources said.

New paper from PHI, Inc. still has yet to price. The offering of five-year senior notes was downsized to $300 million from $500 million on Tuesday with no updates on timing.

The calendar of deals set to price this week includes €1.03 billion of euro-denominated deals. Among them is Bway Corp.'s €475 million offering of six-year senior secured notes (B3/B), which is being marketed via a roadshow set to wrap up on Wednesday.

Meanwhile, California Resources Corp.’s 8% senior notes due 2022 were active in the secondary space as the price of West Texas intermediate crude oil for August delivery shot past $70 a barrel.

The notes were seen up about ½ point after about a 1 point drop on Monday.

Hertz Corp.’s 7 5/8% senior notes due 2022 were trading sloppy in the secondary space with the notes down about 1 point.

The notes’ decline was attributed to a Morgan Stanley report and increased competition from Uber, which is once again allowed to operate in London, a market source said.

Avis Budget Group’s 5½% senior notes due 2023 were down on Tuesday with Avis also the subject of the Morgan Stanley report.

Sprint Corp.’s 6% senior notes due 2022 were down in active trading on Tuesday as representatives from Sprint and T-Mobile US, Inc. prepare to testify before the Senate’s antitrust subcommittee on Wednesday.

Teekay upsizes twice

Teekay Offshore priced a twice-upsized $700 million issue of five-year senior notes (Caa2/B/B) at par to yield 8½%.

The issue was upsized from $600 million after having been previously upsized from $500 million.

The yield printed on top of yield talk and at the wide end of initial talk in the low to mid 8% area.

Citigroup, DNB, Credit Suisse and Credit Agricole were the joint bookrunners.

Brookfield Business Partners LP, with which Teekay Offshore has a strategic relationship, committed to an order of up to $500 million of the notes, subject to a lockup agreement (see related story in this issue).

The new notes traded up out of the gate. They were seen at 101¼ bid, 101½ offered soon after freeing for trade, a market source said.

Chaparral comes wide

Chaparral Energy priced a $300 million issue of five-year senior notes (Caa1/B-) at par to yield 8¾%.

The yield printed 50 basis points beyond the wide end of the 8% to 8¼% yield talk.

J.P. Morgan, Capital One, KeyBanc, Natixis, SG and were the joint bookrunners.

The Oklahoma City-based independent oil and natural gas exploration and production company plans to use the proceeds to pay down the outstanding balance of its revolving credit facility and for general corporate purposes.

Chaparral’s new notes were also well above their issue price after breaking for trade. The notes were seen at par ¾ bid, 101¼ offered in the late afternoon, a market source said.

The strong secondary performance of the new paper was largely attributed to the shortage of new issuances in the market, sources said.

PHI downsizes bonds, upsizes refinancing

PHI downsized the bond portion of its debt refinancing on Tuesday in a restructuring that actually saw the overall size of that refinancing increase.

The Lafayette, La.-based provider of helicopter aviation services downsized its five-year senior secured notes (B3/B/B+) to $300 million from $500 million and talked the bonds at 9¾% to 10%. That talk is well wide of earlier guidance in the mid 8% area to 9%.

At the same time, PHI announced a new $300 million term loan, increasing the overall amount of the financing to $600 million from $500 million.

The bond deal ran a roadshow during the June 18 week. No timing updates were announced on Tuesday.

UBS is the lead bookrunner. RBC is the joint bookrunner.

Bway’s deal

Included in the week's anticipated issuance are €1.03 billion of euro-denominated deals.

One of those, Bway Corp.'s €475 million offering of six-year senior secured notes (B3/B), is a deal which features both the acquiring party and the target raising euros to fund an all-U.S. buyout, sources remarked on Tuesday.

Initial guidance is in the 4 7/8% area.

An investor roadshow is set to wrap up on Wednesday.

BofA Merrill Lynch, Goldman Sachs, BMO and Citigroup are the leads.

Proceeds will be used to help fund the acquisition of the Atlanta-based manufacturer of rigid metal and plastic containers by Stone Canyon Industries LLC, a Santa Monica, Calif.-based global industrial holding company.

California Resources active

While the new paper was in focus on Tuesday, California Resources 8% senior notes due 2022 were active as the price of crude oil again shot past $70 a barrel.

The 8% notes were seen at 90 bid, 90½ offered on Tuesday with most trades between 90¼ and 90½, a market source said.

The notes were up about ½ point to ¾ point on Tuesday after dropping about 1 point on Monday. The price of crude oil rose more than $2.50 on Tuesday.

The rise was buoyed by U.S. efforts to pressure countries to reduce Iranian oil imports.

The U.S. will impose sanctions on any country importing oil from Iran after November, the Wall Street Journal reported.

Hertz ‘sloppy’

Hertz’s junkbonds were “trading sloppy” on Tuesday, a market source said. The Estero, Fla.-based rental car company’s 7 5/8% senior notes due 2022 were down about 1 point to 97¼ bid, 97¾ offered on Tuesday, a market source said.

The notes were trading on a 98 handle on Monday.

The drop in the notes was attributed to a recent report by Morgan Stanley analyst Adam Jonas, a market source said.

While Jonas raised Hertz’s price target for common stock to $15 from $13, his report questioned the rental car company’s ability to offset the depreciation costs in its fleet.

Hertz is also facing increased competition from the peer-to-peer ridesharing service Uber. Uber was given a 15-month license to operate in London after a judge overturned a ban on the company on Tuesday.

The news was a negative for Hertz, the source said.

“Those two things,” put pressure on Hertz’s 7 5/8% notes on Tuesday, the source said.

Avis was also the subject of the Morgan Stanley report and is also expected to be negatively affected by headwinds set to hit the rental car industry.

Avis’ 5½% senior notes due 2023 were down about ½ point on Tuesday with most trades between 98½ and 98¾, according to a market source.

Sprint active

Sprint’s 6% senior notes due 2022 were down in active trading on Tuesday as company representatives prepare to testify in front of the Senate’s antitrust subcommittee. The notes were down about ½ point.

They were seen at 99½ bid, par offered, a market source said. While T-Mobile representatives will also be present to testify in favor of the upcoming merger, T-Mobile’s junkbonds remained unchanged.

Sprint’s junkbonds have been active and seesawing between large gains and slight pullbacks as it moves forward with its merger with T-Mobile.

Indexes down

Three benchmarks for the high-yield secondary market posted losses for the second consecutive trading day on Tuesday.

The KDP High Yield index was down 9 basis points to close Tuesday at 70.66, with the yield now 5.81%. The index was down 6 bps on Monday.

The Merrill Lynch High Yield index was down 7 bps with the year-to-date return now 0.411. The index was down 11.9 bps on Monday with the year-to-date return on Monday 0.481.

The CDX High Yield 30 index was down 6 bps to close Tuesday at 106.19. The index saw a 39 bps drop on Monday.

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