Morning Commentary: Junk higher in line with oil and stocks; Bruin E&P bonds advance

By Paul A. Harris

Portland, Ore., July 24 – Against a backdrop of better equity prices and higher oil prices junk bonds were trading higher on Tuesday morning, a trader said.

High-yield ETFs were notably higher at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.23%, or 20 cents, at $85.79 per share.

The barrel price of West Texas Intermediate crude oil for September 2018 delivery was up half a percent, or 33 cents, at $68.22.

Recent energy deals that struggled to cross the finish line in the new issue market are performing well in the secondary, a trader said.

The new Bruin E&P Partners LLC 8 7/8% senior notes due August 2023 (B3/B+), which came at par on Monday amid a raft of concessions to investors, were better on Tuesday morning at 101 bid, 101 1/8 offered, after having gone out Monday evening at par 7/8 bid.

The $600 million issue came in the middle of the upwardly revised 8¾% to 9% yield talk. Previous official talk was 8¼% to 8½%. The deal widened significantly since it came into the market early in the week of July 16 with initial guidance of 7½% to 7¾%.

In a restructuring, the tenor of the notes was decreased to five years from eight years.

Pricing was delayed. The deal had been expected to clear the market last Friday but was held over the weekend.

There are also covenant changes, sources say.

In another deal swept up by escalating price talk during the time it was in the market, Comstock Resources, Inc.'s 9¾% senior notes due August 2026 (Caa1/B/B) were 1/8 point or so better on Tuesday at 97¾ bid, the trader said.

The $850 million issue priced at 95.988 to yield 10½% last Friday.

Another trader was seeing better sellers of energy paper on Tuesday morning but added that all of it was being absorbed.

Away from energy, the recently minted Simmons Foods, Inc. 7¾% first-lien senior secured notes due Jan. 15, 2024 (B1/BB-) continue to grind higher, a trader said, spotting them at 103¾ bid, 104¼ offered, Tuesday morning.

The $250 million issue priced at par on July 10.

Quiet primary

The new issue market was generally quiet on Tuesday morning, following a modest buildup of the active forward calendar on Monday.

The most recently announced deal, Party City Holdings Inc.’s $500 million offering of eight-year senior notes (B-) is heard to be going well, and playing to significant reverse inquiry, a trader said.

The deal, which is being led by left bookrunner Goldman Sachs, is set to price at the conclusion of a Tuesday-Wednesday roadshow.

Elsewhere on Monday Hi-Crush Partners LP began marketing a $450 million offering of eight-year senior notes (B3/B-), which are expected to price during the present week.

The deal is in the market with initial guidance in the 8½% area but might need a bit more juice in order to cross the finish line, a trader said.

Also on Monday, Intrepid Aviation Group Holdings, LLC started a roadshow for a $515 million offering of three-year senior notes (B/B+) via Jefferies. The roadshow wraps up on Thursday, and the deal is set to price thereafter.

Given the present strength in the market, some of the conspicuous merger and acquisition deals in the pipeline could begin to surface soon, a trader said.

Sources have been watching for BMC Software Inc. bring $1,825,000,000 of senior notes (Caa2) as part of the financing for the buyout of the company by KKR.

Credit Suisse is expected to lead.

Monday outflows

The cash flows of the dedicated high-yield bond funds were negative on Monday, a trader said.

High-yield ETFs sustained $77 million of outflows on the day.

Actively managed funds saw $15 million of outflows on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.