Morning Commentary: Junk opens weaker; energy down; Iron Mountain brings $800 million drive-by

By Paul A. Harris

Portland, Ore., Sept. 24 – Junk opened weaker on Thursday, with cash bonds down a solid one-half point heading into mid-morning on the East Coast of the United States, according to a trader in New York.

In spite of a modest improvement in crude oil prices, energy names were under pressure, the trader said.

Names include SandRidge Energy Inc. and California Resources Corp.

The longer-maturity bonds of Chesapeake Energy Corp. traded lower.

The company’s 5¾% notes due 2023 were 67 bid, 68 offered heading into mid-morning, down from 71 bid, 72 offered on Wednesday, said the trader.

Iron Mountain drive-by

In the primary market Iron Mountain Inc. plans to price an $800 million offering of five-year senior notes (expected ratings Ba3/B+) on Thursday trailing a late-morning conference call with investors.

Early guidance has the yield coming at 5¾% to 6%, a source added.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Barclays, Wells Fargo Securities LLC, Credit Agricole, HSBC, Morgan Stanley & Co. LLC, PNC and RBC are the joint bookrunners for the debt refinancing deal.

Elsewhere Olin Corp. is having to pull out all of the stops as it attempts to place $1.5 billion of senior notes in two tranches, market sources say.

Although there have been no formal revisions to the price talk from the dealer, conversations have moved into the 9% to mid-9% yield context, a trader said.

Earlier in the week the company’s proposed eight-year notes were talked to yield in the 6½% area, and the 10-year notes were talked to yield in the 6¾% area.

In addition there have been changes to the asset sales-, debt limitations- and restricted payments covenants, as well as amendments to the liens language, the source added.

Timing is to be determined; however, there is motivation to get the deal out the door, the trader added.

Abengoa gyrates

Reports and rumors have sparked wild swings in the bonds of troubled Spanish renewable energy producer Abengoa, SA, the trader said.

Abengoa’s bonds got on the move when rumors circulated that the company had arranged to receive a capital increase from HSBC Bank, the source recounted.

When that rumor turned out to be without merit, the bonds tanked.

Abengoa's dollar-denominated 8 7/8% due 2017 dropped 10 to 15 points into the mid-20s, getting as low as 27 bid, 28 offered.

However when news surfaced that there would be a capital increase of at least €650 million by way of a rights issue of new Abengoa class A and class B shares, the bonds popped by 13 to 14 points into the low 40s, then continued to trade higher, all the way into the low 70s.

Meanwhile news that Abengoa expects to prepay €375 million of its 2016 bond before year-end sent those bonds into the low 90s; they were in the low 50s on Wednesday, the trader said.

© 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.