Calumet joins calendar; NextEra trades; Peabody Energy dips; PG&E rises; Netflix declines

By James McCandless and Paul A. Harris

San Antonio, Sept. 20 – A $4 billion active forward calendar in the high-yield market took aboard another bond offer on Friday as Calumet Specialty Products Partners, LP planned to start a roadshow on Monday for a $550 million offering of 5.5-year senior notes, while the high-yield secondary saw a non-cohesive session to end the week.

Also on Friday, Inmarsat plc upsized its offering of seven-year senior secured notes to $1,825,000,000 from $1,125,000,000.

NextEra Energy Operating Partners, LP’s new notes were active, ending at par.

Elsewhere, Peabody Energy Corp.’s issues dipped after the company terminated a cash tender offer.

Utility PG&E Corp.’s paper was on the rise after a group of creditors and wildfire victims said it has its own reorganization plan for the name.

Meanwhile, Netflix, Inc.’s notes declined after its chief operating officer said that the company’s sector was becoming increasingly challenging.

Calumet starts Monday

A $4 billion active forward calendar took aboard another bond offer on Friday.

Calumet Specialty Products Partners, LP, and its wholly owned subsidiary Calumet Finance Corp., plan to start a roadshow on Monday for a $550 million offering of 5.5-year senior notes (Caa1/B-/B-).

Barclays is the left lead bookrunner for the debt refinancing deal.

Talking the deals

Inmarsat plc upsized its offering of seven-year senior secured notes (S&P: B+) to $1,825,000,000 from $1,125,000,000 and talked the deal to yield 6½% to 6¾%, wide of earlier guidance in the low-to-mid 6% area.

Proceeds were shifted from the concurrent term loan.

Books were scheduled to close Friday.

In spite of the present technical strength of the junk market, with the combined high-yield funds seeing their biggest weekly inflow of cash since early February for the week that ended at Wednesday's close, issuers appear to be having limited success pushing through deals with low rates and issuer-friendly covenant packages, sources say.

Of course there are some eye-grabbing headlines that do seem to come with a siren's song of easy terms.

On Thursday NextEra Energy Operating Partners, LP crossed the finish line with a $500 million seven-year bullet (Ba1/BB/BB+) that came with a 3 7/8% print.

And earlier in the week in Europe Greek telecom OTE plc priced a €500 million issue of 0.875% seven-year junk-rated senior notes.

Away from those marquee executions, however, investors appear to be planting their feet when it comes to pricing and lender protection.

On Friday, Shutterfly Inc. upsized its offering of seven-year senior secured notes (expected ratings B1/B) to $785 million from $500 million, and made an equivalent downsize to its bank loan.

Shutterfly talked the bonds to yield 8% to 8¼%, well wide of initial guidance in the low-to-mid 7% area.

Covenant changes were pending, an informed source said.

Books close Monday.

The above-mentioned Inmarsat deal has also engendered some investor pushback on covenants, sources say.

Loan investors also appear to have their feet planted.

Price talk on the downsized Inmarsat and Shutterfly term loans also saw northward revisions on Friday.

Then there is Peabody Energy Corp., which walked away from both the bond and bank loan markets during the past week.

First the St. Louis coal company abandoned a $900 million term loan, hoping for a friendlier reception in Junkland as it undertook to address some bond maturities. However the junk bond market proved just as unfriendly as the loan market, for Peabody. (See related story in this issue.)

Thursday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $382 million of inflows on the day.

Actively managed high-yield funds saw $15 million of inflows on Thursday, the source said.

As mentioned above in this narrative, the combined high-yield bond funds saw a whopping $3.292 billion of net inflows for the week to Wednesday's close, according to Lipper US Fund Flows.

That's the biggest weekly inflow since the week to the Feb. 6, 2019 close, when the combined funds saw $3.86 billion of net inflows, according to a Prospect News analysis of the data.

Also notable, the dedicated leverage loan funds saw $24 million of net inflows in the week to Wednesday's close.

It was the first positive weekly cash flow for the loan funds in 44 weeks, the source said.

NextEra at par

NextEra’s new deal finished Friday activity active but unchanged, traders said.

The 3 7/8% senior notes due 2026 closed at 100 bid.

The Juno Beach, Fla.-based limited partnership’s new notes were priced at $500 million in a Thursday quick-to-market trade.

The yield printed in the middle of yield talk in the 3 7/8% area and tight to early guidance in the 4% area, Prospect News reported.

Peabody dips

Elsewhere, Peabody Energy’s issues dipped, market sources said.

The 6% senior secured notes due 2022 fell 2½ points to close at 100½ bid. The 6 3/8% senior secured notes due 2025 declined by 4¾ points to close at 99 bid.

On Friday, the St. Louis-based coal mining company said that it has terminated its cash tender offers to purchase any and all of its $500 million of outstanding 6% senior secured notes due 2022 and any and all of its $500 million of outstanding 6 3/8% senior secured notes due 2025, citing market conditions, Prospect News reported.

Concurrently, an $800 million offering of seven-year senior notes has also been withdrawn.

PG&E rises

Elsewhere, in utilities, PG&E’s paper was on the rise, market sources said.

The 6.05% paper due 2034 gained 2 points to close at 112¼ bid.

About $54 million of the notes changed hands by the end of the day.

Late Thursday, unsecured creditors for the San Francisco-based bankrupt electric utility and a wildfire victim committee said that it filed its own reorganization plan in bankruptcy court.

The plan calls for the company to pay out a $24 billion settlement to those affected by 2017 and 2018 wildfires, more than proposed in the company’s own plan.

The name has already paid out $11 billion in insurance subrogation claims and plans to cap victim payouts at $8.4 billion.

At this point, the company has retained sole control of its reorganization process, fighting off a previous effort in recent weeks.

“There’s always a chance that the judge might like the deal and entertain it,” a trader said.

A hearing is set for Oct. 6 on whether to accept the plan.

Netflix declines

Streaming giant Netflix’s notes were in decline at the end of the week, traders said.

The 5 7/8% senior notes due 2028 lost 3 points to close at 109¼ bid.

At the close, about $20 million of the notes had traded.

The Los Gatos, Calif.-based entertainment name’s structure came under pressure on Friday after chief executive officer Reed Hastings that the company faced a new landscape as traditional media names prepare their own streaming services.

Hastings cited Disney and Apple as its toughest competition, adding that he was preparing for a “fierce fight.”

Indexes mixed

Three high-yield indexes were mixed, though the trend was positive.

The KDP High Yield Daily index gained 9 basis points, closing out the week at 71.79 with the yield remaining at 5.36%.

The index dipped 17 bps on Thursday, lost 1 bp on Wednesday and fell 9 bps on Tuesday.

On the aggregate, the index lost 1 bp this week.

The ICE BofAML US High Yield index inched up 0.2 bps to end Friday with the year-to-date return at 11.909.

The index gained 6 bps on Thursday, fell 4 bps on Wednesday and shaved off 0.6 bps on Tuesday.

The CDX High Yield 30 index lost 32.60 bps on Friday to 107.2183.

The index dropped 32.37 bps on Thursday, lopped off 31.72 bps on Wednesday and declined by 31.63 bps on Tuesday.

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