GEP Haynesville postpones offering; HC2 widens talk; McDermott tanks; Bed Bath & Beyond active

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.

GEP Haynesville LLC postponed its $600 million offering of five-year senior notes (B3/B) on Wednesday after failing to garner enough interest at widened price talk, according to a market source.

HC2 Holdings, Inc. remains in the market with its $535 million offering of senior secured notes. However, price talk “blew out,” with the timing of the deal still pending, sources said.

High-yield players were eyeing Dubai Aerospace Enterprise Funding LLC’s $1.25 billion two-tranche offering, which is expected to price on Thursday.

The issuer is a strong credit and the deal is expected to receive a positive reception despite the volatility in the market, a source said.

While the domestic primary market continued to see potential issuers drop off the forward calendar, the European primary market saw some action.

Heathrow Finance plc priced £300 million long five-year senior secured bearer bonds in a Wednesday drive-by.

Meanwhile, the secondary space was seen as slightly improved on Wednesday with equity markets rallying even as crude oil futures closed out their worst month in recent history.

Vector Group Ltd.’s newly priced 10½% senior notes due 2026 (B2/B-) were seen above their issue price in the secondary market although few bonds changed hands.

All eyes were on McDermott International Inc.’s 10 5/8% senior notes due 2024 (B2/B-) as they plunged 10 points after the company released third-quarter earnings and announced a divestiture from its storage tank and pipe fabrication businesses.

Bed Bath & Beyond Inc.’s bonds remained active in secondary trading with the notes continuing to see slight gains. The notes have been actively traded since S&P downgraded them to junk last week.

GEP Haynesville postpones

GEP Haynesville postponed its $600 million offering of five-year senior notes on Wednesday after failing to garner enough interest at widened price talk.

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 company was expected to shelve the effort if it could not be completed in that target area, sources said.

J.P. Morgan Securities LLC was managing the sale.

GEP Haynesville marketed the deal as volatility roiled capital markets and crude oil futures closed out one of their worst months in recent history.

Crude oil futures continued their slide on Wednesday, settling at $65.31, a decrease of 86 cents, or 1.3%.

The barrel price of WTI crude oil dropped more than 10% in October, marking its worst month since 2016, CNBC reported.

Postponements

GEP Haynesville is now the third prospective issuer to withdraw an offering in the last two weeks.

INTL FCStone Inc. withdrew its $350 million offering of five-year senior secured notes (Ba3/BB-) on Tuesday.

GFL Environmental Inc. withdrew a $400 million offering of senior unsecured notes (Caa2/CCC+) and shifted the proceeds to its concurrent bank loan on Oct. 25.

All three deals joined the forward calendar last week.

HC2 widens

HC2 Holdings 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.

Timing for the pricing of the deal is 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.

The 11% notes continued to trade in the 99½ to par ½ range, a market source said.

Dubai eyed

High-yield players were eyeing Dubai Aerospace Enterprise Funding’s $1.25 billion two-tranche offering of senior notes, which was announced on Wednesday.

The deal is coming in three-year and five-year tranches with pricing expected on Thursday.

Dubai Aerospace is a strong credit and the issue is expected to receive a positive reception, a market source said.

“This is a Ba3/BB+ rated company looking to improve its capital structure,” a market source said. “It’s certainly on the credit upswing.”

Heathrow prices

Heathrow priced £300 million long five-year senior secured bearer bonds at par with a coupon of 4¾% (Ba3//BB+) in a Wednesday drive-by, according to a market source.

Initial price talk was for a benchmark size deal with a yield in the 4 7/8% area.

BNP Paribas will bill and deliver for the Regulation S deal. Credit Suisse, ICBC and ING are also active bookrunners.

Vector slow to trade

Vector Group’s newly priced 10½% senior notes due 2026 were above their issue price in the secondary market.

However, few bonds were changing hands, a market source said.

The notes were seen at par bid, par ½ offered on Wednesday.

However, only two $1 million prints were on the tape on Wednesday. There was only one $1 million print after the notes broke for trade on Tuesday.

The coupon is “ridiculous,” for a single B credit, a market source said.

The deal was tightly allocated and is not expected to trade much, other sources said.

Vector Group priced a $325 million issue of the 10½% notes at par on Tuesday with the yield printing on top of yield talk.

Earlier guidance was 10¼% to 10½%, a source said.

McDermott tanks

McDermott’s 10 5/8% senior notes due 2024 were the focus of trading activity in the secondary space with the bonds tanking after the company announced third-quarter earnings and the divestiture from one of its business segments.

The notes dropped almost 10 points to close Wednesday at 90½, a market source said. More than $117 million of the bonds were on the tape by the late afternoon.

The bonds were under pressure after the multinational engineering, procurement, construction and installation company reported an earnings miss.

McDermott reported non-GAAP earnings per share of 20 cents for the third quarter versus analyst expectations of earnings per share of 29 cents.

McDermott reported revenue of $2.29 billion for the third-quarter, which also missed analyst expectations of revenue of $2.5 billion.

Adjusted EBITDA for the third-quarter was $275 million.

The company also announced it was seeking a buyer for its storage tank and U.S pipe fabrication business with anticipated proceeds from the sale $1 billion, a market source said.

Bed Bath & Beyond active

Bed Bath & Beyond’s junk bonds continued to see high-volume activity in the secondary space with the notes again improved after trading down last week following S&P’s downgrade.

The company’s 5.165% senior notes due 2044 were up almost 1 point to close Wednesday at 70, a market source said.

About $40 million of the bonds were on the tape by the late afternoon.

The notes were trading on a 68 handle last week.

The company’s 4.915% senior notes due 2034 traded up about 5/8 point to 71.375. More than $23 million of the bonds were on the tape by the late afternoon.

The notes dropped to a 69 handle last week.

Bed Bath & Beyond’s junk bonds have been active in the secondary space since it achieved fallen angel status.

S&P lowered the retailers issuer credit rating and issue-level rating to BB+ from BBB- on Oct. 24.

The downgrade to junk was due to the company’s competitive position being incompatible with an investment-grade rating, S&P said in a press release.

Indexes gain

Indexes saw gains on Wednesday after a mixed Monday and Tuesday and steep losses last week.

The KDP High Yield Daily index posted gains on Wednesday after seven consecutive sessions of losses.

The index was up 5 basis points to close Wednesday at 69.03 with the yield now 6.37%.

The index dropped 12 bps on Tuesday and 14 bps on Monday after a 60 bps decline last week.

The CDX High Yield 30 index posted its third consecutive day of gains on Wednesday.

The index was up 32 bps to close Wednesday at 105.27. The index was up 11 bps on Tuesday and 5 bps on Monday after a 92 bps drop last week.

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