Upsized JBS prices, also Indigo, Oceaneering; new Indigo firms; energy up as crude gains

By Paul Deckelman and Paul A. Harris

New York, Feb. 1 – The new month of February opened up in Junkbondland on Thursday with a pair of new deals pricing, generating some $1.55 billion of proceeds.

Giant meatpacker JBS USA Lux, SA brought a quickly shopped and upsized $900 million of 10-year notes to market.

And natural gas and natural gas liquids exploration and production company Indigo Natural Resources LLC priced a regularly scheduled $650 million offering of eight-year paper.

Secondary market traders said the new Indigo issue notched some solid gains when it began trading in the aftermarket.

The primaryside also saw split-rated oilfield services provider Oceaneering International, Inc. come to market with a scheduled $300 million deal, which later traded around its issue price.

The energy arena would seem to be moving back into the spotlight, with prospective new deals from Berry Petroleum Co., LLC and EnVen Energy Corp. seen on the verge of pricing their respective new issues.

Energy was also strong away from the new deals, with sector benchmark credit California Resources Corp. firming smartly in active trading Thursday, in line with a big jump in world crude oil prices, which were up markedly, their second consecutive gain following a recent dip.

Statistical market performance measures fell across the board on Thursday, after being mixed on Wednesday.

Another numerical indicator – flows of investor cash into or out of high yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – remained in negative territory for a third straight week, after two weeks in a row on the plus side, according to numbers released on Thursday. Some $1.75 billion more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, on top of net outflows of $1.13 billion last week and $3.08 billion during the reporting week ended Jan. 17 (see related story elsewhere in this issue).

JBS upsizes

JBS USA Lux, SA and JBS USA Finance, Inc. priced an upsized $900 million issue of 10-year senior notes (S&P: B-) at par to yield 6¾% in a quick-to-market trade in Thursday’s session.

The deal was increased from $700 million.

The yield printed in the middle of yield talk that was announced in the 6¾% area. Initial talk was in the high 6% area.

Barclays was the left bookrunner. RBC and BMO were the joint bookrunners.

The Greeley, Colo.-based animal protein products processing company plans to use the proceeds to refinance its 8¼% senior notes due 2020, which became callable at par as of Thursday. The additional proceeds resulting from the $200 million upsizing of the deal will be used for general corporate purposes including repayment of amounts outstanding under JBS’ senior secured revolving credit facility, or its ABL revolving facility.

Indigo sells eight-year deal

Indigo Natural Resources LLC priced a $650 million issue of eight-year senior notes (B3/B+) at par to yield 6 7/8%.

The debt refinancing deal widened somewhat as marketing progressed, sources said.

The yield came in the middle of the 6¾% to 7% final yield talk and wide of the 6½% to 6¾% early guidance.

A little extra juice may have helped attract a decent crowd because in the end the book size was said to be around $1.3 billion, a trader remarked.

JP Morgan was the lead.

Split-rated Oceaneering

In the crossover market, Oceaneering International, Inc. priced a $300 million issue of split-rated eight-year senior bullet notes (Ba1/BBB) at par to yield 6%.

The yield printed on top of yield talk that was set in the 6% area.

There was a surprisingly high number of flippers when the deal broke for trading, according to a trader focused on the crossover space.

However the debt refinancing deal cleaned up nicely in the end, trader said, adding that the closing market was par 1/8 bid, par 5/8 offered.

Credit Suisse was the lead left bookrunner. Wells Fargo, J.P. Morgan, DNB Markets, HSBC and BofA Merrill Lynch were the joint bookrunners.

Rockpoint for Friday

Rockpoint Gas Storage Canada Ltd. talked its $400 million offering of senior secured first-lien notes due March 2023 (S&P: BB-/Fitch: B) with a 7% to 7¼% coupon at a reoffer price of 97 to yield 7¾% to 8%.

Pricing tightened relative to the announced anticipated discount of approximately 4 points.

The books close at noon ET Friday and the notes are set to price subsequently.

The deal is heard to be playing to around $1 billion of orders, a trader said.

Joint bookrunner RBC will bill and deliver. BMO and CIBC are also joint bookrunners.

Elsewhere there are a few question marks, heading into Friday.

Possible Friday transactions include JW Aluminum Holding Corp.’s $300 million offering of eight-year senior secured notes (B3/B-). Early guidance was in the 8% area, however some canvassing took place as high as 9½%, according to a market source.

Berry Petroleum Co., LLC has been marketing a $350 million offering of eight-year senior notes (B3/B+) in a roadshow set to wrap up Friday in San Francisco. Initial guidance is in the 6½% to 6¾% area, a trader said.

And in a deal with a credit rating spread that has generated some buzz in the market, EnVen Energy Corp. has been marketing $325 million of five-year senior secured second lien notes (Caa1/BB-).

The bonds are rated Caa1 by Moody’s Investors Service and BB- by S&P, a four-notch different.

EnVen’s deal could also clear before the weekend ahead, sources say. Initial guidance is 9½% to 10%.

Gran Tierra two-team roadshow

Only one new dollar-denominated deal was announced on Thursday.

Gran Tierra Energy Inc. plans to start a two-team roadshow on Monday for a dollar-denominated offering of seven-year senior notes (expected ratings S&P: B+/Fitch: B+), depending on market conditions.

Initial indications have the company coming with a deal sized at $300 million, a source said.

Credit Suisse and RBC are joint global coordinators and joint bookrunners. Scotia is also a joint bookrunner.

“There is a primary market, but it is not particularly robust,” a junk bond trader said on Thursday.

Higher quality bonds, which are most sensitive to rising interest rates, have been moving lower, the trader said.

There is still cash to put to work, but people want to buy at lower levels.

Jerusalem-based Teva Pharmaceutical Industries Ltd. is expected to bring bonds in the next two weeks, according to the trader who cited documents the company filed with the Securities and Exchange Commission. Teva filed a shelf registration for up to $5 billion of securities on Monday.

The company is scheduled to state earnings on Feb. 8, the trader said.

Moody’s recently lowered the company’s senior unsecured credit ratings to Ba2 from Baa3, the source recounted.

Teva bonds will be sold in the high-yield market but are not expected to become part of the high-yield index, the trader said, and added that junk accounts are going to have to do some lifting, in part because Teva has investment-grade debt outstanding.

Scotsman deal

The market continued to buzz about the rejiggered Algeco Scotsman €1,415,000,000 equivalent four-part offering of high-yield notes, on Thursday.

As reported, the roadshow for the deal – now coming in four tranches instead of the five that were included when marketing got underway – has been extended into the week ahead.

The unchanged secured portions of the deal include €1.12 billion equivalent in three tranches (B2/B-/B+) from affiliate Algeco Scotsman Global Finance plc.

The euro-denominated secured notes have been whispered in the 6% area, a trader said.

The dollar-denominated secured notes are whispered to come 150 to 200 basis points behind the euro-denominated notes.

The euro-denominated floating-rate notes are whispered at Euribor plus 600 bps.

The rejiggered €295 million equivalent of unsecured fixed-rate notes (Caa1/CCC/CCC+) from affiliate Algeco Scotsman Global Finance 2 plc – now expected to be issued in dollars only, with the abandonment of a planned euro-denominated unsecured tranche – are expected to come with a 10%-handle yield, the trader said.

Noting that global coordinator BofA Merrill Lynch will bill and deliver for the dollar-denominated secured notes, global coordinator Deutsche Bank will bill and deliver for the unsecured notes, and global coordinator Goldman Sachs will bill and deliver for both tranches of euro-denominated secured notes, the trader asserted that there is a certain level of complexity with the Algeco Scotsman deal.

New Indigo issue improves

In the secondary market, a trader said that the new Indigo Natural Resources 6 7/8% notes due 2026 traded up to 101 bid, “or probably even higher than that,” pegging them in a 101 to 101½ bid range.

A second trader said that more than $46 million of the Indigo bonds changed hands, seeing them trade between 100 5/8 to 101 5/8, with the final prints of the day going off between 101 3/8 and 101 5/8 bid.

He also saw around $20 million of the Oceaneering 6% notes due 2028 having traded, locating that paper within a 100¼ to 100½ bid range versus its par issue price.

A second trader also saw the Houston-based oilfield services company’s new deal in that same area.

Shelf bonds stay strong

One of the traders saw Wednesday’s new deal from Shelf Drilling Holdings, Ltd. going home trading around 101½ to 102 bid.

That was about where several traders had seen the Dubai-based driller’s $600 million regularly scheduled forward calendar issue ending on Wednesday after those 8¼% notes due 2025 had priced at par.

The Shelf deal attracted interest from both regular high-yield accounts and emerging markets investors.

Energy heats up

One of the trader noted that “we saw a nice rebound in oil today,” which rose for a second consecutive session after having been down badly on Tuesday.

The benchmark domestic crude grade, West Texas Intermediate for March delivery, jumped by $1.07 per barrel Thursday on the New York Mercantile Exchange, on top of a 23 cent rise on Wednesday, in contrast to Tuesday’s $1.06 slide. It settled Thursday at $65.80.

Key international grade North Sea Brent for March delivery advanced by 76 cents per barrel in Thursday London futures trading, settling at $69.65.

It had edged up by 3 cents on Wednesday after sliding by 44 cents on Tuesday.

The trader noted that with oil bouncing back “after a little bit of a rough spell,” the stage was set for more new issuance out of the E&P space.

He mentioned that the Shelf deal “had traded well” and noted the Berry Petroleum and EnVen deals on tap.

Meantime, Los Angeles-based E&P operator California Resources’ 8% notes due 2022 were seen by a source having jumped more than 1 point on the day, ending at 85 bid, with over $36 million of turnover, one of the busiest credits of the day.

Indicators turn lower

Statistical market performance measures fell across the board on Thursday after being mixed on Wednesday. The indicators had also been down all around on Monday and again on Tuesday.

For a second consecutive session, the KDP High Yield Daily Index ended down 5 basis points on the day, matching Wednesday’s decline. It closed at 71.52. It was the index’s fifth straight loss.

Also for a second day in a row, its yield rose by 1 bp, ending at 5.40%. It was the fourth successive widening out.

The Markit CDX Series 29 index closed down ¼ point at 108 3/32 bid, 108 5/32 offered versus Wednesday’s performance which saw it edge marginally higher. It was the index’s third lower close in the last four trading days.

And the Merrill Lynch High Yield Index also finished on the downside, losing 0.114% versus Wednesday’s gain of 0.123%. Before that, it had fallen back by 0.294% on Tuesday and by 0.121% on Monday, which was the index’s first losses after five straight gains.

Thursday’s loss dropped the index’s year-to-date return to 0.526% from Wednesday’s close at 0.641%. It also remained well down from the 0.936% seen on Friday, which had been the third consecutive new peak year-to-date level.

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