CNH, Calfrac drive by; TMS downsizes; Forest Oil up on asset sale; funds gain $238 million

By Paul Deckelman and Paul A. Harris

New York, Oct. 3 - The high-yield primary market strung together a pair of drive-by pricings on Thursday as activity picked up after Wednesday's near-complete lack of activity in dollar-denominated, fully junk-rated domestic or industrialized-nation issuance.

Agricultural and construction machinery manufacturer CNH Industrial NV bulldozed its way into Junkbondland with a quickly shopped $500 million offering of 3.5-year notes via a financing subsidiary. The new bonds firmed a little in the aftermarket; meanwhile, the company's existing bonds were seen trading around.

Calfrac Well Services LP, which provides those services to the energy industry, brought a quick-to-market $150 million add-on to its existing 2020 notes via a limited partnership subsidiary.

Those were the only two actual pricings seen.

Price talk meantime emerged on steel industry industrial services provider TMS International Corp.'s eight-year note offering, which is expected to get done on Friday. However, syndicate sources heard that the deal had been downsized to $275 million.

They also said that NGL Energy Partners LP, an oil and natural gas midstream operator, had begun a roadshow for its $400 million eight-year paper offering, which is likely to price next week.

Away from the new deals, Forest Oil Corp.'s bonds rose on the news the energy company will sell certain assets in a $1 billion deal and will use the proceeds to reduce debt and enhance its financial flexibility.

Statistical market-performance measures turned mixed after two sessions of having been higher.

And high-yield mutual funds and exchange-traded funds saw a fourth consecutive week of inflows, although the amount of new liquidity was just a fraction of last week's huge inflow.

Lipper funds gain $238 million

As Thursday's market activity was winding down, junk market participants familiar with the fund-flow statistics generated by AMG Data Services - considered a key barometer of overall junk market liquidity trends - said that during the week ended Wednesday, $238 million more came into those funds than left them. Loan funds meanwhile saw an influx of $768 million.

It was the fourth consecutive gain in the junk funds reported by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp. The latest inflow came on the heels of the $3.1 billion cash injection seen during the week ended Sept. 25, which had been the largest such rise in the junk funds since mid-July.

Besides that massive cash addition, inflows had also been seen in the week ended Sept. 18, when $1.40 billion more came into the funds than left them, and Sept. 11, when a $632 million inflow was seen. During that four-week stretch, net inflows have totaled about $5.36 billion, according to a Prospect News analysis of the fund-flow numbers.

For the year so far, inflows have now been seen in 24 weeks, against 16 weeks of outflows, according to the analysis, but cumulative flows for the year as a whole remain negative due to a sizable losing streak seen during May and June, which was prompted by investor worries over whether the Federal Reserve would end its accommodative monetary policy.

However, that year-to-date net outflow figure, which topped the $9 billion mark in late June, according to the analysis, has been steadily whittled down since then, with the latest inflow bringing it down further still to about $2.2 billion, according to the estimate.

Cumulative fund-flow estimates may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The sustained flows of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the roughly $1 trillion junk market - have been seen by analysts as a key catalyst behind the high-yield secondary sphere's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which ultimately produced some $327 billion of new dollar-denominated, junk-rated paper from domestic or industrialized-country issuers, according to data compiled by Prospect News.

It was also seen as one of the major drivers behind the robust patterns of primary activity and secondary strength that had continued for much of this year's first half before the market turned choppy over the past several months.

The past four weeks of net inflows coincided with the explosive expansion of junk primary activity seen last month, when over $47 billion of new paper priced, according to the Prospect News new-issuance data - the biggest September ever.

CNH Capital prints at 3¼%

The primary came out of its early-week hibernation on Thursday in a session that produced a pair of drive-by deals as well as deal announcements.

Each of Thursday's two junk issuers brought quick-to-market single-tranche deals, raising a combined total of $649.4 million.

CNH Capital LLC priced a $500 million issue of 3¼% non-callable senior notes due Feb. 1, 2017 (expected Ba1/confirmed BB) at par to yield 3.251%.

The yield printed at the tight end of the 3¼% to 3 3/8% yield talk.

Joint active bookrunner BofA Merrill Lynch will bill and deliver. Citigroup Global Markets Inc., Credit Agricole CIB and Morgan Stanley & Co. LLC were also joint active bookrunners.

Proceeds will be used to fund working capital and for general corporate purposes.

Calfrac, at the rich end

Calfrac Holdings LP priced a $150 million add-on to its 7½% senior notes due 2020 (B1/B+) at 99.625 to yield 7.566%.

The reoffer price came at the rich end of price talk in the 99.5 area.

RBC Capital Markets was the left bookrunner. Morgan Stanley was the joint bookrunner.

Proceeds will be used to repay bank debt incurred in financing the acquisition of all of the operating assets of Mission Well Services, LLC.

NGL Energy starts roadshow

NGL Energy Partners began a roadshow on Thursday for its $400 million offering of eight-year senior notes (B2/BB-/BB-).

The deal is expected to price during the week ahead.

RBC is the left bookrunner for the debt refinancing deal. RBS Securities Inc., Deutsche Bank Securities Inc., PNC Capital Markets LLC, BofA Merrill Lynch, UBS Investment Bank and SunTrust Robinson Humphrey Inc. are the joint bookrunners.

TMS downsizes, sets talk

TMS International downsized its offering of eight-year senior notes (B3/B-) to $275 million from $300 million and talked the notes to yield in the 7¾% area.

That talk came 25 basis points below the tight end of earlier guidance of 8% to 8¼%, sources said.

The books are closed, and the deal is expected to price Friday.

Goldman Sachs & Co., J.P. Morgan Securities LLC, HSBC Securities (USA) Inc. and Deutsche Bank are the bookrunners for the buyout deal.

TMS is the only offering on deck for Friday as of Thursday's close.

However, sources around the market expect to see business in the primary market pick up in the week ahead.

Reaching out to investors

News of two pre-marketing efforts circulated on Thursday.

Toronto-based gold mining company Iamgold plans to start a non-deal roadshow on Monday in New York City and New Jersey.

Citigroup is leading the presentations, which will include one-on-one meetings and a group investor lunch.

Ensuing stops are scheduled for Boston on Tuesday and Toronto on Wednesday.

And from Europe, Millicom International Cellular SA plans to meet with fixed-income investors on Monday and Tuesday ahead of an expected benchmark dollar-denominated offering of senior notes.

BNP Paribas, Citigroup and JPMorgan will be the joint bookrunners.

Aside from Millicom, there is only one European name on the active forward calendar.

France's Oberthur Technologies is roadshowing a €200 million offering of senior notes due 2020 (Caa1/CCC/CCC+), which are expected in the early to middle part of the week ahead, via Goldman Sachs, JPMorgan and Lloyds.

That deal is being discussed in a high 9% to low 10% yield context, according to a London-based sellside source.

The week ahead will bring at least a pair of new deal announcements from Europe, the sellsider said, but added that neither will be huge and will likely be sized at €200 million to €250 million.

CNH deal firms slightly

When the new CNH 3¼% notes due 2017 were freed for secondary dealings after their par pricing, a trader pegged the new paper at 100½ bid, 101 offered.

A second trader quoted the Amsterdam-based construction and farm equipment manufacturer's quickly shopped new deal at 100½ bid, 101½ offered, although he suggested that despite its high-yield rating, the deal would likely attract more interest from high-grade investors as a crossover play than it would from the junk precincts due to its very un-junk-like sub-4% coupon.

A market source meantime saw the company's 3 7/8% notes due 2015 having been fairly actively traded Thursday, easing 1/8 point on the day to about the 103 bid mark on volume of more than $8 million.

Its 3 5/8% notes due 2018 were seen going home about unchanged on the day at just below par bid, although volume was only about $2 million.

Traders saw no immediate activity in the Calgary, Alta.-based oilfield services provider Calfrac's new add-on to its existing 7½% notes due 2020.

Caesars easing continues

Looking at the deals that came to market last week, a trader said Caesars Entertainment Resort Properties LLC's 8% first-lien notes due 2020 were down ¼ point on the day at 99 3/8 bid, 99 5/8 offered.

A second trader quoted the Las Vegas-based gaming giant's new deal at 99¼ bid, par offered.

The first trader also saw Caesars' 11% second-lien senior secured notes due 2021having fallen by 5/8 point on the session to 97 bid, 97½ offered.

Caesars priced both tranches of that $2.15 billion two-part behemoth of a deal at par on Friday after having increased the size of the overall deal from an originally planned $1.85 billion. The company upsized the 8% notes to $1 billion from an originally planned $500 million while downsizing the 11% notes to $1.15 billion from $1.35 billion originally.

The new bonds had not done well in initial aftermarket dealings, with the 8s having fallen to around 98½ bid when they were freed for trading on Monday, while the 11s had done even worse on Monday, dropping to 96½ bid, 97 offered from their par issue price.

Both tranches were seen up more than 1 point in Tuesday's dealings, although they then coughed up some of those recovered gains on Wednesday and continued to backslide on Thursday.

Forest firms on asset sale

Away from the new deals, Forest Oil's 7¼% notes due 2019 gained 2 points on the day to finish at 102¼ bid, a market source said. Its volume of over $16 million was probably the heaviest in the junk space.

Those bonds jumped on the late-day announcement that the Denver-based oil and natural gas exploration and production company had agreed to sell its oil and gas assets located in the Panhandle region of northern Texas to Templar Energy LLC for $1 billion. The transaction is expected to close on or before Nov. 25, with an effective date of Oct. 1, and is subject to customary purchase price adjustments and certain closing conditions.

Forest said that it does not expect to incur any federal or state income taxes on the sale and intends to use the proceeds "primarily to reduce debt and enhance financial flexibility."

Forest's New York Stock Exchange-traded shares, which had fallen by 6 cents, or 0.94% during the regular session to end at $6.35, got a big boost from the news in extended trading, jumping by 77 cents from its regular close, or 12.13%, to finish at $7.12.

Rally try fizzles

All told, a trader said "it was a pretty light day," suggesting that a lot of portfolio managers and other market decision makers were out of pocket and probably still in Scottsdale, Ariz., where Deutsche Bank had been holding its annual leveraged finance conference, considered one of the major highlights on the junk bond yearly calendar.

A second trader said that "the market opened a little softer. It attempted to strengthen earlier in the day. It looked like it was trying to come back a little around midday."

However, by the end of the session, he said that junk "had a softer tone."

Market indicators turn mixed

Statistical junk-market performance indicators meantime turned mixed on Thursday after having been on the upside for the two previous sessions and having been down across the board in the two sessions before that.

The Markit Series 21 CDX North American High Yield index lost 3/16 point on Thursday, snapping a two-session winning streak. It closed at 104¾ bid, 104 7/8 offered.

The index had risen by 3/32 point on Wednesday.

However, the KDP High Yield Daily index saw its second consecutive gain, rising by 4 bps to end Thursday's session at 73.50. It had risen 6 bps on Wednesday, breaking a three-session skid.

Its yield fell by 3 bps to end at 6.09%, its third consecutive narrowing. On Wednesday, it had come in by 2 bps.

And the widely followed Merrill Lynch High Yield Master II index notched its third straight gain on Thursday with a 0.152% rise, which followed Wednesday's 0.103% improvement. The three sessions of gains on Tuesday, Wednesday and Thursday followed a six-session plunge.

The latest gain lifted its year-to-date return back above the 4% mark to 4.133%, versus Wednesday's 3.975% close.

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