Dollar primary stays quiet; euro market busier; metals, mining, oil names off; indicators slide

By Paul Deckelman and Paul A. Harris

New York, Dec. 8 – For a second consecutive session, the dollar-denominated segment of the high-yield primary market was quiet on Tuesday, with no pricings having taken place.

The sole pricing that did take place involved a euro-denominated deal from a German issuer, containerboard producer Progroup AG, which did a €95 million add-on to its existing 2022 secured notes.

Syndicate sources in that market meantime said that a European subsidiary of U.S. tire manufacturer Goodyear Tire & Rubber Co. would be shopping a euro-denominated eight-year bond deal around to investors, with pricing expected Wednesday.

Media company Clear Channel Outdoor Holdings, Inc. hit the road on Wednesday to market its proposed $225 million of five-year notes.

Away from the quiet primary, metals and mining issues like Fortescue Metals Group were under some pressure amid continuing weak demand for commodities, adversely affecting their bonds.

The energy market – exhibiting many of the same characteristics – also remained weak, pushing down such names as Chesapeake Energy Corp., Whiting Petroleum Corp. and Halcon Resources Corp.

Statistical measures of junk market performance were sharply lower across the board on Tuesday, their second straight downside session. The indicators had turned lower all around on Monday after having been mixed on Friday. It was the third lower session in the last four trading days.

Progroup at the rich end

Progroup placed Tuesday's sole new issue of high-yield notes.

The €95 million add-on to Progroup's 5 1/8% senior secured notes due May 1, 2022 (B1/B+) priced at 105 to yield 4.219%.

The reoffer price came at the rich end of the 104¾ to 105 price talk.

Joint bookrunner Deutsche Bank AG, London Branch will bill and deliver for the acquisition financing. Commerzbank and HSBC were also joint bookrunners.

Goodyear roadshow Wednesday

Goodyear plans to hold a roadshow for a €250 million offering of eight-year senior notes (BB) on Wednesday in London.

The deal is also set to price on Wednesday.

Joint bookrunner Deutsche Bank will bill and deliver. BNP Paribas, BofA Merrill Lynch, Credit Agricole, Goldman Sachs, JPMorgan and Wells Fargo are also joint bookrunners.

The Akron, Ohio-based tire company intends to issue the notes via its European subsidiary, Goodyear Dunlop Tires Europe BV.

Proceeds, together with cash and cash equivalents, will be used to redeem in full €250 million of Goodyear Dunlop 6¾% senior notes due 2019.

Meanwhile Clear Channel unit Clear Channel Communication International BV is on roadshow for a $225 million offering of five-year senior notes (B2/B) via bookrunner Goldman Sachs.

The use of proceeds involves the repayment of loans within the corporate structure. Ultimately, most of the cash will go to controlling stockholder iHeart Communications, Inc., which may use those proceeds for its own corporate purposes, including debt repayment, sources say.

The deal appears headed for a Thursday pricing, a trader said, adding that yield discussions have been taking place around 7%.

Also on Tuesday, Moody's downgraded Clear Channel Worldwide Holdings, Inc.'s series A & B senior notes due 2022 to B2 from B1 and the series A & B senior subordinated notes due 2020 to Caa1 from B3, the trader noted.

Mixed flows

The cash flows of the dedicated high-yield funds were mixed on Monday, the most recent session for which data was available at press time, a trader said.

High-yield exchange-traded funds saw $202 million of inflows on the day.

Asset managers sustained $105 million of outflows on Monday.

ETFs were big sellers on Tuesday, a source said but added that there was a late bid in the afternoon.

Meanwhile, losses continue to stack up in the high-yield metals and mining sectors, the source added.

Miners getting hit

In the secondary market, a trader said that the major trend that he saw on Tuesday was “pressure on the resources names – coal, mining and metals – from continued weakness in commodity prices.”

For instance, he said one of the most active credits in that space was Australian iron ore miner Fortescue Metals Group’s 9¾% notes due 2022.

More than $24 million of the notes changed hands during the session, making it one of the busiest names in Junkbondland.

The Fortescue paper, he said, “was down about 4 or 5 points” from recent levels. “They made back 1 or 2 points of that” later in the day, he said, but still closed lower on the session.

At another desk, a market source said the Fortescue bonds were ending lower at 87¼ bid, down 1 point on the day and four points from where they had begun the week.

The company’s 6 7/8% notes due 2022 were down a deuce on the day at 63 bid.

In the coal segment of the market, Consol Energy Inc.’s 5 7/8% notes due 2022 slid by more than three points to 63¾ bid in very active dealings, a trader said, with volume topping the $23 million mark.

The Canonsburg, Pa.-based coal and natural gas company’s 8% note due 2023 were down nearly two points, ending at 71 bid.

St. Louis-based coal operator Peabody Energy Corp.’s deeply distressed 6½% notes due 2020 were trading below 15 bid, down 1¾ points on the day.

The downturn in commodity prices – driven largely by the pronounced slowdown in the economy of China, the world’s second-largest economy behind the United States and formerly a voracious buyer of oil, coal and steel, and aggravated by sluggish demand elsewhere as well, including Europe – has also had its impact on steel producers.

On Tuesday, Arcelor Mittal SA’s 6¼% notes due 2021 lost nearly 5 points on the day, one of the market sources said, ending at 79¼ bid.

The 4½% notes due 2017 of the Luxembourg-based company, which is easily the world’s largest steelmaker by tonnage produced, were likewise lower, ending at 96 bid.

Domestic competitor United States Steel Corp.’s 7% notes due 2018 ended down 4 points on the day at 62 bid, while AK Steel Holding Corp.’s 7 5/8% notes due 2020 were down 1¾ points at 30½ bid.

Energy slide continues

Oil and natural gas are also among the particularly weak commodities these days, and energy exploration and production companies’ bonds are being punished for it.

Tuesday was no exception, with the oil and gas sector paper widely seen lower.

Houston-based Halcon Resources’ 8 5/8% notes due 2020 were off by 1½ points at 75 3/8 bid, with over $17 million having traded.

Denver-based E&P Whiting Petroleum’s 5¾% notes due 2021 lost 2 points to close at 87¾ bid, with over $14 million trading.

And Chesapeake Energy – whose bonds have been falling since the Oklahoma City-based company’s announcement of a debt exchange on terms investors feel are unfavorable – was again on the downside.

Its 4 7/8% notes due 2022 lost 1½ points to close at 29 bid, with over $22 million traded.

Indicators down again

Statistical measures of junk market performance were lower across the board for a second consecutive session on Tuesday. The indicators had turned lower all around on Monday after having been mixed on Friday. It was the third lower session in the last four trading days.

The KDP High Yield Daily index plunged by 52 basis points on Tuesday to end at 64.62, its fourth straight loss after three successive gains and its fifth loss in the last eight sessions. On Monday, it had slid by 34 bps.

Tuesday’s close represented a third consecutive new low for the year and a new 52-week low for the index, eclipsing Monday’s prior mark of 65.14.

It was also the index’s lowest finish since July 22, 2009, when it went home at 64.24

For a second session in a row, its yield ballooned upward by 11 bps to finish at 7.19%, matching Monday’s rise. It was the yield’s fourth consecutive widening after two straight narrowings, which had followed two unchanged sessions and another narrowing, making Tuesday’s close its fifth widening in the last 10 sessions.

Tuesday’s yield marked a second consecutive new high for 2015, surpassing the former 2015 highest yield of 7.08% set on Monday.

The Markit Series 25 CDX North American High Yield index swooned by 19/32 point on Tuesday to end at 101 9/16 bid, 101 19/32 offered, its second straight loss after one gain and its fourth loss in the last five sessions. It had fallen by 9/32 point on Monday after having gained 3/16 point on Friday.

The Merrill Lynch North American Master II High Yield index plummeted by 0.668% on Tuesday, its fourth successive loss after three sessions before that on the upside and thus its fifth loss in the last eight sessions. It had lost 0.399% on Monday.

The index’s year-to-date loss widened to 3.391% on Tuesday from Monday’s 2.741%. That set a new low for the index’s worst 2015 cumulative setback, eclipsing the prior mark of 3.069% recorded on Oct. 2.

It was the biggest cumulative loss the index had seen since Oct. 5, 2011, when it closed with a year-to-date loss of 3.834%.

One of the index’s components, its yield to worst, rose to 3.391% from Monday’s 2.741%, in the process establishing a second straight new wide level for the year so far.

Another index component, the average price of tracked bonds, fell to its lowest price of the year on Tuesday, 90.20294. It was the second straight new 2015 low price; the previous low of 90.83892 had been set on Monday.

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