Primary quiet; Solera to price; Intelsat slide broken; Chesapeake Energy mixed; new Summit off

By Paul Deckelman and Paul A. Harris

New York, Feb. 24 – The high-yield primary sphere was quiet on Wednesday, with no new deals reported to have priced during the session.

However, syndicate sources said that price talk emerged on the sole deal being actively marketed, automobile insurance claims software provider Solera, LLC’s $2.03 billion equivalent two-part offering of eight-year dollar- and euro-denominated notes.

The sources said that the talk that came out had widened from initial guidance.

Also on the new-deal front, traders said that Tuesday’s new eight-year deal from concrete and asphalt producer Summit Materials, Inc. was slightly lower, though on very light volume.

Away from the new deals, the two-session plunge in Intelsat SA’s notes came to an end, with some of the communications satellite company’s bonds actually trading upward after having gotten hammered on Monday and Tuesday. Volume remained heavy, though.

Chesapeake Energy Corp.’s bonds were also seen mixed on the session after the benchmark oil and natural gas name posted quarterly earnings and reported notable progress in bringing down its debt load.

Whiting Petroleum Corp.’s bonds remained under pressure, though, as that exploration and production operator posted disappointing fourth-quarter earnings.

Statistical market performance measures turned lower across the board on Wednesday after having been mixed on Tuesday, their second lower session in the last four trading days.

Primary remains dormant

The primary market failed to generate news on Wednesday, as the late February earnings blackout and risk aversion spurred by ongoing volatility in the global capital markets and energy prices keep junk bond issuers at bay, market sources say.

One deal remains on the calendar, and sources say it's facing headwinds.

Solera, LLC and Solera Finance, Inc. set price talk in a $2.03 billion equivalent offering of eight-year senior notes (Caa1/B-) on Tuesday.

The deal, via left bookrunner Goldman Sachs & Co., is coming in tranches of dollar-denominated and euro-denominated notes, the sizes of which remain to be determined.

The dollar-denominated notes are talked to yield 10¾% to 11%. That official talk came well wide of earlier guidance of 9½% to 10%, sources say.

The euro-denominated notes are talked to yield in the 25 basis points area inside of the yield of the dollar-denominated notes.

Books for both tranches were scheduled to close Wednesday, and the deal is set for a Thursday execution.

Beyond Solera the active calendar is empty.

Solera is coming on the heels of Summit Materials, Inc., the present week's only other deal.

Summit priced a $250 million issue of senior notes due April 15, 2022 (Caa1/B) at par to yield 8½% on Tuesday.

The yield printed wide of yield talk, and the new notes slipped below the issue price in Wednesday trading, sources said.

Tuesday inflows

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

High-yield exchange-traded funds saw $372 million of inflows on the day.

Actively managed funds saw $275 million of inflows on Tuesday.

However, the cash flows of the dedicated bank loan funds were negative on Tuesday. The loan funds sustained $125 million of outflows on the day, the trader said.

New Summit notes easier

In the secondary market, a trader said the new Summit Materials 8½% notes due 2022 “didn’t trade well.”

He said the notes “broke down through par” and were last seen around 99¾ bid, on “some small volume.”

At another desk, a market source said there had only been “two or three” large-sized trades all day in the credit.

He pegged them at that same 99¾ bid level, calling it a loss of ¼ point.

The Denver-based supplier of cement, ready-mixed concrete, asphalt and construction aggregates priced its quickly shopped $250 million issue of those notes at par on Tuesday.

The new bonds came too late in the session on Tuesday for any real aftermarket trading at that time. They were the first purely junk-rated issue that the market had seen since consumer products company Prestige Brands Holdings, Inc.’s quick-to-market $350 million tranche of eight-year bonds exactly one week earlier.

Intelsat skid snapped

For a third consecutive session, Luxembourg-based communications satellite company Intelsat’s bonds “were the volume winners, again,” a trader said Wednesday, dominating the high-yield Most Actives list.

But unlike what happened on Monday and again on Tuesday – with the paper down by multiple points across the company’s whole capital structure both days – on Wednesday, that plunge seemed to moderate, with some of the company’s bonds actually on the upside after having been previously hammered down.

The company’s most actively traded issue, its Intelsat Jackson Holdings SA 5½% notes due 2023, traded between 60 and 62 during the session, the trader said, ending at 60½ bid – off the day’s highs but up around 2 points on the day.

“A boatload of these traded,” more than $50 million, easily topping the actives list.

Another trader saw those bonds ending at 60¾, up a deuce on the day, estimating round-lot volume at $47 million.

That strength was in sharp contrast to the weakness seen on Monday, he said, when those bonds had swooned 9¾ points, dropping from the mid-70s to around 65 bid, and again on Tuesday, when they fell another 7¼ points into the upper 50s, on heavy volume each day.

Not all of the Intelsat structure was up on Wednesday, with a third day of losses in some of its issues, though nothing approaching the carnage seen on Monday and Tuesday.

A trader saw Intelsat Jackson’s 6 5/8% notes due 2022 down around a point, ending at 42 bid, with over $32 million traded, while its 7¼% notes due 2019 closed at 70¾, down ¼ point.

“All of these issues saw $30 million, $40 million traded,” he said.

The 6 5/8% notes had been the big losers on Tuesday, cascading down by 14 points to the 43 bid level after not having traded much on Monday.

The 7¼% notes, in contrast, had nosedived by 9½ points on Monday to the 78½ bid level from the mid-80s previously, and they lost another 7 points on Tuesday, ending at 71 bid.

Intelsat Luxembourg SA’s 7¾% notes due 2021 dropped by 1 point on Wednesday to 22½ bid after having fallen by 4 points on Tuesday to around 23 bid.

“So we have paper in the 20s, the 40s, the 60s, the 70s, all over the lot – and on a lot of volume,” one of the traders said.

Another market source suggested that Intelsat had become “so oversold” the previous two sessions that the severe downturn was simply not sustainable.

However, for a third straight session, Intelsat’s New York Stock Exchange-traded shares were getting killed on Wednesday, ending down 30 cent, or 12.15%, at $2.17 per share. Volume of 2.28 million was over six times the norm.

Those shares had fallen by 9.19% on Tuesday on about 1.5 times the usual volume and had slid by 9.63% on Monday, with volume more than triple the norm.

The bonds and shares got hammered starting Monday after the company issued its preliminary numbers for the fourth quarter and full fiscal year ended Dec. 31.

Quarterly revenues of $571.26 million were down 7.7% year-over-year from $619 million in the comparable 2014 fourth period, versus average analyst estimates of just under $576 million. Full-year revenues were $2.35 billion, about in line with the estimates but down from $2.47 billion last year.

It also issued full-year 2016 revenue guidance of $2.14 billion to $2.22 billion, down from expectations of around $2.29 billion. Adjusted EBITDA is expected to come in around $1.63 billion to $1.68 billion.

Intelsat also announced on Monday that it had retained Guggenheim Securities to assess what it called “financing and balance-sheet initiatives,” but company executives declined to say what these were, although they indicated that the hire was not a prelude to a merger-or-acquisition transaction or to a Chapter 11 bankruptcy restructuring.

Chesapeake mixed after numbers

Elsewhere, traders saw Chesapeake Energy’s bonds turning in a mixed performance on Wednesday after the Oklahoma City-based oil and natural gas exploration and production company posted fourth-quarter numbers.

Although the company lost $2.2 billion during the quarter, largely due to a $2.8 billion non-cash charge on the impairment of the value of its unproduced oil and gas holdings due to sharply lower commodity prices, the company had a more optimistic outlook when it came to debt and liquidity.

Chesapeake cut its debt load by $2.2 billion during the fourth quarter ended Dec. 31 and in the first two months of this year, primarily on a big secured-debt-for unsecured debt exchange offer that ended up taking out a net total of over $1.5 billion. Its executives also said they would focus on its near-term maturities, notably bonds and convertible notes maturing next year and in 2018, and they expressed confidence about the upcoming borrowing-base redetermination on its credit facility. (See related story elsewhere in this issue.)

Chesapeake’s 8% secured notes due 2022, issued in that aforementioned debt-exchange transaction, were seen down by ¼ point at 38¼ point, with over $37 million having changed hands.

But its remaining 3¼% notes coming due next month on March 15 jumped 3¾ points to 99½ bid, on over $15 million of volume.

Chesapeake’s 6½% notes due 2017 rose 4¼ points to 42 bid, with over $11 million traded.

The company’s NYSE-traded shares zoomed by 50 cents, or 22.83%, ending at $2.69. Volume of 62 million shares was over twice their usual volume.

Whiting trades off

Also in the energy sphere, Whiting Petroleum reported disappointing fourth-quarter numbers, a trader said, and fell for a second straight session.

The Denver-based exploration and production company’s 5% notes due 2019 lost 1½ points, ending at 40½ bid, with over $19 million traded.

On Tuesday, those bonds had fallen by over 5 points on the session in busy dealings.

Indicators turn lower

Statistical market performance measures turned lower across the board on Wednesday after having been mixed on Tuesday, their second lower session in the last four trading days.

The KDP High Yield Daily index fell by 9 basis points on Wednesday to end at 62.54, its second consecutive loss, on top of Tuesday’s 10-bps retreat. It was the index’s third loss in the last four sessions.

For a second session in a row, its yield edged up by 1 bp, finishing at 7.43%, its fourth straight widening out after having come in over the four sessions before that.

The Markit Series 25 CDX North American High Yield index was off by 7/32 point on Wednesday, going out at 97 7/8 bid, 97 15/16 offered, its second successive loss and fourth in the last five sessions. It had eased by 1/8 point on Tuesday.

The Merrill Lynch North American High Yield Master II index also ended on the downside, losing 0.265%, in contrast to Tuesday’s 0.01% gain, which had been its second advance in a row. Wednesday’s loss was its second fall in the last four sessions.

It widened the index’s year-to-date deficit to 2.928% from 2.67% on Tuesday, although the year-to-date red ink total still remains well short of the 5.142% loss seen on Feb. 11, the worst cumulative deficit for the year so far and the index’s worst level since the 30% plunge recorded at the end of 2008.

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