Vantage Drilling, Avation add-on price; LifePoint lags; energy names in focus; funds add $487 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 15 – While volatility continued to roil markets with the energy sector under pressure, one oil and gas name saw a blue-ribbon execution on Thursday.

Vantage Drilling International brought a deal that came upsized, on an accelerated timeline, and priced at the tight end of price talk.

The offshore drilling contractor priced an upsized $350 million issue of five-year senior secured first-lien notes (Caa1/B) at par to yield 9¼%.

Avation plc priced a $50 million add-on to its 6½% senior notes due May 15, 2021 (B+/BB-) at 99.75 to yield 6.61% in a Thursday drive-by.

While the domestic primary market’s forward calendar remains light, Atlantica Yield is expected to price its $300 million offering of eight-year senior notes (BB/BB+) on Friday.

In the European market, Groupe Ecore Holding SAS (Luxembourg) priced its €255 million offering of five-year senior secured floating-rate notes (B/BB-).

Co-operative Group Ltd. wrapped up a roadshow for its £250 million offering of five-year fixed-rate green-eligible notes with pricing expected on Friday.

Meanwhile, market volatility continued to take its toll on the secondary space, which remained under pressure on Thursday despite a slight improvement in crude oil futures, sources said.

RegionalCare Hospital Partners Holdings, Inc./LifePoint Health, Inc. new 9¾% senior notes due December 2026 (Caa1/CCC+) traded down as much as 4 points in high-volume activity.

The energy sector remained the focus of secondary trading with California Resources Corp.’s 8% senior secured second-lien notes due December 2022 again among the most actively traded issues in the space.

Whiting Petroleum Corp.’s 6.625% senior notes due 2026 also saw active trading with the notes slipping in the high-volume activity.

While the market in general was soft, earnings-related news continued to drive some names lower.

Frontier Communications Corp.’s junk bonds continued their downward momentum in active trading on Thursday after reporting disappointing earnings last week.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw $487 million in inflows for the week ended Nov. 14, according to fund-flow statistics generated by AMG Data Services Inc.

The week marks the second consecutive week of inflows after several billion-dollar outflows in October. Funds added $1.04 billion in cash for the week ended Nov. 7.

While fund flows have been mixed for the past few months, outflows continue to outpace the inflows.

Vantage Drilling upsized, tight

In a primary market that has proven to be an obstacle course for issuers through much of the autumn, Thursday's session saw a blue-ribbon execution.

Vantage Drilling International brought a deal that came upsized, on an accelerated timeline, and priced at the tight end of price talk.

The Houston-based offshore drilling contractor priced an upsized $350 million issue of five-year senior secured first-lien notes (Caa1/B) at par to yield 9¼%.

The issue size was increased from $300 million

The yield printed at the tight end of the 9¼% to 9½% yield talk, which was also initial talk, a trader said.

Timing of the deal was accelerated. It was scheduled to roadshow through Thursday and price Friday.

Shortly after the deal priced, the new Vantage Drilling 9¼% first lien notes were par ¼ bid, 101 offered at the dealer, according to an investor.

Credit Suisse was the left bookrunner.

Sources also noted that the two joint bookrunners, Clarksons Platou and Pareto Securities, have established footprints in the offshore drilling sector.

Vantage Drilling plans to use the proceeds to repay its first- and second-lien debt, and to fund the acquisition of the Soehanah jackup oil rig.

Avation drives by with tap

In Thursday drive-by action, Avation plc priced a $50 million add-on to its 6½% senior notes due May 15, 2021 (B+/BB-) at 99.75 to yield 6.61%.

The reoffer price came on top of price talk.

Wells Fargo was the left bookrunner. Morgan Stanley was the joint bookrunner.

The Singapore-based aircraft lessor plans to initially use the proceeds to repay certain debt before redeploying the capital for purposes of growth.

Ecore FRN atop talk

In Thursday's European session, Groupe Ecore Holding SAS (Luxembourg) priced a €255 million issue of five-year senior secured floating-rate notes (B/BB-) with a 625 basis points spread to Euribor at 98.

The deal, via sole bookrunner Barclays, came on top of talk.

The France-based recycling company plans to use the proceeds, together with a new factoring facility and cash on its balance sheet, to fund a distribution to its shareholders, to repay its existing factoring facility and to repay existing bank loans.

Looking to Friday

Two deals are on deck to price Friday – one dollar-denominated and one sterling-denominated.

Atlantica Yield is expected to price a $300 million offering of eight-year senior notes (BB/BB+).

Official talk pending guidance backed up into the low to mid 7% area from the low to mid 6% area, a trader said on Thursday.

Meanwhile U.K.-based Co-operative Group Ltd. was scheduled to wrap up a roadshow for its £250 million offering of non-callable five-year fixed-rate green-eligible notes on Thursday in Edinburgh.

That deal is also expected to price Friday.

RegionalCare trades down

RegionalCare’s 9¾% senior notes due 2026 saw a steep drop in intraday trading on Thursday. However, sources did not feel the lowball trades were indicative of the true level of the notes.

The 9¾% notes traded as low as 96 on Thursday after closing Wednesday at 99¼, a market source said.

However, the trading activity on the 96 level was primarily between a dealer and an account.

Outside of those trades, the notes were flat to down slightly with trades between 98¾ and 99¼, a market source said.

The new paper dominated activity in the secondary space with more than $82 million of the bonds on the tape.

RegionalCare Hospital Partners Holdings and LifePoint Health priced a downsized $1,425,000,000 issue of the 9¾% notes at par on Wednesday.

The deal was decreased from $1,575,000,000 with $150 million of proceeds shifted to a concurrent term loan, increasing its size to $4.35 billion from $4.2 billion

The yield printed near the wide end of the 9½% to 9¾% yield talk, which had moved out from earlier talk of 9% to 9¼%.

Initial price talk was in the 9¼% area, according to market sources.

The deal also underwent covenant changes bearing primarily upon how the company may disburse cash, manage assets and incur additional debt.

Energy in focus

Energy names remained in focus in the secondary space with California Resources’ 8% senior notes due 2022 again one of the most actively traded issues of the day.

While active, the notes were largely flat as the barrel price of WTI crude oil for December delivery improved by 26 cents, a market source said.

The notes continued to trade around 83½ with more than $34 million of the bonds on the tape, a market source said.

Whiting Petroleum’s 65/8% senior notes due 2026 were also active on Thursday although with little movement in price, a market source said.

The notes were down about 1/8 point to close Thursday at 95 7/8, a market source said. More than $22 million of the bonds were on the tape by late in the session.

Whiting Petroleum announced it had appointed a new chief operating officer on Thursday.

However, the news would not account for the notes’ activity in the secondary space.

“It’s all oil related,” a market source said.

Frontier down again

Frontier Communications’ junk bonds continued to trade down in the secondary space, a trend that began after the company reported third quarter earnings last week.

Frontier’s 11% senior notes due 2025 dropped 1¾ point to close Thursday at 68¾. More than $17 million of the bonds were on the tape by the late afternoon.

Frontier’s 10½% senior notes due 2022 shaved off 1 point in active trading to close the day at 75. More than $15 million of the bonds were in play during Thursday’s session.

Frontier’s junk bonds have been on a downward spiral since reporting earnings.

The 11% notes were at 76 prior to its earnings report, a market source said. The 10½% notes were at 83½.

Wednesday outflows

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

High-yield ETFs sustained $784 million of outflows on the day.

Actively managed high-yield funds saw $21 million of outflows on Wednesday, the trader said.

Indexes down again

Indexes posted losses for the fourth consecutive session on Thursday.

The KDP High Yield Daily index dropped 27 basis points to close Thursday at 68.56 with the yield now 6.54%.

The index dropped 20 bps on Wednesday and 19 bps on Tuesday.

The index dropped 20 bps on Friday while still posting a 12 bps gain on the week last week.

The ICE BofAML US High Yield index dropped into negative territory on Thursday for the first time since June.

The index dropped 42.7 bps on Thursday with the year-to-date return now negative 0.075.

The index dropped 34 bps on Wednesday and 41.8 bps on Tuesday.

The index fell 40.3 bps on Friday although it still marked a 10.4 bps gain on the week last week.

The CDX High Yield 30 index slid 7 bps to close Thursday at 104.47.

The index dropped 32 bps on Wednesday and 68 bps on Tuesday. The index dropped 78 bps on Friday and was down 24 bps on the week last week.

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