Junk: Crescent Energy prices tap; Permian Resources flat; Ford gains on IG upgrade

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 7 – In the United States junk bond market, Thursday activity was centered on an add-on deal from Crescent Energy Co. that priced as a drive-by offering.

Meanwhile, it was another soft day in the secondary space although the market clawed back from a weak start to close well off the lows of the day.

Quality credits on the front end of the curve remained well bid, a source said.

However, caution was in the air.

“Guys are cautious given the potential backdrop for higher rates,” a source said. “We’re by no means out of the woods yet.”

While the market cheered on the macro data released in the last week of August, the gains were partially driven by the lack of liquidity in the space.

While the latest Consumer Price Expenditure report, the Federal Reserve’s preferred inflation gauge, came in line with expectations, the number was still moving in the wrong direction.

While bets have decreased for a November rate hike, the market still widely expects one before the year comes to an end with the market increasing their bets for a December rate hike and questioning the Fed’s ability to engineer a soft landing, a source said.

“They’ve never done it before,” the source said.

The market was relatively active with new paper from Permian Resources Corp. jumpstarting activity.

However, Permian’s new 7% senior notes due 2032 (B2/BB-/BB-) fell flat in the aftermarket although the notes were lifted into the close.

Topical news drove some activity with Ford Motor Credit Co. LLC’s senior notes (Ba2/BB+) on the rise following Fitch Rating’s upgrade of the notes to investment-grade.

Altice France Holding SA’s senior notes also made large gains on news the company was considering asset sales to address its debt.

Meanwhile, high-yield mutual and exchange traded funds had nominal inflows with $252 million entering the space in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flows report.

Primary

The dollar-denominated primary market remained active on Thursday, as Crescent Energy Co. priced an upsized $150 million add-on (from $125 million) to the Crescent Energy Finance LLC 9¼% senior notes due Feb. 15, 2028 (B1/BB-/BB-) at 101.125 to yield 8.858% in a drive-by.

The issue price came at the rich end of price talk in the 101 area.

The tap broke sharply higher, and was trading at 102 bid, 102½ offered heading into the Thursday close, a trader said.

Meanwhile French TV producer/distributor Banijay Entertainment SAS kicked off a $350 million minimum offering of 5.5-year senior secured notes (B1/B+/BB-) with initial talk in the low-to-mid 8% area.

The overall €910 million equivalent two-part offering also includes a €350 million minimum tranche of the notes with initial guidance in the mid-to-high 7% area.

The telephone roadshow wraps up Monday.

The Sept. 11 week could also see the launch of an M&A megadeal.

A $4 billion equivalent amount of senior secured notes backing the buyout of Worldpay could be launched into the market as early as the week ahead, according to a high-yield portfolio manager.

The deal will come in tranches of dollar- and euro-denominated notes, the manager said.

Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC will have the lead.

Permian flat

Permian’s new 7% senior notes due 2032 had a lackluster start in the secondary space with the notes largely falling flat.

While the notes spent most of the session wrapped around par, they were lifted into the close to end the day at par ¼, a source said.

There was $58 million in reported volume.

The notes priced tight, leaving little room for movement in the secondary.

However, the deal came in support of the company’s merger with Earthstone Energy Inc. with proceeds to be used to repay debt, including amounts assumed in the merger.

The merger was credit positive for Permian with the market largely expecting credit upgrades to result, a source said.

S&P Global Ratings has already placed its ratings for Permian on CreditWatch with positive implications.

Permian priced a $500 million issue of the 7% notes at par in a Wednesday drive-by.

The yield printed in the middle of the 6 7/8% to 7 1/8% yield talk.

Ford’s upgrade

Ford’s senior notes made large gains in heavy volume on Thursday after Fitch raised the company to investment-grade.

Ford’s 3¼% senior notes due 2032 jumped 1 point to close the day at 78 with the yield 6.7%.

There was $18 million in reported volume.

The 6.1% senior notes due 2032 also gained about 1 point to close the day at 95 1/8 with a yield of 6 7/8%.

There was $14 million in reported volume.

Ford’s 7.2% senior notes due 2030 gained 7/8 point to close the day at 101 7/8 with the yield also about 6 7/8%.

There was $12 million in reported volume.

Ford’s notes have drifted lower throughout August as the market reassessed its rate expectations and analysts warned of potential headwinds for the industry.

However, the notes underwent a surge of buying interest on Thursday after Fitch lifted its credit ratings to BBB- from BB+.

The upgrade was due in part to Fitch’s belief that the supply chain issues and production volatility of the past two years have largely abated.

Altice gains

Altice France’s senior notes had a surge in buying interest on Thursday following news reports the company was considering asset sales to address its heavy debt burden.

The 8 1/8% senior secured notes due 2027 (B2/B-) gained 1 point to close the day at 87½ with the yield 12¾%, according to a market source.

There was $18 million in reported volume.

The 10½% senior notes due 2027 (Caa2/CCC) jumped 2 points to close the day at 59½ with the yield 29%.

There was $12 million in reported volume.

The 5½% senior secured notes due 2029 (B2/B-) gained 1½ points to close the day at 74 5/8 with the yield 11 3/8%.

There was $12 million in reported volume.

The notes were in focus after multiple media outlets reported that the company was considering asset sales to address its debt burden with a deal to sell its data centers to Morgan Stanley Infrastructure Partners imminent.

Indexes

The KDP High Yield Daily index shaved off 1 basis point to close Thursday at 50.22 with the yield 7.59%. The index was down 11 bps on Wednesday and 20 bps on Tuesday.

The ICE BofAML US High Yield index added 8.5 bps with the year-to-date return now 6.758%.

The index was down 27.1 bps on Wednesday and 25.6 bps on Tuesday.

The CDX High Yield 30 index added 3 bps to close Thursday at 102.6.

The index was off 15 bps on Wednesday and 31 bps on Tuesday.

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