Caleres prices sole dollar deal, SoftBank on tap; oil, coal credits mixed, Chesapeake slides

By Paul Deckelman and Paul A. Harris

New York, July 21 – The high-yield primary market saw one relatively modest-sized offering get done on Tuesday as Caleres Inc. – the footwear maker formerly known as Brown Shoe Co. Inc. – priced a regularly scheduled $200 million eight-year deal.

Traders did not report any immediate aftermarket dealings in the new notes.

Tuesday’s issuance, while small, still topped Monday, when no new dollar-denominated and fully junk-rated paper had come to market from domestic or industrialized-country issuers.

But Wednesday is expected to produce a sizable dollar-denominated pricing, with Japanese telecommunications company SoftBank Group Corp. scheduled to bring a benchmark-sized offering of dollar- and euro-denominated paper to market in five separate tranches, although all the notes will be sold under Regulation S.

Among recently priced issues, both halves of oil and natural gas operator WPX Energy Inc.’s $1 billion deal continued to fall back from the moderate gains they had notched in initial trading after those bonds had priced on Friday.

Away from new or recently priced credits, traders said that coal and oil and gas names, recently under pressure, were a mixed bag on Tuesday.

Consol Energy Inc.’s bonds, which had been down sharply on Monday, rebounded on Tuesday, along with its shares, helped by the news that a major investor had raised its stake in the coal and oil and gas company.

On the downside, Chesapeake Energy Corp.’s paper was lower after the oil and gas firm announced that it would not be paying its next quarterly dividend, instead preferring to conserve cash; debt investors were said to be flummoxed by the company’s lower-than-expected cash levels.

Statistical measures of junk market performance were lower across the board for a third consecutive session on Tuesday.

Caleres prices atop talk

In Tuesday’s dollar-denominated primary market, Caleres priced a $200 million issue of eight-year senior notes (B1/BB) at par to yield 6¼%.

The yield printed on top of yield talk.

BofA Merrill Lynch was the left bookrunner for the debt refinancing deal. Wells Fargo and J.P. Morgan were the joint bookrunners.

Softbank five-part benchmark

Looking to the Wednesday session, Tokyo-based telecommunications company SoftBank is expected to execute a benchmark sale of non-callable senior notes (Ba1/BB+) in five tranches.

Although it is a Regulation S only deal, the Softbank offer has two dollar-denominated tranches: seven-year notes talked to yield in the 5 3/8% area and 10-year notes talked to yield in the 6% area.

The deal also features three euro-denominated tranches: seven-year notes talked to yield in the 4¼% area, 10-year notes talked to yield in the 5% area and 12-year notes talked to yield in the 5½% area.

Deutsche Bank is a global coordinator and physical bookrunner. Goldman Sachs is a global coordinator and joint bookrunner. BofA Merrill Lynch, Credit Agricole, Mizuho and Morgan Stanley are joint bookrunners.

Proceeds will be used for general corporate purposes including debt refinancing.

Telenet at a discount

As with Monday, the bulk of Tuesday’s primary market news came out of Europe, where dealers are attempting to clear a pipeline – including deals backed by bridge loans about to fund – that built up during the volatility related to the finances of Greece.

On Tuesday Belgium-based cable operator Telenet Group Holding NV priced a €530 million issue of 4 7/8% 12-year senior secured notes (expected ratings B1/B+) at 98.885 to yield 5%.

The yield printed on top of yield talk.

Goldman Sachs was the left bookrunner for the debt refinancing deal. JPMorgan, RBC and SG CIB were the joint bookrunners.

SNAI prices mirror notes

Italy-based sports betting firm SNAI SpA priced €110 million of 7 5/8% mirror notes due June 15, 2018 (B1/expected B-) at 102.5.

The reoffer price came rich to price talk of 101.75 to 102.25.

JPMorgan and UniCredit were the joint bookrunners.

The Porcari, Italy-based company plans to use the proceeds to refinance debt and for general corporate purposes, and also to fund costs related to its acquisition of Cogemat SpA.

Domus Vi tapping 6 7/8% notes

France-based elderly care services provider Domus Vi is in the market with a €125 million add-on to its 6 7/8% senior secured notes due Aug. 15, 2021.

Joint bookrunner Goldman Sachs will bill and deliver. Deutsche Bank and Natixis are also joint bookrunners.

Proceeds will be used to finance the acquisition of Pontevedra, Spain-based Geriatros SA.

Thames Water prices tight

In the sterling-denominated primary market, Thames Water (Kemble) Finance plc priced a £175 million issue of non-callable seven-year senior secured notes (B1//BB) at par to yield 5 7/8%.

The yield printed at the tight end of yield talk that had been set in the 6% area.

HSBC, Morgan Stanley and Royal Bank of Scotland were the joint bookrunners.

The Reading, England-based provider of water and wastewater services to London and surrounding areas plans to use the proceeds to repay debt and to pay expenses related to the close-out of hedging arrangements.

Caleres issue unseen

Back in the dollar-denominated part of Junkbondland, traders did not report any initial aftermarket dealings in the new 6¼% notes due 2023 issued by Caleres.

There likewise was no activity seen in the existing Brown Shoe 7 1/8% notes due 2019, which are to be repurchased using the proceeds from the new deal. Those bonds were most recently traded last week, at just under the 104 bid level.

SoftBank issue softer

Ahead of SoftBank Group’s expected big deal on Wednesday, the Tokyo telecommer’s existing 4½% notes due 2020 were seen down nearly ½ point in brisk trading.

A trader quoted the notes at around the 99 7/8 bid level on volume of more than $20 million.

WPX continues to ease

Friday’s new issue of WPX Energy notes were seen on the downside for a second straight session on Tuesday, continuing to back off from the levels they had notched in initial aftermarket dealings following their pricing.

A trader pegged both halves of that $1 billion two-part deal at “just under par.”

He saw the company’s 7½% notes due 2020 at 99¾ bid, which he said was down by around ¼ point, while its 8¼% notes due 2023 were at 99 7/8 bid, a loss of about 3/8 point.

A second trader pegged the 7½s at 99 7/8, calling that down 1/8 point, while the 8¼s were also at 99 7/8, although he said that was down nearly ½ point on the day.

He said that the bonds remained among the most active junk market names, with over $25 million of the 8¼s trading, and over $15 million of the 7½s.

At another shop, a market source saw two-sided markets, with the 7½% notes at 99 3/8 bid, 100 3/8 offered, down ½ point on the day.

He saw the 8¼% notes at 99¾ bid, 100¼ offered, off by ¼ point on the day.

On Friday, WPX, a Tulsa, Okla.-based oil and natural gas exploration and production company, priced $1 billion of the notes at par in tranches of $500 million each after the regularly scheduled forward calendar deal was downsized from $1.2 billion originally.

The 7½% notes were seen to have gotten as good as around a 100¼ bid context, with the 8¼s having firmed to 100½ to 100¾ initially, with about $50 million of each having traded.

They continued to trade actively after that, with over $47 million of the 8¼% notes and more than $20 million of the 7½% notes having changed hands, and both issues quoted at having come in from Friday’s closing levels.

Genesis, Blue Racer ease

Among other recently priced names, a trader saw Houston-based midstream energy partnership Genesis Energy LP’s 6¾% notes due 2022 at 98¼ bid, 98½ offered, off by 1/8 point on the day.

Genesis’ quick-to-market $750 million offering had priced on Thursday at 98.629, yielding 7%.

The moved down from their initial aftermarket levels on Friday, finishing around 98 to 98¼ bid on volume of more than $36 million, but had firmed off those lows on Monday, going home at 98½ bid.

BlueRacer Midstream, LLC’s 6 1/8% notes due 2022 eased by ¼ point on Tuesday, to 101 ¾ bid, 102 ¼ offered, after having gained ¼ point on Monday to finish around 102 bid.

The Dallas-based midstream energy company had priced $300 million of those notes as an add-on to its existing $550 million issue in a drive-by transaction last Wednesday. The additional notes had priced at 101.5 to yield 5.791%.

Consol comes back

Away from the new issues, a trader said that he had seen “a little bounce in the natural resources names – coal names, etc.”

For instance, he saw Consol Energy’s 5 7/8% notes due 2022 as one of the most active junk names for a second straight session, quoting them up 2½ points on the session, ending at 79½ bid, after having slid 1½ points on Monday. The previous session’s fall followed a warning from the Canonsburg, Pa.-based coal mining and oil and natural gas company that it expects to report a second-quarter loss due to lower commodity prices.

But on Tuesday, its news was on the positive side.

Southeastern Asset Management, which already owns 19.6% of Consol, disclosed in a Securities and Exchange filing that it had raised its stake in the company to 21.1%.

Southeastern – considered to be an activist investor – also said that it planned to meet with the company’s management to discuss monetizing Consol’s gas business.

A second market source said that Consol’s bonds were up some 2½ points on the session, ending at 79 bid, on volume of over $23 million.

Oil names mixed

Among other active issues, Los Angeles-based oil and natural gas exploration and production company California Resources Corp.’s benchmark 6% notes due 2024 rose by 1 5/16 bid to 79¼ bid on volume of more than $23 million, bouncing back from Monday’s 2 point loss.

But Oklahoma City-based oiler SandRidge Energy Inc.’s 8¾% notes due 2020 nosedived more than 4 points to end at 74¼ bid, with over $24 million of the bonds having changed hands.

Chesapeake nixes dividend

Chesapeake Energy announced Tuesday that it was suspending its dividend payments in an effort to shore up cash.

In response, the company’s bonds were slipping.

A trader saw the 5¾% notes due 2020 trading actively, falling 2½ points to 91¾. The 6 1/8% notes due 2021 were then pegged at 87, down 5 points from a week ago, the trader said.

The 4 7/8% notes due 2022 ended at 81, off 2½ points, as the 6½% notes due 2017 dipped just ½ point to 99½.

A second market source placed the 6 5/8% notes due 2020 at 92½ bid, down 2½ points.

The Oklahoma City-based oil and gas producer said cutting the dividend – a move many oil companies have taken as oil prices have dropped – would result in savings of up to $240 million a year. Those savings will then be used to develop “high quality” assets, the company said.

Chesapeake also announced that it was selling nearly all of its stake in CHK Cleveland Tonkawa LLC to FourPoint Energy LLC. Proceeds from that sale will be used to redeem preferred stock interests in the partnership, which will reduce dividend payments by $75 million per year.

Other adjacent properties are also being sold for $90 million in cash.

“We think the moves are prudent, but also signal [the company’s] concern that market weakness is likely to continue,” wrote Gimme Credit analyst Philip C. Adams in an afternoon comment released Tuesday.

Goldman Sachs & Co. was a little more blunt in its own Tuesday research report, declaring that “while a dividend cut is generally positive for credit, in this case, we remain skeptical.”

Indicators slip again

Statistical measures of junk market performance were lower across the board for a third consecutive session on Tuesday.

The KDP High Yield Daily Index plunged by 28 basis points on Tuesday to end at 69.38, its third straight loss and fourth in the last six sessions. On Monday, it had lost 11 bps, after having slid by 22 bps on Friday.

Its yield meanwhile rose by 6 bps to 5.88%, after having risen by 3 bps on both Friday and again on Monday.

The Markit Series 24 CDX North American High Yield Index retreated by 5/32 point on Tuesday to end at 106¾ bid, 106 25/32 offered, its third loss in a row and its fourth in the last five sessions. It had eased marginally on Monday and had been off by 1/16 point on Friday.

The Merrill Lynch North American Master II High Yield Index saw its third straight setback, falling by 0.281% on Tuesday. That followed losses of 0.128% on Monday and 0.24% on Friday.

Tuesday’s loss dropped its year-to-date return to 2.034% from 2.321% on Monday.

That year-to-date figure remained well down from the 4.062% reading recorded on May 29, the index’s peak level for the year so far.

-Stephanie N. Rotondo contributed to this review

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