Cogent add-on prices as calendar builds; market mixed as crude gyrates; funds gain $598 million

By Paul Deckelman and Paul A. Harris

New York, Nov. 28 – The high-yield primary realm saw one smallish deal price on Monday as Cogent Communications Group, Inc. did a quickly shopped $125 million add-on to its existing 2022 senior secured notes.

The offering was quoted a little higher after that pricing.

Syndicate sources meantime said that the Junkbondland forward calendar grew notably with several new-deal announcements, among them the news that Canadian mining company Hudbay Minerals Inc. will be hitting the road to market a $1 billion offering of six- and eight-year paper.

Other names slating prospective deals included Grinding Media Inc. and MC Grinding Media (Canada) Inc., Advance Pierre Foods Holdings, Inc. and Catalent, Inc.

The recently priced new deal from oil and natural gas operator EP Energy LLC and that company’s existing bonds were among the busier credits on the day.

Oil and gas names such as WPX Energy Inc., Rice Energy Inc., MEG Energy Corp. and Whiting Petroleum Corp. were seen mixed amid the gyrations of the world crude markets ahead of this week’s OPEC meeting – oil prices, which fell sharply on Friday, staged a strong rebound on Monday.

Statistical market performance measures were mixed on Monday after having been higher across the board on Friday. It was their second mixed session in the last three trading days.

High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – moved back into the black during the latest week, breaking a string of six consecutive net outflows, as $598 million more came into those weekly reporting only domestic funds than left them via investor redemptions. In contrast, the funds had fallen by $2.284 billion the week before (see related story elsewhere in this issue).

Cogent drives by

Cogent Communications priced Monday’s sole deal, bringing a $125 million add-on to its 5 3/8% senior secured bullet notes due March 1, 2022 (expected B1/confirmed B+) that came at 100.375 to yield 5.29%.

The tap came rich to price talk that had been set in the par area. Initial guidance was also par.

Joint bookrunner Barclays will bill and deliver. Deutsche Bank and Morgan Stanley were also joint bookrunners.

The Washington, D.C.-based wireless telecommunications services provider plans to use the proceeds for general corporate purposes including share repurchases and dividends to stockholders.

Hudbay plans $1 billion

The new issue calendar saw a meaningful buildup on Monday and could continue to do so into the middle part of the week, depending on market conditions, sources say.

Hudbay Minerals plans to start a roadshow on Tuesday for a $1 billion two-part offering of senior notes.

The deal, which includes tranches of six-year notes and eight-year notes, is expected to price on Friday.

Barclays in the lead left bookrunner. RBC and BofA Merrill Lynch are the joint bookrunners.

The Toronto-based mining company plans to use the proceeds to fund a tender offer for its 9½% senior notes due 2020 and for general corporate purposes.

Moly-Cop plans $725 million notes

Grinding Media and MC Grinding Media (Canada) are expected to price a $725 million offering of seven-year senior secured notes to help fund the acquisition of Moly-Cop by American Industrial Partner.

The deal is expected to come to market late this week.

Morgan Stanley, Jefferies, Deutsche Bank and UBS are the joint bookrunners.

AdvancePierre sets roadshow

AdvancePierre Foods plans to start a roadshow on Tuesday in New York for a $350 million offering of eight-year senior notes (expected ratings B3/B-).

Initial guidance has the deal coming with a yield in the high 5% area, a trader said.

Barclays is the lead left bookrunner. Credit Suisse, Deutsche Bank, Morgan Stanley and Wells Fargo are the joint bookrunners for the debt refinancing deal.

Catalent to sell euro notes

Catalent plans to start a roadshow on Tuesday for a $400 million equivalent offering of euro-denominated senior notes.

Morgan Stanley, JP Morgan, RBC and BofA Merrill Lynch are leading the deal.

The Somerset, N.J.-based provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products plans to use the proceeds to fund its acquisition of Accucaps Industries Ltd. as well as to pay down bank debt and to provide cash on the balance sheet for general corporate purposes.

Thomas Cook to start marketing

Thomas Cook Group plc plans to start a roadshow on Tuesday for a €300 million minimum offering of guaranteed senior notes due 2022.

The offer is being led by global coordinators and physical bookrunners BofA Merrill Lynch, DNB and Lloyds.

The London-based travel company plans to use the proceeds to redeem its guaranteed senior notes due June 2017 and a portion of its senior notes due June 2020.

Friday inflows

Cash flows for dedicated high-yield bond funds were positive on Friday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $189 million of inflows on the day.

Actively managed funds saw $50 million of inflows.

The news follows a report from Lipper US Fund Flows, issued late last week, that dedicated high-yield bond funds saw $598 million of inflows for the week to last Wednesday’s close.

However a breakdown of those cash flows leaves only the high-yield ETFs in the green, a trader said on Monday.

The ETFs gained $720 million for the week to Wednesday’s close, leaving the actively managed funds in the red for the week, the source added.

Daily cash flows for dedicated bank loan funds also remained strongly positive last Friday, the trader added.

The loan funds saw $275 million of inflows on the day.

Cogent quoted higher

Traders did not see much activity in Cogent Communications’ new 5 3/8% notes following the pricing of that add-on tranche.

However one market source quoted them at a 100¾ to 101¾ bid context, up from their 100.375 pricing level.

EP Energy trades actively

A trader said that overall, Monday’s market was “very quiet,” agreeing with the suggestion that many market participants who had made a long holiday weekend out of it by skipping Friday’s lightly traded session following Thursday’s Thanksgiving holiday close in the United States were just now straggling back in, “still on their turkey hangover,” he said.

One name which was actively traded, though, he said was EP Energy’s 8% notes due 2024, $500 million of which had priced at par on Nov. 17.

He called the Houston-based oil and natural gas exploration and production company’s new paper “off ¼ point or so” at 102 bid.

A second trader saw the bonds straddling the 102 mark at 101 7/8 bid, 102 1/8 offered.

Yet another market source also pegged that paper at 102 bid, seeing more than $12 million changing hands – robust enough trading to land it among the day’s Most Active issues, leading all recently priced deals on that score.

The company’s existing 9 3/8% notes due 2020 were even busier, with more than $18 million having traded.

The first trader called them “up 1 point or so,” ending at around 80¼ bid.

Energy names mixed

Other energy names were seen mixed on the day, as oil prices continued to gyrate, pushing strongly into the black during the session after having fallen badly on Friday.

On the upside, a market source saw WPX Energy’s 6% notes due 2022 up around 1 3/8 points on the day, ending at 101½ bid, while Rice Energy’s 6¼% notes due 2022 ended 1 point better at 102.

On the downside, Canadian oil sands producer MEG Energy lost ¾ point, ending at 86 bid, while Whiting Petroleum’s 5% notes due 2019 were down by a similar amount, closing at 98½ bid.

Those movements came against a backdrop of volatile crude prices ahead of the mid-week meeting in Vienna of OPEC oil ministers, who may or may not reach agreement on limiting output in order to support prices.

The benchmark U.S. crude oil grade, West Texas Intermediate for January delivery, shot up by $1.02 per barrel in Monday dealings on the New York Mercantile Exchange, closing at $47.08, after having plunged by $1.90 per barrel on Friday when it looked like the ministers might not be able to agree to curb output.

The key European grade, Brent crude of January delivery, likewise rebounded by $1 per barrel Monday on the London ICE Futures Market, settling at $48.24, in contrast to Friday’s $1.76 per barrel price plunge.

Noting that Friday nosedive, a trader pointed out that “there’s been chatter – the [OPEC ministers’] deal is falling apart, then it’s coming back together. You’re going to have that kind of chatter until something firm is announced.”

He noted that oil “started out weak this morning – there were headlines that the deal wasn’t coming together.”

Then later on, he said, “there were other headlines coming out that Iraq was going to participate in the [output] cut and come on board with it,” boosting prices.

“I would expect the same kind of headlines and reactions [on Tuesday].”

Indicators turn mixed

Statistical market performance measures were mixed on Monday after being higher across the board on Friday. It was their second mixed session in the last three trading days.

The KDP High Yield Index firmed by 5 basis points on Monday to close at 70.20, its fifth consecutive gain and eighth advance in the last nine sessions. On Friday, it had risen by 4 bps.

The index’s yield came in by 1 bp to end at 5.83%, its second straight narrowing. It had decreased by 2 bps on Friday after having been unchanged last Wednesday. The Index was not published on Thursday due to the Thanksgiving Day holiday break.

The Markit Series 27 CDX Index retreated by 1/32 point on Monday to end at 104 19/32 bid, 104 5/8 offered, after rising by 5/32 point on Friday.

But the Merrill Lynch High Yield Index notched its sixth straight gain and its ninth improvement in the last 10 sessions, rising by 0.141%. On Friday, it had been better by 0.011%.

Monday’s advance lifted its year-to-date return to 15.109% from 14.947% at the close on Friday – its first time back over the psychologically potent 15% mark since Nov. 8, when it had closed at 15.287%.

However, those levels remain well under its peak cumulative return for the year so far of 16.768%, set on Oct. 25.

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