Morning Commentary: High-yield market opens lower; W&T Offshore bonds up 4 points on asset sale

By Paul A. Harris

Portland, Ore., Sept. 1 – Junk bonds were down ¼ point to ½ point heading into midday on the East Coast of the United States, according to a debt capital markets banker who added that energy names were down more.

The drop was taking place against a backdrop of selling in the stock market, with the Dow Jones industrial average down 2.17%.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was trading at $85.55 per share heading into midday, down 30 cents.

The SPDR Barclays High Yield Bond ETF (JNK) was 12 cents lower at $36.70 per share.

Energy, which has been volatile during the past year, has been exceptionally so in recent days, with the barrel price of West Texas Intermediate crude for Oct. 15 delivery having traversed a price range spanning a low of $38.60 late last week to a high of $49.20 yesterday, the recent spike coming on news that the Organization of Petroleum Exporting Countries signaled on Monday that there is a willingness to reach out to oil producers in order to create equilibrium in the market and arrive at a fair and reasonable oil price.

However the WTI barrel price was back down $2.07 heading into the Tuesday midday, with high-yield market watchers – energy representing 14% of the index – scrambling to uncover the catalyst for the latest drop.

W&T trades up on asset sale

Not all of the news out of the energy sector was bad news as September got underway, however.

The W&T Offshore, Inc. 8½% senior notes due June 15, 2019 were up 4 points since late last week on news that the company entered into a definitive agreement with Ajax Resources, LLC for the sale of all of W&T’s interest in the Yellow Rose field in the Permian Basin, according to a New York-based trader.

The W&T Offshore 8½% notes were trading at 51 bid, 51¼ offered, heading into the Tuesday midday, up from 47 bid, 47½ offered on Friday.

In a Tuesday press release W&T Offshore said that it expects gross pre-tax proceeds from the transaction to be approximately $376.1 million, which it plans to use to pay down the outstanding balance under its secured revolver and provide additional liquidity for future operations and acquisitions.

Active September pipeline

Volatility, late-summer low liquidity and the absence of a significant number of market participants continued to sideline the primary market, as September got underway.

No deals have been priced or announced in over a week.

However, pending market conditions, there is an active new-deal pipeline for post-Labor Day September, according to a syndicate banker, who added that, pending conditions, that pipeline currently appears to encompass $25 billion to $35 billion of new issue business.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.