Wynn, GenOn, New Gold lead $2.15 billion session; oil names slide; funds down $386 million

By Paul Deckelman and Paul A. Harris

New York, May 4 – The high-yield primary arena saw a burst of activity on Thursday as $2.15 billion of dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers came to market in four tranches.

That was up from the $1.85 billion which had priced in two tranches on Wednesday.

Thursday’s new-deal volume was the heaviest in Junkbondland in a month, since the $2.67 billion that got done in five tranches back on April 5.

Gaming operator Wynn Resorts Ltd. had the big deal of the day, pricing a quickly shopped $900 million of 10-year notes.

Also driving by during the session were power producer GenOn Energy Inc., with an upsized $550 million of five-year first-lien secured paper, and Canadian metals miner New Gold Inc., which brought $300 million of eight-year notes to market.

The day’s lone regularly scheduled forward calendar offering was builder AV Homes, Inc.’s upsized $400 million of five-year notes.

Traders said the New Gold notes firmed smartly in busy trading when they hit the aftermarket and the new Wynn paper was also quoted higher.

GenOn’s existing notes set to come due next month – which are to be redeemed using the proceeds from the bond deal – soared in heavy trading, although some of the company’s other paper was in retreat, also on very active volume.

Wednesday’s new deal from Restaurant Brands International Inc. was the most actively traded junk credit, ending little changed on the day.

Away from the new or recently priced issues, energy credits like California Resources Corp. and Oasis Petroleum Inc. were sharply lower in active dealings as world crude oil prices slid more than $2 per barrel on market concerns about oversupply of petroleum.

Statistical market performance measures turned lower across the board on Thursday – their first losing session since April 18. The indicators had been mixed on Tuesday and Wednesday and were higher all around in three consecutive sessions before that.

Another numerical indicator – the flow of investor cash into or out of high-yield mutual funds and exchange-traded funds, which is considered a reliable barometer of overall junk market liquidity trends – returned to the downside in the latest reporting week, posting its third outflow in the last four weeks, according to numbers released on Thursday. Some $386 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, versus the $291 million net inflow seen for the seven-day period ended April 26 (see related story elsewhere in this issue).

Wynn 10-year bullet

As has become the way of the primary market in recent weeks, the Thursday session saw a disproportionate amount of action in an otherwise generally quiet week.

Four issuers raised a combined total of $2.15 billion with single tranche deals.

Three of those issuers came with drive-bys.

Two deals were upsized.

Indications are that the high-yield new issue market remains issuer friendly.

Three of Thursday’s four deals came at the tight ends of talk while the fourth came on top of talk but well inside of initial guidance.

Wynn Resorts priced $900 million issue of 10-year senior bullet notes (B1/BB-) at par to yield 5¼%.

The yield printed at the tight end of the 5¼% to 5 3/8% yield talk which had been narrowed from initial guidance of 5¼% to 5½%.

The debt refinancing deal was between 1.5-times and two-times oversubscribed, sources said.

Deutsche Bank, BNP Paribas, BofA Merrill Lynch, Credit Agricole, Fifth Third, Goldman Sachs, JP Morgan, Morgan Stanley, Scotia, SMBC Nikko and SunTrust were the joint bookrunners.

GenOn upsizes

In the deal that had the market buzzing on Thursday, GenOn Energy priced an upsized $550 million issue of five-year senior secured first lien notes at par to yield 10½%.

The yield printed on top of yield talk.

Initial guidance was in the 11% area, according to a trader.

The deal, which was expected to be non-rated at the time of issuance, was helmed by sole bookrunner Goldman Sachs.

It appeared to largely be spoken for by existing GenOn bondholders, traders said.

It also sparked interest among the hedge funds, a trader noted.

The existing 7 7/8% notes set to mature in June, originally issued by Reliant Energy, had a wild ride beginning at the time GenOn’s new deal was announced on Thursday morning.

The 7 7/8% notes due 2017, which traded at 72 on Wednesday, traded as high as 92 and were quoted higher on Thursday morning subsequent to the announcement.

The 7 7/8% paper later settled into the mid 80s, which is where it was at the end of the day, a New York-based trader said.

AV Homes upsizes

AV Homes priced an upsized $400 million issue of five-year senior notes (B3/B-) at par to yield 6 5/8%.

The issue was increased from $300 million.

The yield printed at the tight end of yield talk in the 6¾% area, which had been tightened from initial guidance of 6¾% to 7%.

J.P. Morgan, Citigroup, Credit Suisse, RBC and U.S. Bancorp managed the sale.

The Scottsdale, Ariz.-based homebuilder plans to use the proceeds to take out its $200 million of outstanding 8½% senior notes due 2019 as well as to repay $30 million currently outstanding under its revolving credit facility and for general corporate purposes, which may include acquisitions.

New Gold prices tight

New Gold priced a $300 million issue of eight-year senior notes (expected ratings B3/B) at par to yield 6 3/8%.

The yield printed at the tight end of yield talk set in the 6½% area, and inside of the 6½% to 6¾% initial guidance.

JP Morgan, BofA Merrill Lynch, RBC, Scotia, BMO, CIBC and TD were the underwriters.

The Toronto-based gold mining company plans to use the proceeds, together with cash on hand, to fund the redemption of its $300 million of 7% senior notes due 2020.

Mixed Wednesday flows

Daily cash flows for dedicated high-yield bond funds were mixed on Wednesday, the most recent session for which data was available at press time, according to a trader.

High-yield ETFs sustained $189 million of outflows on the day.

Actively managed funds saw $130 million of inflows.

The news preceded the weekly report from Lipper US Fund Flows, issued later on Thursday, which showed that dedicated high-yield bond funds saw $386 million of outflows during the week to Wednesday’s close.

New Gold glitters in trading

In the secondary sphere, New Gold’s 6 3/8% notes due 2025 moved solidly higher on active volume when they were freed to trade.

Two traders at different shops pegged the mining company’s new deal in a 101 to 101½ context, while a third quoted it going out at 101 3/8 bid, well up from its par issue price, with more than $17 million changing hands.

Wynn paper a winner

Elsewhere among the day’s new issues, a trader quoted Wynn Resorts’ 5¼% notes due 2027 at 100¾ bid, 101 offered, though they weren’t among the day’s volume leaders as New Gold’s issue was.

The Las Vegas-based casino company’s new deal – officially brought to market via its Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. subsidiaries – priced at par.

Traders meantime did not immediately report any initial aftermarket dealings in the day’s other two issues, Scottsdale, Ariz.-based builder AV Homes’ 6 5/8% notes due 2022 and Princeton, N.J.-based power producer GenOn’s 10½% five-year senior secured notes issued by its Remote Escrow Vehicle LLC special-purpose financing subsidiary.

Existing GenOn paper gyrates

They did see intense activity in GenOn’s existing bonds, particularly in the 7 7/8% notes slated to come due on June 15.

Those notes – which are to be redeemed with the new-deal proceeds – zoomed by as much as 20 points during the session, reaching into the lower 90s, before coming off those peak levels.

A market source saw them ending at 86½ bid, still up an impressive more than 13 points on the day, with over $56 million traded.

The company’s other bonds did not fare quite so well, he said, with its 9 7/8% notes due 2020 down 5/8 point on the day at 61 bid, with more than $61 million of turnover.

GenOn’s 9½% notes due 2018 were down more than 1 full point on the day at 65¼ bid. Volume was over $39 million.

Restaurant Brands active

Elsewhere, a trader said that Wednesday’s new issue from Restaurant Brands International was easily the day’s busiest junk credit, seeing over $80 million of the Oakville, Ont.-based quick-service eateries operator’s 4¼% first-lien senior secured notes due 2024 trading in a range from just below par to 100 3/8 bid.

A second trader also located them around par, calling that down 3/8 point from their initial highs.

The company priced $1.5 billion of the notes at par on Wednesday after upsizing that quickly shopped transaction from an originally announced $1 billion.

Oil names slide lower

Away from the new or recently priced issues, a trader said that “with oil down more than $2 on the day” on over-supply concerns, energy credits were big losers.

He saw Los Angeles-based oil and natural gas exploration and production operator California Resources’ 8% notes due 2022 off by almost 3½ points on the day at 70 bid, with over $16 million traded.

Houston-based sector peer Oasis Petroleum’s 6 7/8% notes due 2022 finished down 1 7/8 points at 98¾ bid, on volume of over $14 million.

Indicators turn lower

Statistical market performance measures turned lower across the board on Thursday – their first losing session since April 18. The indicators were mixed on Tuesday and Wednesday and higher all around for three consecutive sessions before that.

The KDP High Yield Daily Index nosedived by 13 basis points on Thursday, closing at 72.10. That was its second straight loss. It also eased by 2 bps on Wednesday after rising 6 bps on Tuesday, being unchanged on Monday and firming for six consecutive sessions before that.

Its yield widened out by 5 bps to 5.17%. The yield was unchanged at 5.12% on Wednesday after coming in by 2 bps on Tuesday and widening by 2 bps on Monday – its first widening after six sessions of tightening.

The Markit CDX Series 28 Index ended down for a third session in a row, backtracking by over ¼ point to close at 107½ bid, 107 17/32 offered. It had also edged downward by 1/32 point Wednesday after being marginally lower on Tuesday. That followed two consecutive upside sessions before that, including Monday’s 5/32 point improvement.

And even the Merrill Lynch North American High Yield Index finally weakened on Thursday after enjoying an 11 session winning streak. It ended down 0.233%, following Wednesday’s 0.007% gain.

The loss dropped the index’s year-to-date return to 3.745% from Wednesday’s close at 3.987%, which had been its eighth straight new year-to-date high.

© 2015 Prospect News.
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