Primary pace picks up as Blue Racer, Sunoco drive by; new Blue Racer, TerraForm firm

By Paul Deckelman and Paul A. Harris

New York, July 15 – The high-yield primary continued to bounce back on Wednesday from its long pricing drought suffered during most of the first half of this month.

Two new issues generating a total of $904.5 million of proceeds came to market – the first such twin pricing of new dollar-denominated and fully junk-rated credits seen since June 25, when TI Group Automotive Systems LLC and Summit Materials LLC each did a single-tranche issue during the same session.

As had been the case on both Monday and Tuesday, each of Wednesday’s two new deals was an opportunistically timed and quickly shopped drive-by offering.

Energy names dominated Wednesday’s primary. The big deal of the day was master limited partnership Sunoco LP’s upsized $600 million issue of five-year notes.

Earlier in the session, Blue Racer Midstream, LLC brought a $300 million add-on to its existing 2022 notes to market.

The latter bonds were seen having moved up when they hit the aftermarket. Traders did not report any immediate secondary dealings in the new Sunoco paper.

They did see active trading at somewhat higher levels in Tuesday’s new issue of 10-year notes from clean-energy company TerraForm Power Operating, LLC.

Away from the new or recent deals, Micron Technology, Inc.’s bonds – which had risen Tuesday on the news that a state-run Chinese company was considering offering to buy the computer chip maker – extended those gains on Wednesday.

RKI Exploration and Production LLC, whose bonds had jumped more than a dozen points on Tuesday on news that the company will be acquired by WPX Energy, Inc., continued to actively trade near those higher levels.

Sabine Oil & Gas Corp.’s battered bonds were seen having firmed a little following the news of the company’s bankruptcy filing.

Statistical market performance measures were mixed on Wednesday for a second straight session, following three consecutive upside sessions before that.

Sunoco upsizes

Two drive-by issuers priced single-tranche deals to raise a combined total of $905 million during Wednesday's primary market session.

One of the two deals was upsized.

One priced at the rich end of price talk, and the other came at the wide end of yield talk.

Sunoco LP and Sunoco Finance Corp. priced an upsized $600 million issue of five-year senior notes (Ba3/BB/BB) at par to yield 5½%.

The issue was upsized from $500 million.

The yield printed at the wide end of the 5 3/8% to 5½% yield talk.

The deal appeared to be going okay, according to an investor who added that pricing was ratcheted down so that the new Sunoco paper would price on top of the company's existing bonds.

So much for market concessions.

Credit Suisse was the lead bookrunner. BBVA, DNB, Goldman Sachs, J.P. Morgan, RBC and Wells Fargo were the joint bookrunners.

The Houston-based master limited partnership plans to use the proceeds to fund the acquisition of Susser Holdings Corp.

Blue Racer taps 6 1/8% notes

Blue Racer Midstream, LLC and Blue Racer Finance Corp. priced a $300 million add-on to their 6 1/8% senior notes due Nov. 15, 2022 (B3/B) at 101.5 to yield 5.791%.

The reoffer price came at the rich end of the 101.25 to 101.5 price talk.

The deal, which was trading at 102¼ bid, 102¾ offered, was heard to have been five times oversubscribed, sources said.

Wells Fargo was the left bookrunner. Barclays, Capital One, Comerica, RBC, SunTrust and US Bancorp were the joint bookrunners.

The Dallas-based midstream energy company plans to use the proceeds to repay borrowings under its revolver, as well as to fund continued expansion, and for general corporate purposes.

Eldorado talk 7% to 7¼%

Eldorado Resorts, Inc. talked its $375 million offering of eight-year senior notes (Caa1/B-) to yield 7% to 7¼%.

Talk comes on top of initial guidance.

Books close at 1 p.m. ET Thursday, and the Rule 144A and Regulation S with registration rights deal is set to price thereafter.

JPMorgan, Macquarie, Credit Suisse, U.S. Bancorp and KeyBanc are the joint bookrunners.

GFKL starts roadshow

There was also news from the euro-denominated junk market on Wednesday.

German debt collector GFKL started a roadshow on Wednesday for a €365 million two-part offering of seven-year senior secured notes (B2).

The Hessen, Germany-based company plans to sell fixed-rate note and floating-rate notes.

Tranche sizes remain to be determined.

Joint bookrunner Goldman Sachs International will bill and deliver. Citigroup, Credit Suisse and ING are also joint bookrunners.

Proceeds will be used to repay amounts drawn under the company's senior secured bridge facility.

There could be more news out of the European primary market, a debt capital markets banker said on Wednesday, adding that there is a pipeline known to include at least two deals that would be marketed via roadshows.

All such activity hinges on market conditions, which remain somewhat unsure owing to lingering uncertainty regarding a solution to Greece's sovereign debt problems.

Investors have cash but are in no hurry, said the banker, who added that right now the buyside has the upper hand, creating an interesting dynamic in the market.

In addition to chop generated by financial headlines, there is the onward march of time, the banker added.

August is nigh, and players are inclined to take extended holidays in the late summer.

That could slow things down further.

ETF inflows continue

High-yield ETFs saw another substantial daily inflow, $761 million, on Tuesday, the most recent session for which data was available at press time, sources said.

Tuesday's flow follows Monday's $730 million of inflows to the exchange-traded funds.

Institutions are using ETFs as proxies, one investor maintained, adding that one reason this has been taking place is the absence of a substantial calendar.

Meanwhile, actively managed funds continued to see flat to slightly negative flows, sustaining $10 million of outflows on Tuesday.

Dedicated bank loan funds, meanwhile, saw $125 million of inflows on Tuesday.

Blue Racer races up

In the secondary market, traders said that Blue Racer Midstream’s newly priced 6 1/8% add-on notes due 2022 had moved up from their 101.5 issue price in initial aftermarket dealings.

One trader quoted the new paper at 102¼ bid, while a second pegged them at 102½.

A third trader saw two-sided markets at 102¼ bid, 102¾ offered.

Yet another market source also saw the notes going home at 102 bid, with over $36 million of the notes having traded, tops in Junkbondland.

But he said that level – while up from where the add-on had priced – was actually down by ¾ point from the levels at which the existing 6 1/8% notes had traded before the company did its new deal.

While Blue Racer’s bonds were actively traded, those market participants meanwhile did not report any initial aftermarket dealings in the day’s other new deal, Sunoco’s upsized $600 million of five-year notes.

TerraForm trades up

Traders saw active dealings in TerraForm Power Operating’s new 6 1/8% notes due 2025, $300 million of which had priced at par on Tuesday in an unscheduled offering.

A trader quoted the Bethesda, Md.-based clean-power company’s bonds at 101½ bid, well up from their pricing level.

Another saw the notes at 101¼ bid, 101 5/8 offered.

However, another trader said that while the level he saw at 101 5/8 bid represented a healthy gain over the issue price, it was still down 1/8 point from the peak level of 101¾ seen on Tuesday in initial aftermarket dealings.

About $32 million of those notes changed hands.

Audatex little moved

Traders saw Monday’s quick-to-market offering of 6 1/8% notes due 2023 from Audatex North America Inc., structured as an add-on to the already outstanding eight-year paper, continuing to trade on Wednesday, but with little real price movement.

One trader saw the bonds at 99.5.

Another located them around 99 3/8 bid, 997/8 offered.

And at another shop, a trader said that the bonds had slipped to 99 3/8 bid, slightly below issue, on volume of about $16 million.

Audatex – a wholly owned indirect subsidiary of Solera Holdings, Inc., a Westlake, Texas-based provider of software and services to the automobile insurance claims processing industry – priced its quick-to-market deal at 99.5 to yield 6.201% on Monday after the transaction was restructured; an originally planned tranche of new 10-year senior unsecured notes was abandoned, leaving just the $850 million add-on to the existing 6 1/8% notes.

The new notes will be immediately fungible with the existing notes and will carry the same indenture terms.

New deals main focus

A trader said that apart from the new deals, “nothing really jumped out.

“The new-issue stuff was the bigger volume traders,” he said.

Another trader said, however, that “some names got to trade a little bit – nothing much in the morning, but more in the afternoon.”

Micron moves up

A trader said that Micron Technology’s 5½% notes due 2025– which gained 1½ points on Tuesday on takeover speculation – firmed by another ¼ to ½ point on Wednesday, with their last trades at 96 bid.

Micron, another trader said, “was also busy today,” on the heels of Tuesday’s activity.

He said that collectively, its different bond issues generated about $31 million of volume as the bonds “kept going up a little bit, but not much.”

He called the 2025 the most active issue, seeing them up 5/8 point.

China’s Tsinghua Unigroup Ltd. was reported to be readying a bid for the Boise, Idaho-based computer chip manufacturer, although nothing is official yet.

News reports say Tsinghua Unigroup’s planned offer values Micron at $23 billion, or around $21 per share, although analysts say that’s probably too low.

The deal may also raise eyebrows on Capitol Hill and at the Pentagon, which will examine the national security implications of a Chinese state-owned company buying an American computer chip maker and gaining access to its patents and other intellectual property.

RKI mostly holds gains

In the other big merger-and-acquisition-driven junk market situation, a trader said that RKI Exploration & Production’s 8½% notes were “almost unchanged from yesterday [Tuesday].”

He said that the bonds had moved from 99 to 99¼ bid on Monday, but then jumped to 111½ in Tuesday’s dealings, when more than $16 million of the bonds had changed hands.

However, a second trader called the bonds ¼ point lower on Wednesday, at 111¼, on about $17 million of turnover.

The Oklahoma City-based oil and natural gas E&P name’s bonds zoomed on Tuesday on the announcement that Tulsa, Okla.-based sector peer WXP Energy plans to acquire RKI using the proceeds from a $1.2 billion two-part bond deal that the latter company is currently shopping around to junk investors, plus the proceeds from offerings of common equity and convertible mandatory preferred shares.

Sabine paper up after filing

Elsewhere, a trader saw Sabine Oil & Gas’ 7¼% notes due 2019 – originally issued by Forest Oil Corp., which merged with and into Sabine last year – “up a couple of points,” trading at 22½ bid, with over $24 million of the notes having traded.

He attributed the rise to the fact that following the Houston-based exploration and production company’s Chapter 11 filing, its bonds are now trading flat, or without their accrued interest, resulting in an increase in the bonds’ nominal price.

Another trader also saw the bonds at 22½, versus the 19-to-20 level before the filing, calling them up 1 to 1½ points.

At another desk, a market source said that about $32 million of the company’s paper had changed hands during the session, with the 7¼% 2019 notes “the most liquid,” seeing them moving within a 2-point range between 20¾ and 22¾ bid, with the last trades of the day between 22½ and 22¾ bid.

He said that there were no prints on Tuesday to compare those levels to, but “the bonds have been trading with a 21 handle since the beginning of July, so they moved up a little bit” to 22¾.

The Sabine 7¼% notes “were certainly a little more active” on the news of the company’s bankruptcy, but were still trading in a lower-20s context, “kind of where they had been.”

He suggested that Sabine’s filing had been largely expected.

The first trader said the 2019s were the most active issue in the company’s capital structure, seeing Sabine’s 7 ½% notes due 2020 racking up just $3 million of volume. Those notes “were in the same vicinity” as the 7¼s, with larger-sized trades around 22½. He said that normally the 7½s “don’t trade very much.”

Sabine’s 9¾% notes due 2017 – issued back when the company was known as NFR Energy LLC – were “also not a very active trader,” with about $8 million having changed hands on the day. They were going home at around 17¾ bid, “also up a couple of points.”

A second trader saw those bonds “a little higher price-wise,” attributing the nominal gain in the bonds’ price to their now trading flat.

Not much else was going on in the sector, one of the traders said, noting that when he did a search for oil-related names, “Sabine was the one with most of the activity today, since it moved a couple of points and had some decent-sized trading.”

Transocean, Vantage active

Also in the energy sphere, a trader noted a fair amount of action on Wednesday in Transocean’s bonds, noting some of the Vernier, Switzerland-based international offshore energy drilling company’s bonds were trading in the 70s, while others were up over par.

“They have a lot of issues,” he said.

He said that over $20 million of its 6.8% notes due 2038 changed hands on Wednesday, ending in a 72½-to-73 bid context. He said that at 72½ bid “they’d be pretty much unchanged, and at 73, they’d be up a little.”

So there was “not much [price movement] – but decent size traded.”

At another desk, a trader saw RIG’s 6 3/8% notes due 2021 trading around 88-to-88¼ bid, versus a range of 88½ to 89½ on Tuesday.

However, he still called the credit “relatively unchanged,” with no fresh news out that might explain the increased activity level.

Its 6 7/8% notes due 2021 gained 1/8 point to end at 88½ bid on volume of more than $18 million.

Another offshore energy driller – Houston-based Vantage Drilling Co.’s 7½% notes due 2019 – gained 1¼ points to end at 55¼ bid on volume of over $15 million.

Indicators seen firmer

Statistical market performance measures were mixed on Wednesday for a second straight session, following three consecutive upside sessions before that.

The KDP High Yield Daily index was up by 4 basis points on Wednesday, ending at 69.98, after having eased by 2 bps on Tuesday and having gained 9 bps on Monday.

Its yield, meanwhile, was unchanged for a second straight session on Wednesday, at 5.76%, after having come in by 5 bps on Monday.

The Markit Series 24 CDX North American High Yield index lost 1/16 point on Wednesday, ending at 106 21/32 bid, 106 11/16 offered. On Tuesday, it had been unchanged, after moving up by 5/16 point on Monday, its third successive gain.

The Merrill Lynch North American Master II High Yield index put up its fifth advance in a row on Wednesday, rising by 0.116%, on top of Tuesday’s 0.042% gain.

Wednesday’s improvement lifted its year-to-date return to 2.699% from 2.58% on Tuesday, although it remained well down from the 4.062% reading recorded on May 29, the index’s peak level for the year so far.

© 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.