Nexstar plans notes offering; secondary market firms; energy names improve; Tesla active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 3 – The domestic primary market remained dormant on Monday with the window for new deal activity in 2018 narrowing to two weeks.

While no new deals were announced during Monday’s session, sources were hopeful improved market conditions would rekindle new issue activity before the year draws to a close.

Nexstar Media Group Inc. announced that it would use new bonds and loans to help fund its acquisition of Tribune Media Co., providing an inkling about future new deal activity.

Meanwhile, the secondary space firmed on Monday with equity markets improved after a reduction in trade tensions between the U.S. and China and crude oil futures jumping amid chatter about production cuts.

The junk bonds from several energy names were on the rise in high volume activity on Monday, including California Resources Corp., Whiting Petroleum Corp., Weatherford International plc, and Cenovus Energy Inc.

Tesla Inc.’s junk bond was a benefactor of U.S. President Donald Trump and China President Xi Jinping declared trade war truce with the notes making minor gains in active trading.

Nexstar's Tribune buy to include bonds

The active forward calendar ended Monday’s session empty.

News that President Donald Trump and Chinese President Xi Jinping called a truce in the ongoing trade dispute at the G20 Summit in Buenos Aires sent the stock market soaring higher and could rekindle the high yield new issue market in the run-up to the new year, a syndicate banker said.

However, this source claimed to have no specific issuer names that could potentially appear in a late 2018 issuance window.

That window should stay open until at least Friday, Dec. 14, sources say.

The only news related to the primary market came from Nexstar Media Group, which plans to use new bonds and loans to fund the cash consideration of its acquisition of Tribune Media Co.

The company has received a commitment for $6.4 billion of financing from Bank of America Merrill Lynch, Credit Suisse and Deutsche Bank.

Nexstar is buying Tribune Media for $6.4 billion including the assumption of Tribune’s outstanding debt.

The deal is expected to close late in the third quarter of 2019.

Energy on the rise

While the energy sector has dragged the overall secondary market lower for much of November, the sector was contributing to the gains seen Monday as crude oil futures jumped.

Several energy names were improved in high volume activity.

California Resources Corp.’s 8% senior notes due 2022 were again major volume movers with the notes up 2½ points after a 3 point drop on the week last week.

The notes were quoted at 78½ bid, 79 offered on Monday and closed the day at 78¾, sources said. More than $20 million of the bonds were on the tape by the late afternoon.

The 8% notes were quoted at 76 bid, 77 offered on Friday, according to a market source.

Weatherford International’s 9 7/8% senior notes due 2024 jumped 3¼ points in active trading on Monday.

The notes traded up to 70¼ with more than $20 million of the bonds on the tape, a market source said.

In addition to rising crude oil futures, Weatherford’s 9 7/8% notes gained on news the sale of 11 oil rigs in Saudi Arabia to ADES International Holding Ltd. had been completed.

The sale is part of a definitive agreement between Weatherford and ADES with ADES acquiring 31 rigs for $287.5 million in the Middle East.

Whiting Petroleum’s 6 5/8% senior notes due 2026 rose 2 points to 98 with more than $13 million of the bonds on the tape.

After a brutal November that saw crude oil futures twice dip below the $50 threshold in intraday trading, futures were strong at the launch of December.

News that Russia may join OPEC in curbing production sent the barrel price of WTI crude oil for January delivery soaring.

Crude oil futures settled at $52.95 on Monday, an increase of $2.02 or 3.96%.

Canada’s production cut

Cenovus Energy’s 4¼% senior notes due 2027 were among the energy names to see gains in high volume activity after Canada’s largest oil producing province announced it will curb production in 2019.

The notes rose 1 3/8 point to 90½, a market source said. More than $19 million of the bonds were on the tape by the late afternoon.

The Alberta province announced on Monday it would impose an 8.7% oil production cut to curb plummeting oil prices in Canada.

The decision was lauded by Cenovus chief executive officer Alex Pourbaix.

“Under normal circumstances, oil and gas producers would never advocate for government intervention in the market, but these are not ordinary circumstances,” Pourbaix said in a press release.

Pipeline policy failures have impacted Canada’s export capabilities creating an imbalance that has caused the benchmark price for heavy oil to collapse and a deep discount in Canadian light oil prices compared to WTI crude oil futures, he said in the release.

Tesla in focus

Tesla’s 5.3% senior notes due 2025 were major volume movers in the secondary space with the notes seeing slight gains in the high volume activity.

The 5.3% notes were up ¼ point to 87 on Monday with about $20 million of the bonds on the tape, a market source said.

The notes improved alongside Tesla’s equity with the electric car manufacturer one of the benefactors of the trade war truce.

President Donald Trump announced China had agreed to cut tariffs on U.S. made cars, a previous lament of Tesla.

Tesla has said China’s tariffs were impacting its competitiveness in the country.

However, the validity about Trump’s claims have not been verified.

News also broke on Monday about plans to aggressively ramp up production of Tesla’s Model Y SUV, which was contained in a document leaked to employees prior to its third quarter earnings report.

Mixed Friday flows

The daily cash flows of the dedicated high-yield funds were mixed on Friday, the most recent session for which data was available at press time, according to an investor.

High-yield ETFs saw $119 million of inflows on the day.

Actively managed funds sustained $135 million of outflows on Friday, the source said.

And the daily cash flows of the dedicated bank loan funds remained negative on Friday, with the loan funds sustaining $235 million of outflows on the day the investor added.

Indexes gain

Indexes opened the week on strong footing after all saw gains on the week last week.

The KDP High Yield Daily index was up 20 bps to close Monday at 68.57 with the yield now 6.49%.

The index was up 21 bps on the week last week after a 32 bps drop the previous week.

The ICE BofAML US High Yield index returned to the black on Monday. The index was up 48 bps with the year-to-date return now 0.405%.

The index gained 0.8 bps on Friday with the year-to-date return 0.075. The index rose 40.6 bps on the week last week after a 26.5 bps decline the previous week.

Returns sank into negativity territory on Nov. 15 for the first time since June.

The CDX High Yield 30 index was up 32 bps to close Monday at 104.79. The index saw a meteoric rise of 104.12 bps on the week last week after a 74 bps drop the previous week.

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