EnLink, NGL price; Euro deals trade up; Weatherford tanks; Tesla drops; funds add $2 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 4 – The domestic high-yield primary market was active on Thursday with two deals pricing.

EnLink Midstream, LLC priced a $500 million issue of senior bullet notes due June 1, 2029 (Ba1/BB+/BBB-) at par to yield 5 3/8% in a Thursday drive-by.

NGL Energy Partners LP priced a $450 million issue of seven-year senior notes (B2/B+/B) at par to yield 7½% on Thursday.

However, all eyes will be on Friday’s session when news is expected to surface on Staples, Inc.’s $2,125,000,000 two-part deal.

Ensign Drilling Inc. may also price its $700 million offering of five-year senior notes (B2/BB-) on Friday.

The European primary market was also active with a green deal pricing.

Otto Group priced a €250 million issue of non-rated seven-year “sustainable” senior bullet notes at par to yield 2 5/8%.

With the dearth of new paper in the European market, several recent euro-denominated deals were putting in strong performances in aftermarket trading.

Meanwhile, the domestic secondary space remained largely unchanged on Thursday as it has been for much of the week.

Weatherford International plc’s 5 1/8% senior notes due Sept. 15, 2020 tanked in active trading on Thursday as the notes approach their maturity.

Tesla Inc.’s 5.3% senior notes due 2025 also dropped in high-volume activity due to disappointing first-quarter delivery numbers.

Meanwhile, the technicals of the secondary space remained strong with junk funds seeing their fourth consecutive week of inflows.

High-yield mutual funds and exchange-traded funds saw inflows of $2 billion for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

EnLink bullet oversubscribed

EnLink Midstream priced a $500 million issue of senior bullet notes due June 1, 2029 (Ba1/BB+/BBB-) at par to yield 5 3/8% in a Thursday drive-by.

The yield printed at the tight end of yield talk in the 5½% area. Initial guidance was in the 5½% to 5¾% area.

The notes were trading at par ½ bid, 101 offered shortly after they broke, according to an investor who added that the order book was heard to be in good shape, at five-times to six-times deal size.

Joint active bookrunner RBC Capital Markets LLC will bill and deliver. BMO Capital Markets Corp., SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC are also joint active bookrunners.

The Dallas-based midstream energy services provider plans to use the proceeds to repay debt and for general corporate purposes.

NGL in line with talk

In a deal that kicked off Wednesday, and was marketed by means of investor conference calls, NGL Energy Partners priced a $450 million issue of seven-year senior notes (B2/B+/B) at par to yield 7½% on Thursday.

The yield printed in the middle of yield talk in the 7½% area and tight to early guidance in the mid-to-high 7% area.

Joint active bookrunner RBC Capital Markets LLC will bill and deliver. Mizuho Securities USA Inc. was also a joint active bookrunner.

The Tulsa, Okla.-based midstream services provider plans to use the proceeds to repay debt under its credit agreement and for general corporate purposes.

Friday

Looking to the Friday session, the market anticipates news on the Staples $2,125,000,000 two-part deal.

Staples is selling $750 million secured notes being guided in the mid-to-high 7% area, and $1,375,000,000 unsecured notes being guided in the high 9% to low 10% area.

The Staples roadshow was scheduled to wrap up Thursday, a source said.

Also in the market is Ensign Drilling Inc. with $700 million of five-year senior notes (B2/BB-) with initial talk in the 9% area.

The deal is expected to price before the end of the week, but may still have some wood to chop, an investor said, adding that Ensign could carry into the April 8 week.

Otto prices green deal

In the European session, Otto GmbH & Co. KG priced a €250 million issue of non-rated seven-year “sustainable” senior bullet notes at par to yield 2 5/8%.

The yield printed on top of yield talk.

Joint bookrunner and sole sustainability structuring advisor ING will bill and deliver.

The Hamburg-based mail order and e-commerce company plans to use the proceeds to finance and/or refinance existing and/or future eligible projects under its sustainable finance framework.

European deals going strong

With a dearth of new paper in the European market, several recent deals were performing well in the secondary space despite pricing at the rich end of talk.

Loxam Group’s secured and unsecured tranches were both trading at a premium to their issue price.

Loxam’s 2 7/8% senior secured notes due 2026 (BB-) were changing hands at 101¼, a market source said.

The 4½% senior subordinated notes due 2027 (B) were changing hands at 101½ during Thursday’s session.

Loxam priced an upsized €300 million tranche of the 2 7/8% notes and a €200 million tranche of the 4½% notes at par on Wednesday.

The 2 7/8% notes printed at the tight end of yield talk in the 3% area.

The 4½% notes printed on top of final yield talk, which had tightened from earlier talk in the 4¾% area.

SGL Carbon SE’s 4 5/8% senior notes due 2024 rose to 101 in the secondary space. SGL Carbon priced a €250 million issue of the 4 5/8% notes at par on Wednesday.

Pricing came at the tight end of yield talk in the 4¾% area.

Weatherford tanks

Weatherford’s 5 1/8% senior notes due Sept. 15, 2020 tanked in active trading on Thursday as investors began to show their concern over the upcoming maturity of the notes.

The 5 1/8% notes dropped 6 5/8 point to 81 on Thursday. More than $15 million of the bonds were on the tape by the late afternoon, according to a market source.

Weatherford is currently seeking shareholder approval for a 1 for 20 reverse stock split to regain compliance with the New York Stock Exchange.

Weatherford is also asking shareholders to approve an increase in the number of authorized shares for the company to issue.

The moves were seen as a negative for the credit.

Tesla drops

Tesla’s 5.3% senior notes due 2025 dropped in high-volume activity after releasing disappointing first quarter delivery numbers.

The 5.3% senior notes traded down about 2 points outright to 86, according to a market source.

More than $19 million of the bonds were on the tape by the late afternoon.

Tesla’s capital structure was under pressure on Thursday after the electric car manufacturer’s closely watched delivery numbers fell far short of analyst expectations.

Tesla reported 63,000 deliveries in the first quarter versus analyst expectations for deliveries of 76,000 to 78,000.

Cash flows flat on Wednesday

The daily cash flows of the dedicated high-yield bond funds were flat on Wednesday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs were just north of the line with $3 million of inflows on the day, while actively managed high-yield funds were right on top of that line, with $0 net flows on Wednesday, the source added.

Later Thursday the market heard that the combined funds saw $2 billion of net inflows in the week to Wednesday's close, according to Lipper US Fund Flows.

Indexes

Indexes were again mixed on Thursday with some posting nominal gains and others losses.

The KDP High Yield Daily index dropped 2 basis points to close Thursday at 70.33 with the yield now 5.79%.

The index was up 4 bps on Wednesday, 2 bps on Tuesday and 14 bps on Monday.

The ICE BofAML US High Yield index was up 1.6 bps on Thursday with the year-to-date return now 7.792%. The index was up 14 bps on Wednesday, 3.6 bps on Tuesday and 22 bps on Monday.

The index saw a cumulative gain of 42.8 bps on the week last week, surpassing 7% returns on March 26.

The index initially crossed the 7% threshold on March 21 but sank below it the following day.

The index just recently passed 6% year-to-date returns on March 11.

The CDX High Yield 30 index rose 8 bps to close Thursday at 106.9. The index dropped 1 bp on Wednesday and 17 bps on Tuesday after a 35 bps gain on Monday.

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