American Energy sends out new red, tweaks covenants; L Brands rises to 103¼ bid

By Paul A. Harris

Portland, Ore., Oct. 28 – Dealers continue to work the American Energy – Permian Basin, LLC $560 million offering of five-year senior secured first lien notes, a deal which has been shrouded in “radio silence,” a high-yield investor said on Tuesday morning.

Orders have come in specifying a yield as high as 10%, although talk continues to be 9% to 10%, the source added.

But the deal is not done yet, the investor said.

A new red went out and there have been covenant changes.

The deal, which kicked off on Oct. 16 via left bookrunner Goldman Sachs and joint bookrunners Jefferies and BofA Merrill Lynch, came with initial guidance in the 9% area.

On Monday the company began a consent solicitation to amend its 8% senior secured second-lien notes due 2020.

The solicitation expires at 5 p.m. ET Wednesday.

L Brands was a blowout

Junk appeared to be on a solid footing on Wednesday, sources said.

L Brands Inc.’s new 6 7/8% notes due Nov. 1, 2035 (Ba1/BB+), which priced Tuesday at par in a massively upsized $1 billion issue, were at 103¼ bid at mid-morning Wednesday.

The blowout 20-year bullet deal was upsized from $400 million and played to $3 billion of orders, a trader said.

Allocations came to fractions of orders as accounts were severely cut back, sources said.

Elsewhere on Wednesday morning, high-yield ETFs were flat to slightly higher.

The iShares Trust - iShares iBoxx $ High Yield Corporate Bond ETF (HYG) was trading at $85.61 per share, up 15 cents.

The SPDR Series Trust - SPDR Barclays High Yield Bond ETF (JNK) was 3 cents better at $36.49 per share.

Cash flows for dedicated high-yield funds were positive on Tuesday.

High-yield ETFs saw $258 million of inflows on the day while asset managers took in $400 million on Tuesday.

Cash flows for European high-yield accounts have also been decidedly positive, a London-based debt capital markets banker said on Wednesday morning.

Junk has been improving throughout October, the London-based banker said.

The iTraxx Europe Crossover index, which this source uses to gauge the appetite for risk, was at 300 basis points bid on Wednesday, the banker said, adding that the index has tightened 25 bps since Oct. 19.

Last Friday it hit its recent tight-mark at 295 bps bid.

The index has been tightening since the beginning of October, the banker said.

Meanwhile the primary market was quiet Wednesday morning.

There are deals in the pipeline in Europe and the United States, sources say.

Given the supportive technicals, the execution seen by L Brands on Tuesday and the continued strength of those new 20-year bonds in the secondary market on Wednesday, some of those deals could start to come, the high-yield investor said.

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