Bonanza Creek drive-by, Triangle lead $1.24 billion day; Rockwood jumps on acquisition news

By Paul Deckelman and Paul A. Harris

New York, July 15 – The high-yield market continued to churn out new deals on Tuesday for a second consecutive session as syndicate sources saw four new issues having priced – although unlike Monday, which had been dominated by opportunistically timed and quickly shopped drive-by offerings, most of Tuesday’s activity came in regularly scheduled transactions pricing off the forward calendar.

The day saw $1.24 billion of dollar-denominated and purely junk-rated paper come to market, on top of the $1.48 billion that had gotten done on Monday.

The day’s big deal was an upsized $450 million offering of eight-year notes from Denver-based energy operator Triangle USA Petroleum Corp. via a subsidiary. Sector peer Bonanza Creek Energy, Inc. – also based in Denver – had the day’s sole quick-to-market pricing, with $300 million of 8.5-year notes.

Away from the energy arena, Northwest Hardwoods, Inc., a Coos Bay, Ore.-based lumber manufacturer, brought $300 million of seven-year secured notes to market. New York-based Ipreo Holdings, LLC, a software provider for the financial industry, completed the day’s dealings with a downsized $180 million eight-year issue.

Traders said that Triangle Petroleum’s new bonds did especially well in the aftermarket.

But other secondary issues struggled – even Monday’s robust new deal from Rex Energy Corp. – as Junkbondland was seen generally in retreat, particularly after Federal Reserve chief Janet Yellen’s appearance before the Senate Banking Committee.

But one credit that shrugged off the bad vibes was Rockwood Specialties Group Inc., whose 2020 notes and shares both jumped in heavy trading on the news that the Princeton, N.J.-based specialty chemicals maker is to be acquired by Albermarle Corp.

But the junk market was softer otherwise, with statistical indicators of market performance seen lower across the board after Monday’s upside momentum had melted.

Triangle upsized and tight

The deal stream continued its steady flow in the dollar-denominated high-yield primary market on Tuesday, as four issuers brought single-tranche deals and raised a combined total of $1.24 billion.

Executions were a mixed bag and betrayed some chop in risky assets, according to a market source who mentioned testimony given before the United States Congress by Federal Reserve chairman Janet Yellen, stating in part that “In some sectors, such as lower-rated corporate debt, valuations appear stretched.”

One of Tuesday's four deals came upsized and priced at the tight end of talk.

However the other three, one of which was downsized, came at the wide end of talk.

Only one of Tuesday's deals was a drive-by.

In a deal that ran an investor roadshow, Triangle USA Petroleum priced an upsized $450 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 6¾%.

The debt refinancing and acquisition-related deal was upsized from $350 million.

The yield printed at the tight end of the 6¾% to 7% yield talk.

J.P. Morgan, Credit Suisse and BofA Merrill Lynch managed the sale.

Bonanza Creek drives by

Bonanza Creek Energy priced a $300 million issue of 8.5-year senior notes (B3/B-) at par to yield 5¾%.

The yield printed at the wide end of yield talk in the 5 5/8% area.

RBC was the left bookrunner for the debt refinancing and general corporate purposes deal. Wells Fargo, JPMorgan, KeyBanc and BMO were the joint bookrunners.

Northwest Hardwoods deal

Northwest Hardwoods priced a $300 million issue of seven-year senior secured notes (B3/B) at par to yield 7½%.

The yield printed at the wide end of the 7¼% to 7½% yield talk.

Morgan Stanley, Credit Suisse and Jefferies were the joint bookrunners for the buyout deal.

Ipreo downsizes

Ipreo Holdings priced a downsized $185 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 7¼% on Tuesday, according to a syndicate source.

The deal was downsized from $200 million.

The yield printed at the wide end of the 7% to 7¼% yield talk.

BofA Merrill Lynch, Goldman Sachs, Credit Suisse, Deutsche Bank, Morgan Stanley and RBC were the joint bookrunners for the buyout deal.

American Energy price talk

In a deal set to price Wednesday, American Energy – Permian Basin set price talk for its $1.4 billion three-part offering of senior notes (Caa1/CCC+).

A tranche of five-year floating-rate notes, which come with one year of call protection, is talked to price at 99 with a 650 basis points spread to Libor.

A tranche of 6.25-year fixed-rate notes with 2.5 years of call protection is talked to yield in the 7¼% area.

A tranche of 7.25-year fixed-rate notes with three years of call protection is talked to yield in the 7½% area.

Tranche sizes remain to be determined.

Relative to earlier guidance, the floating-rate tranche price talk is wide of the 600 bps initial guidance, according to a trader. However talk on both tranches of fixed-rate notes came tight to earlier guidance that had the 6.25-year notes coming in the mid-7% range, and the 7.25-year notes coming in the high-7% range.

Goldman Sachs is the sole bookrunner.

Citgo starts Wednesday

Citgo Petroleum Corp. plans to start a roadshow on Wednesday for a $650 million offering of eight-year senior secured notes (B1/BB-/).

Deutsche Bank is the left bookrunner for the debt refinancing and dividend funding deal. RBS is the joint bookrunner.

Pricing is expected in the week ahead.

Twin Set prices tight

Italy-based women's apparel marketer Twin Set – Simona Barbieri SpA priced a €150 million issue of three-month Euribor plus 587.5 bps five-year senior secured floating-rate notes (B1//) at 99 on Tuesday.

The reoffer price came at the tight end of price talk in the Euribor plus 600 bps area.

Physical bookrunner UBS will bill and deliver. Banca IMI and UniCredit were joint bookrunners.

The company, which is based in Capri, Italy, plans to use the proceeds to repay debt, as well as to fund a distribution to shareholders and for general corporate purposes.

Europcar sets Wednesday call

Europcar Group SA plans to participate in an investor conference call at 5:30 a.m. ET on Wednesday to discuss a €350 million offering of seven-year senior secured notes (B3/expected B).

The debt refinancing deal is expected to price Thursday.

Joint global coordinator JPMorgan will bill and deliver. Deutsche Bank is also a joint global coordinator. BNP Paribas, CM-CIC, Credit Agricole CIB, Goldman Sachs International and SG CIB are bookrunners.

Winoa plans roadshow

France-based Winoa Group plans to start a roadshow on Wednesday in London for its €260 million offering of six-year senior secured notes.

Joint bookrunner Deutsche Bank will bill and deliver. KKR is also a joint bookrunner.

The Le Cheylas, France-based producer and distributor of steel abrasive products plans to use the proceeds to refinance debt.

Triangle triumphs

When the new Triangle USA Petroleum Corp. 6¾% notes due 2022 hit the aftermarket, “they were doing very well,” a trader said, pegging the bonds at 101 3/8 bid, 101 5/8 offered, up from their par issue price.

A second trader had the bonds in a 1010 to 101 ½ context.

Among the day’s other issues, a trader quoted Bonanza Creek Energy’s new 5¾% notes due 2023 at 100 1/8 bid, 100 3/8 offered, while a second saw them in a 100¼ to 100 3/8 context, with “some trades late in the day all up at 100 3/8 [bid].” Yet another trader located the new issue at 100¼ to 100½, versus their par issue price.

When Northwest Hardwoods’ 7½% senior secured notes due 2021 priced late in the session, a trader saw the bonds at “a wide” 100½ to 101½ context, while a second had them going home in a 100½ to 101¼ context.

Due to the lateness of the hour at which the issue priced, as well as its relatively small size, there were no immediate aftermarket levels seen for Ipreo Holdings’ 7¼% notes due 2022 after their par pricing.

Market mostly lower

Apart from the strength shown by the new Triangle Petroleum deal and, to a lesser extent, the Bonanza Creek and Northwest Hardwoods issues, traders saw a generally softer market.

“The rest of the market definitely continues to trade under a little bit of pressure,” one of them said. “The outflows from the ETFs [exchange-traded funds] and the [high-yield mutual] funds continue to put a little bit of pressure on the market.” He said that generically, junk issues were about ¼ point softer, “depending what you’re looking at – but definitely softer.”

A second trader agreed that “there’s been a lot of ETFs selling, so the market has been under pressure.”

“Things are off pretty good, after the Yellen testimony,” opined a third trader, referring to the Fed boss’ appearance Tuesday before the Senate Banking Committee, in which she expressed wariness about the junk bond rally over the past several years.

“In some sectors, such as lower-rated corporate debt, valuations appear stretched and issuance has been brisk,” she said.

“Accordingly, we are closely monitoring developments in the leveraged loan market and are working to enhance the effectiveness of our supervisory guidance,” she added.

Recent issues retreat

The market’s softness extended even to some of the recently priced new issues that had been seen doing well, such as Rex Energy’s 6¼% notes due 2022. The State College, Pa.-based oil and natural gas exploration and production company’s $325 million drive-by deal had priced at par on Monday and then had moved as high as a 101 to 101¼ context in initial aftermarket dealings.

But on Tuesday, a trader said, “they came in” from those lofty levels; he saw them going home wrapped around 100¼ bid.

A second trader agreed that the Rex bonds had given back most of Monday’s gains. He saw them initially trading between 100¼ and 100¾, but said that they “sold off as the day went on,” until finally closing in a 99¾ to 100 1/8 context.

Another Monday deal seen moving lower was McGraw-Hill Global Education Intermediate Holdings, LLC’s 8½% /9¼% PIK toggle notes due 2019, $400 million of which priced on Monday at 99 to yield 8.748%. On Tuesday, a trader said, “it was kind of limping along a little bit,” quoting the paper at 98½ to 98¾.

A second trader also saw the New York-based educational materials provider’s issue at that lower level.

Rockwood rallies

The star of the day was easily Rockwood Specialties Group’s 4 5/8% notes due 2020; those bonds gained 2 points to close at 105 3/8 bid on volume of more than $71 million, making it easily the most active junk credit.

Rockwood’s New York Stock Exchange-traded shares also jumped by $7.44, or 9.83%, to end at $83.14 on volume of 23.1 million shares – almost 20 times the norm.

The bonds got a big boost on the announcement that the specialty chemicals producer’s parent company, Rockwood Holdings, Inc., has agreed to be acquired by sector peer Albemarle for $6.2 billion, with the buyer guaranteeing Rockwood’s debt.

Moody’s Investors Service, which already rates Rockwood at Ba1, put the company under review for a ratings upgrade.

Market indicators head south

Statistical indicators of junk market performance fell across the board on Tuesday after having been unchanged-to-higher on Monday and mixed on Friday.

The KDP High Yield Daily index dropped by 12 bps to end at 74.5 after having been unchanged on Monday; before that it had fallen over seven consecutive sessions.

However, its yield – which would normally move inversely to the index reading and would rise as the index fell – actually came in by 1 bp on Tuesday to end at 5.06%. It had been unchanged on Monday and had risen over the last six sessions before that.

The Markit CDX Series 22 index lost 7/32 point on Tuesday to close at 108 17/32 bid, 108 19/32 offered, in contrast to Monday, when it had strengthened by ¼ point after having declined over the two sessions before that.

The widely followed Merrill Lynch High Yield Master II index was in retreat by 0.113% on the day; on Monday, it had moved higher by 0.057%, its second successive improvement.

Tuesday’s loss dropped its year-to-date return to 5.444% from 5.563% on Monday. It also remained well down from the 5.751% return recorded last Monday, the peak level for 2014.

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