Sanchez sells upsized drive-by add-on, Teine Energy prices; recent new issues stay active

By Paul Deckelman and Paul A. Harris

New York, Sept. 9 – The high-yield primary saw a second consecutive session of just modest activity on Tuesday. As had been the case on Monday, two smallish single-tranche deals had priced by the time the dust had settled.

Sanchez Energy Corp. brought an upsized and quickly shopped $300 million add-on to its existing 2023 bonds.

Out of that same oil and gas sector, Canada’s Teine Energy Ltd. did a $350 million eight-year issue as a regularly scheduled forward calendar deal.

Monday’s quickly shopped $200 million add-on to diversified holding company Harbinger Group Inc.’s existing 2022 notes was seen only lightly traded on Tuesday, holding right around their issue price.

And similar to Monday’s activity, traders saw continued brisk trading levels in some of the new deals that came to market last week, such as those from T-Mobile US, Inc., Clear Channel Communications, Inc., and Linn Energy, LLC.

Secondary market activity away from the new deals remained lackluster.

Statistical indicators of junk market performance were lower across the board on Tuesday after having been mixed for the two previous sessions.

Teine Energy at a discount

The dollar-denominated high-yield primary market saw a pair of single-tranche deals price on Tuesday, generating a combined total of $649 million of proceeds.

Teine Energy priced a $350 million issue of eight-year senior notes (B3/CCC+) at 99.234 to yield 7%.

The yield printed at the wide end of yield talk in the 6 7/8% area.

Joint bookrunner Barclays will bill and deliver. J.P. Morgan was also a joint bookrunner.

The Calgary, Alta.-based oil and gas exploration, development and production company marketed the deal on an investor roadshow and will use the proceeds to refinance debt and for general corporate purposes.

Sanchez Energy upsizes

In a quick-to-market deal, Sanchez Energy priced an upsized $300 million add-on to its 6 1/8% senior notes due Jan. 1, 2023 (B3/B-) at 100.75 to yield 5.968%.

The offering was upsized from $250 million.

The reoffer price came on top of price talk.

RBC was the left bookrunner. Credit Suisse was the joint bookrunner.

The Houston-based oil and gas exploration and development company plans to use the proceeds for general corporate purposes including working capital.

Jupiter Resources re-launches

As with Monday, the active new issue calendar saw a big buildup on Tuesday.

Most, if not all, of it is expected to clear by the end of the week.

Jupiter Resources Ltd. re-launched its $1,125,000,000 offering of eight-year senior notes.

The deal, which was sidelined in early August due to market conditions, is set to price this week.

Credit Suisse, TD, RBC, Barclays, Goldman Sachs, UBS, Deutsche Bank and Nomura are joint bookrunners for the acquisition financing.

W.R. Grace brings $1 billion

W.R. Grace & Co.-Conn. plans to start a two-day roadshow on Wednesday in New York for a $1 billion two-part offering of non-callable senior notes (expected ratings Ba3/BB+).

The deal is coming in tranches of seven-year notes and 10-year notes.

Goldman Sachs is the left book bookrunner. Deutsche Bank and BofA Merrill Lynch are the joint bookrunners.

The Columbia, Md.-based specialty chemicals company plans to use the proceeds to terminate obligations under the deferred payment agreement with the Personal Injury Trust for about $632 million, as well as to partially fund the settlement of the warrant issued to the Personal Injury Trust. In addition, proceeds will be used to repay amounts outstanding under the revolver and for other general corporate purposes.

Acosta launches $800 million

Acosta Sales & Marketing began to market an $800 million offering of eight-year senior notes (Caa1/CCC+) on Tuesday.

Goldman Sachs is the left bookrunner for the buyout financing. JPMorgan, Morgan Stanley and Barclays are the joint bookrunners.

Proceeds will be used to help fund the buyout of Acosta, a Jacksonville, Fla.-based provider of sales and marketing services to the consumer goods industry, by Carlyle Group from Thomas H. Lee Partners LP.

J.C. Penney five-year deal

J.C. Penney Co., Inc. began marketing a $350 million public offering of non-callable five-year senior notes (expected ratings Caa2/CCC-).

JPMorgan, Barclays and Goldman Sachs are the joint bookrunners for the debt refinancing and general corporate purposes deal.

A sizable calendar

On almost any active forward calendar the above-mentioned Jupiter Resources and W.R. Grace deals would look super-sized.

However, on the present calendar they are dwarfed by the California Resources Corp. $5 billion three-part high-yield deal (Ba1/expected BB), which is also expected to price this week.

Price talk has yet to surface, but the short-dated 5.5-year tranche has been whispered at 4½% to 4¾%, the tranche of notes due 2021 is whispered at 5% to 5¼%, and the long tranche of notes, which mature in 2024, is whispered at 5½% to 5¾%, according to market sources.

That talk may be backing up, according to an investor who said late Tuesday that yield talk could go ¼% to ½% higher.

That could have something to do with its size, but more likely has to do with the size of the forward calendar, which grew to $10 billion on Tuesday, the investor said.

“The calendar has become sizable,” the source commented.

“It could be bigger than the $40 billion that was rumored for September, as we were heading into Labor Day.

“And there is not a lot of money coming in right now.”

Fund flows for Monday were modestly negative, the buysider said, adding that exchange-traded funds saw $53 million of outflows, while actively managed funds saw $30 million of outflows. The investor was citing information contained in a report from JPMorgan.

“There is still plenty of money around from coupon payments, so that's not an especially big worry,” the investor said.

“But everything that came last week was priced to perfection and has gone nowhere in the secondary market.

“Had they left just a little on the table it could have traded up one half to three-quarters.”

Nyrstar at the wide end

The European primary market also generated a steady news flow on Tuesday.

Belgium-based Nyrstar priced a €350 million issue of 8½% five-year senior notes (B3/B-) at par to yield 9%.

The yield printed at the wide end of the 8¾% to 9% yield talk.

Goldman Sachs International was the global coordinator and joint bookrunner for the debt refinancing and general corporate purposes deal. Royal Bank of Scotland was also a joint bookrunner.

Celanese starts roadshow

Celanese US Holdings LLC began a roadshow on Tuesday in London for a €300 million public offering of non-callable five-year senior notes.

Joint bookrunner Deutsche Bank will bill and deliver. BofA Merrill Lynch, Citigroup, HSBC, JPMorgan and Royal Bank of Scotland are also joint bookrunners.

The Dallas-based chemicals company plans to use the proceeds to redeem its 6 5/8% senior notes due 2018.

Iron Mountain sterling deal

Iron Mountain Europe plc, a subsidiary of Iron Mountain Inc., began a two-day London roadshow on Tuesday for its £350 million offering of eight-year senior notes (expected ratings Ba1/B+).

Joint physical bookrunner JPMorgan will bill and deliver. Barclays is also a joint physical bookrunner.

BofA Merrill Lynch, Credit Agricole CIB and Wells Fargo Securities are joint bookrunners.

The Boston-based provider of storage and information management services plans to use the proceeds to repay bank debt and for general corporate purposes.

Sanchez, Teine up slightly

In the secondary arena, traders saw some modest gains in Sanchez Energy’s 6 1/8% add-on notes due 2023, with one quoting the new deal at 101 bid, 102 offered, versus the 100.75 price at which the deal had come to market, yielding 5.968%.

A second trader pegged the deal in a 100½-to-101 context.

A trader meantime saw “a couple of trades” in Teine Energy’s 6 7/8% notes due 2022 in a par-to-100 3/8 context, versus its 99.234 issue price, which had yielded 7%.

At another desk, a market source saw the bonds get as good as 100¼, saying they were left at a par bid.

Harbinger hangs in

A trader saw Harbinger Group’s add-on to its 7¾% notes due 2022 trading around a par bid. But he said that he had seen only a handful of smallish trades, amounting to about 250 bonds, in contrast to Monday, when more than $7 million had traded in the aftermarket.

A second trader located the bonds at par bid, 100¼ offered, up from initial trading levels around 99 7/8 bid, 100 3/8 offered.

The New York-based diversified holding company priced $200 million of the notes as a drive-by add-on to its existing paper on Monday, bringing the deal to market at par to yield 7.746%.

Recent deals trade around

Among some of the deals that came to market last week, T- Mobile US’ huge new two-part offering remained right near the top of the Most Actives list on Tuesday.

A trader saw its 6 3/8% notes due 2025 off by 1/8 point at 100½ bid, with over $35 million having traded, and said that its 6% notes due 2023 were also down 1/8 point at 100 5/8 bid on volume of more than $20 million.

A second market source said that the 6 3/8s were down by 3/8 point at 100¼, while its 6s were ½ point lower at 100 3/8 bid.

The Bellevue, Wash.-based Number-Four U.S. wireless carrier had priced $1.3 billion of the 6% paper and $1.7 billion of the 6 3/8% notes at par late in the session last Wednesday, although terms did not emerge until Wednesday night, well after proceedings had wrapped up. That $3 billion drive-by deal had been massively upsized from the $2 billion originally announced.

When the notes were freed for trading on Thursday, they racked up massive volume of over $200 million in each tranche, easily dominating the Most Actives list, and they remained actively traded on Friday, with more than $33 million of each changing hands, and again on Monday, when over $45 million of the 6 3/8s traded and over $38 million of the 6% notes were traded.

Elsewhere, Clear Channel’s new 9% senior secured-priority guarantee notes due 2022 were seen by a market source having gained 1/16 point to close at an even par bid on volume of over $23 million.

A second source located the bonds in a par to 100¼ context.

The San Antonio-based diversified media company’s notes had priced at par in a quick-to-market transaction on Friday and had been quoted in a par-to-100½ context when they were freed for the aftermarket.

On Monday, more than $33 million traded, ending slightly below par.

Linn Energy’s big new two-part offering remained actively traded on Tuesday, with the Houston-based oil and natural gas company’s 6½% notes due 2021 off by 1/16 point at 99 3/8 bid, with over $16 million having traded.

Its 6½% notes due 2019 were seen off by ½ point at 101¾ bid, with over $17 million moving around.

Linn had priced $650 million of the 2021 notes at 98.619 on Thursday to yield 6¾% as part of a quick-to-market $1.1 billion two-part offering, which it upsized from the originally announced $1 billion. Over $90 million had traded on Friday, easily topping the Most Actives List, and it stayed busy on Monday as well, with over $23 million traded.

That offering also included a $450 million add-on to the existing 6½% 2019 notes, which priced at 102 to yield 6.001%. Those bonds initially firmed by around 1/8 point; on Friday, they gained another 1/16 to finish at 102 3/16, with more than $44 million having changed hands, and in Monday’s dealings, the paper continued to gain slightly, going out at 102¼ bid on volume of over $19 million.

Lackluster secondary market

A trader said that the deals from last week “continued to trade around their deal price, a couple below deal price.”

He said the non-new-deal secondary market was meanwhile “kind of muted. There’s a lot of focus on the primary market.”

Noting the heavy volume of new paper that came into Junkbondland last week – over $11 billion, making it easily one of the biggest weeks of this year so far – he continued that “it seemed like accounts weren’t prepared for it.”

He opined “that’s the sense I get, but it doesn’t make a lot of sense,” in view of the fact that it was well-expected that September would see heavy new issuance, perhaps as much as $40 billion, with a lot of that coming in the immediate post-Labor Day week.

“That number was around, and people knew it,” he declared. “It’s not like the talk was $10 [million for the month] and they got $40 [million] – that $40 [million] number was floating around for a while.”

On top of that, he said that over the last half of August not much was going on, but “there wasn’t much preparedness [for the new-deal rush] being done in that time frame.”

The crush of new paper “definitely put pressure on secondary issues, both today and [Monday],” he concluded.

A second trader, noting the relative paucity of activity in the junk market away from the new deals, suggested – tongue only halfway in cheek – that “with the big Apple announcement [of two new iPhones and its Apple Watch personal computing device] and the whole Ray Rice thing [with the football star sacked amid allegations of domestic violence], “there’s not a lot of time for trading bonds these days. There are more important things to research.”

Indicators head south

Statistical indicators of junk market performance were lower across the board on Tuesday after having been mixed for the two previous sessions.

The KDP High Yield Daily index plunged by 22 basis points to close at 73.42; on Monday, it had managed to break out of its six-session rut, edging up by 1 bp. It has now finished lower in seven sessions out of the last eight.

Its yield meantime rose by 6 bps to 5.25% after having been unchanged on Monday. It has now been higher in eight out of the last nine sessions.

The Markit CDX Series 22 index posted its second loss in a row on Tuesday, declining by 19/32 to 107 1/16 bid, 107 3/32 offered; it had been off by 5/32 point on Monday.

The widely followed Merrill Lynch High Yield Master II index slid by 0.153% on Tuesday after having posted a 0.025% gain on Monday. It has now declined in five sessions out of the last six.

The latest setback lowered its year-to-date return to 5.211% from 5.371% on Monday. It also remained well off from its peak level of the year so far, 5.847%, set last Monday.

© 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.