Primary quiet; Kraton, Clear Channel slate deals; new ClubCorp notes off; energy credits slide

By Paul Deckelman and Paul A. Harris

New York, Dec. 7 – The high-yield primary market opened the new week on a quiet note on Monday, with no new issues seen having priced during the session.

Syndicate sources did say that two prospective issuers began shopping dollar-denominated junk bond deals.

Chemical manufacturer Kraton Polymers LLC and media company Clear Channel Outdoor Holdings, Inc. were both heard to have hit the road to market their respective new deals to investors, Kraton’s a $425 million offering of eight-year notes and Clear Channel’s a $225 million of five-year paper.

They also said that Goodyear Tire & Rubber Co. was doing something that most domestic junk issuers usually don’t do – tap the European high-yield market with an eight-year euro-denominated issue.

Among recently priced new dollar-denominated bonds, traders saw Friday’s sole new deal, golf course operator ClubCorp. Holdings Inc.’s eight-year notes, having lost more than 1 point on the session in fairly active trading.

Other recently priced offerings, including HCA Inc., Aramark Services, Inc. and Group 1 Automotive Inc., traded within a narrow range versus where those new notes went home on Friday.

Away from the new or recent deals, it was another tough day for the energy sphere.

Crude oil prices hit their lowest levels since 2009, which put oil and natural gas credits such as Energy XXI Ltd., Comstock Resources Inc. and Oasis Petroleum Inc. under pressure in active dealings.

Chesapeake Energy Corp.’s bonds were also lower, with the company’s recently announced exchange offer for its notes as well as oil prices weighing on its issues.

Coal names such as Peabody Energy Corp. and Consol Energy Inc. were also lower.

Statistical measures of junk market performance turned lower across the board on Monday after having been mixed on Friday. It was the second lower session in the last three trading days.

Kraton starts roadshow

No deals priced in Monday's primary market session, which produced just a slight amount of news.

“There was not much going on in the primary market or the secondary market,” a trader remarked, adding that everything in the secondary market seemed to be for sale and that bids were few and far between.

There were two new deal roadshow announcements.

Kraton Polymers started a roadshow on Monday for a $425 million offering of eight-year senior notes (B3/CCC+).

The acquisition deal, via Credit Suisse Securities (USA) LLC, Nomura and Deutsche Bank Securities Inc., is set to price late this week.

Early guidance has the notes coming in a mid-10% yield context, according to a trader.

Clear Channel five-year deal

Clear Channel Outdoor Holdings started a roadshow for a $225 million offering of five-year senior notes via bookrunner Goldman Sachs & Co.

Clear Channel International intends to use the proceeds, together with cash on hand, to make a $225 million loan to Clear Channel CV, an indirect parent of Clear Channel International and a subsidiary of Clear Channel Outdoor Holdings, which will be due at the same time and under the same terms as the notes.

Clear Channel CV intends to use the proceeds from the loan to repay and terminate a $65.3 million loan due to Clear Channel Worldwide Holdings, Inc., an indirect parent of Clear Channel International and a subsidiary of Clear Channel Outdoor Holdings, and to make a distribution of the remaining proceeds to Clear Channel Worldwide Holdings, which intends to use those proceeds to fund a special $220 million cash dividend to its stockholders, including its controlling stockholder, iHeart Communications, Inc., which may use those proceeds for its own corporate purposes, including debt repayment.

Goodyear €250 million offer

Goodyear Tire & Rubber announced in a Monday press release that it intends to offer €250 million of senior notes due 2023 via European subsidiary Goodyear Dunlop Tires Europe BV.

Proceeds, together with cash and cash equivalents, will be used to redeem in full €250 million of 6¾% senior notes due 2019.

Meanwhile, one deal remained on the active calendar from the week gone by.

NGL Energy Partners LP's $300 million offering of five-year senior notes (B2/BB-/BB-), from the battered energy sector, is facing headwinds, market sources say.

Pricing, which started in the 9% area, has been on the march and lately was heard in the context 11½% to 12%.

There were no updates on Monday.

Outflows on Friday

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

High-yield exchange-traded funds saw $268 million of outflows on the day.

Asset managers sustained $155 million of outflows on Friday.

New ClubCorp notes seen lower

In the secondary market, a trader said that Friday’s new issue from ClubCorp was down about a point from where it had finished Friday.

He said that those 8¼% notes due 2023 had fallen to around 99 1/8 bid, well off from the 100¼ bid level at which the notes had traded in very thin initial aftermarket dealings following their pricing.

More than $15 million of the notes had traded on Monday, putting the issue high up on the day’s Most Actives list.

The Dallas-based operator of country clubs and golf courses as well as sports, business and alumni clubs brought its $400 million issue to market at par on Friday after upsizing the regularly scheduled forward calendar deal from an originally announced $350 million.

Recent deals little changed

Going back a little farther, other deals which had priced last week were seen holding around the same levels at which they had gone home on Friday.

A trader saw HCA’s 5 7/8% notes due 2026 “on either side of 101.”

At another desk, however, a trader quoted the notes ½ point lower at 100¾ bid, with over $16 million having changed hands.

HCA, a Nashville-based hospital operator, priced $500 million of those notes on Thursday as a quickly shopped add-on to its existing $1 billion of the notes, which priced at par back on Nov. 9.

The add-on priced at 100.25 to yield 5.837%.

Group 1 Automotive’s 5¼% notes due 2023 “were holding in,” said a trader who quoted them at 100 1/8 bid, 100 3/8 offered.

The Houston-based operator of a chain of automobile dealerships and collision-repair shops priced $300 million of the notes at par on Thursday after upsizing that drive-by transaction from $250 million originally.

He also saw Aramark’s 5 1/8% notes due January 2024 “holding in at a premium of about a point” above the par level at which the Philadelphia-based food service and uniform provider priced its unscheduled $400 million issue on Thursday after upsizing it from $350 million originally.

And Ball Corp.’s $1 billion of 4 3/8% note due 2020 were “very well bid for” in a 101-to-101½ bid context.

That was the level that the megadeal “rocketed up” to after pricing at par on Wednesday – part of the Broomfield, Colo.-based metal beverage container manufacturer’s €2.1 billion equivalent three-part scheduled forward calendar offering.

Energy names on the slide

Away from the new deals, traders said that the main story of the day was the continued carnage in the energy arena, which was driven by a large fall in crude oil prices Monday that left those prices at their lowest levels since early in 2009.

Reacting to the failure of OPEC ministers to agree to make any cuts in the global oil cartel’s aggregate output when they met last week – meaning the current world oil glut will continue – benchmark West Texas Intermediate crude for January delivery fell $2.32, or 5.80%, to settle at $37.65 a barrel on the New York Mercantile Exchange.

Among the oil and natural gas exploration and production credits getting pounded down in response was Energy XXI’s 11% notes due 2020, which lost more than 3¼ points to end below 39½ bid, on volume of more than $14 million.

Oasis Petroleum’s 6 7/8% notes due 2022 dropped 5¼ points on the session to end at 79¼ bid, with over $13 million having traded, while Comstock Resources’ 10% notes due 2020 were down nearly 3 points, going home at 52¾ bid, with over $12 million having traded.

Chesapeake carnage continues

Another energy name under pressure was Chesapeake Energy. Not only did its bonds fall along with those of its sector peers on the disappointing OPEC news and the resulting sharp drop in oil prices, but the Oklahoma City-based oiler’s paper had already been battered around last week on its announcement of plans to take out some of its existing debt by issuing new second-lien notes at a discount to the existing notes’ prices.

Its 7¼% notes due 2018 lost another 3 points Monday, ending at 54¾ bid, on over $12 million traded.

Although the company’s 2017 and 2018 bonds got hammered down last week, a trader said that the company’s longer-dated issues – which are less likely to be accepted by the company under the terms of the exchange offer it announced last week – “are down a couple of points.”

He saw its 5¾% notes due 2023 at 31¼ bid on Monday, down from 34¾ on Friday.

Coal in a hole

A market source saw various coal names lower in active trading.

He said that Peabody Energy’s 6% notes due 2018 ended down 1½ points at 21 bid, with more than $19 million traded, tops in Junkbondland on Monday.

And he saw Consol Energy’s 5 7/8% notes due 2022 about ½ point lower at 67 bid, on over $16 million of volume.

Indicators turn lower

Statistical measures of junk market performance turned lower across the board on Monday after having been mixed on Friday. It was the second lower session in the last three trading days.

The KDP High Yield Daily index slid by 34 basis points on Monday to close at 65.14, its third straight loss after three consecutive gains and its fourth loss in the last seven sessions. On Friday, the index had lost 19 bps.

Monday’s close represented a new low for the year and a new 52-week low for the index, eclipsing the prior mark of 65.48, which had been set just this past Friday.

Its yield ballooned upward by 11 bps to finish at 7.08%, its third successive widening after two straight narrowings, two straight unchanged sessions and another narrowing, making Monday’s close its fourth widening in the last nine sessions. The yield had moved up 5 bps on Friday.

Monday’s yield marked a new high for 2015, surpassing the former 2015 highest yield of 7.05% set on Oct. 2.

The Markit Series 25 CDX North American High Yield index fell by 9/32 point on Monday to end at 102 5/32 bid, 102 3/16 offered. It had risen by 3/16 point on Friday, its first gain following two losses before that. Monday’s loss was its third in the last four sessions

The Merrill Lynch North American Master II High Yield index lost 0.399% on Monday, its third straight loss after three successive sessions on the upside and thus its fourth loss in the last seven sessions. It had retreated by 0.24% on Friday.

The index’s year-to-date loss widened to 2.741% on Monday from 2.351% on Friday.

However, those year-to-date losses were still well above the index’s worst 2015 cumulative setback of 3.069% recorded on Oct. 2.

Another index component, the average price of tracked bonds, fell to its lowest price of the year on Monday, 90.83892. It was the second straight new 2015 low price; the previous low of 91.264343 had been set this past Friday.

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