Hess Midstream prices; Melco Resorts on tap; Enviva, Compass Minerals, Aveanna, Telesat trade up

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 25 – While the domestic high-yield primary market has slowed its pace in the runup to the Thanksgiving holiday, activity continued on Monday with one drive-by deal pricing and one more deal on deck for Tuesday.

Hess Midstream Partners LP priced an upsized $550 million issue of 8.5-year senior notes (Ba3/BB+/BB+) on Monday.

Melco Resorts & Entertainment Ltd. joined the forward calendar with a $650 million offering of 10-year senior notes (Ba2/BB), which is expected to price during Tuesday’s session.

In the European primary market, WEPA Group began marketing a €550 million two-tranche offering of senior secured notes (expected ratings B1/BB-).

Meanwhile, the secondary space launched the week on firm footing with positive news from the trade front buoying the market.

The space was active and saw decent volume despite the holiday week, sources said.

Centene Corp.’s recently priced tranches continued to dominate trading activity although the notes were largely moving sideways.

While several of the deals to price over the past two weeks fell flat in the secondary, the deals to clear the market during Friday’s session were not among them.

Telesat Canada and Telesat LLC’s 4 7/8% senior notes due 2027 were more than 1 point above their issue price in active trading (Ba3/BB-).

While less active, Aveanna Healthcare LLC’s 9¾% first-lien senior secured notes due 2026 (B2/B-), Compass Minerals International’s 6¾% senior notes due 2027 (B1/B+) and Enviva Partners, LP and Enviva Partners Finance Corp.’s 6½% senior notes due 2026 (B1/B+/BB-) rose more than 3 points above their issue price.

In recent issues, Teva Pharmaceutical Industries’ 7 1/8% senior notes due 2025 (Ba2/BB) were lifted on Monday following news the company was working to resolve an antitrust probe of alleged price-fixing.

Active Monday

Although the three sessions ahead of the extended Thanksgiving holiday weekend in the United States are expected to generate a low news volume, there was a decent amount of activity on Monday, and there will be at least some activity on Tuesday.

Hess Midstream Partners priced an upsized $550 million issue of 8.5-year senior notes (Ba3/BB+/BB+) at par to yield 5 1/8%.

The issue size increased from $500 million.

The yield printed at the tight end of the 5 1/8% to 5¼% yield talk. Initial talk was in the 5¼% area.

A lot of reverse inquiry was at play in the Hess Midstream deal, a trader said.

Meanwhile, Melco Resorts & Entertainment talked its $650 million offering of 10-year senior notes (Ba2/BB) to yield in the 5 5/8% area.

Official talk comes tight to the 5 5/8% to 5¾% early guidance.

The deal is set to price Tuesday.

There was also primary market news in Europe.

German tissue supplier WEPA Group plans to sell €550 million of senior secured notes (expected ratings B1/BB-) in two tranches.

The deal is coming in tranches of eight-year non-call-three fixed-rate notes and seven-year non-call-one floating-rate notes.

Centene sideways

Centene’s recently priced new tranches remained in focus in the secondary space.

While the most actively traded issues on Monday, the notes were mostly trading sideways, sources said.

Centene’s 4 5/8% senior notes due 2029 continued to trade around 105. The tranche saw more than $126 million in reported volume during Monday’s session.

The 4¼% senior notes due 2027 also leveled off around 103, a source said.

More than $80 million of the bonds were on the tape during Monday’s session.

Centene priced a $3.5 billion tranche of the 4 5/8% notes at par and a $2.5 billion tranche of the 4¼% notes at 99.16 to yield 4 3/8% on Nov. 21.

The $7 billion three-tranche offering also included a $1 billion add-on to Centene’s 4¾% notes due 2025.

Centene’s tranches are highly liquid and will most likely remain major volume movers in the secondary space, a market source said.

The notes saw a meteoric rise after breaking for trade, which sources attributed to the belief that the health insurer will be upgraded to investment grade.

While the notes are expected to remain active, they have most likely leveled off, a market source said.

At a premium

While several of the deals to price over the past two weeks have fallen flat in the aftermarket, the deals to clear the market last Friday bucked the trend.

All were seen well above their issue price in the secondary space on Monday.

Of last Friday’s deals, Telesat’s 4 7/8% notes due 2027 saw the heaviest volume on Monday, but made the least gains.

However, the notes were still trading more than 1 point above their issue price.

Telesat’s 4 7/8% notes were changing hands in a 101 3/8 to 101¾ context, a market source said. The bonds saw more than $25 million in reported volume during the session.

Telesat priced a downsized $400 million issue of the 4 7/8% notes at par last Friday.

The yield printed in the middle of the 4¾% to 5% yield talk. Initial guidance was in the 5% area.

The deal was downsized from $500 million.

Aveanna Healthcare’s 9¾% senior notes due 2026 traded up to a 103 handle, which sources attributed to the attractive coupon.

However, volume was light on Monday with only $7.5 million of the bonds on the tape.

Aveanna priced a $560 million issue of the 9¾% senior notes at par last Friday.

The yield printed at the tight end of the 9¾% to 10% yield talk and at the wide end of initial guidance in the mid-to-high 9% area.

Compass International’s 6¾% senior notes due 2027 also traded up to a 103 handle and stood poised to close Monday at 103 5/8, according to a market source.

The bonds saw $10 million in recorded volume during the session.

Compass priced a $500 million issue of the 6¾% senior notes at par last Friday.

In contrast to several of the recent deals which priced at the tight end of talk, the 6¾% notes priced wider than talk for a yield of 6¼% to 6½%.

Enviva Partners’ 6½% senior notes due 2026 were also trading on a 103 handle on Monday with about $10 million in recorded volume, according to a market source.

The notes saw a strong break and traded up to 102 5/8 after freeing for trade last Friday.

Enviva priced an upsized $550 million issue of the 6½% notes at par on Friday.

The yield printed at the tight end of the 6½% to 6¾% yield talk. The deal was upsized from $450 million.

The deal was heard to be heavily oversubscribed and saw a substantial amount of reverse inquiry, sources said.

Teva lifted

Teva’s recently priced 7 1/8% senior notes due 2025 were lifted on Monday following news the company was working with the U.S. Department of Justice to resolve a criminal antitrust investigation into generic drug-fixing.

The 7 1/8% notes rose 1 point to 101½ during Monday’s session, according to a market source. More than $17 million of the bonds were on the tape by the late afternoon.

Teva priced a $1 billion tranche of the 7 1/8% notes at par on Nov. 19.

The notes initially fell flat in the aftermarket and were largely wrapped around their issue price after breaking for trade.

News that Teva was in negotiations with the DOJ to resolve the DOJ’s criminal probe of generic drug price-fixing lifted the notes on Monday.

However, Teva is also facing an investigation from the attorney generals of several states and civil cases over its alleged role in price-fixing.

Teva’s potential settlement with the DOJ could help support the additional investigations and litigation against it, Bloomberg reported.

Friday outflows

The dedicated high-yield bond funds saw $51 million of net outflows on Friday, according to a market source.

High-yield ETFs saw $64 million of inflows on the day.

However, actively managed high-yield funds sustained $115 million of outflows on Friday, the source said.

Although the JP Morgan high yield index has returned a robust 10.93% for 2019 to Friday's close, returns for the month of November are negative-0.15%, the source said.

Ongoing weakness in energy prices is putting pressure on the high-yield index, sources say.

Dollar prices of 119 bonds across 63 companies in the developed world are down 10 points or more since the end of August, the market source said.

Among them are familiar high yield energy names such as California Resources Corp., Chesapeake Energy Corp., Antero Resources Corp., Noble Corp., Whiting Petroleum and EP Energy.

However, the distress that has overtaken the weaker portion of the high yield credit spectrum is by no means isolated to energy names.

Away from energy, the list of companies whose bonds fell includes such all-weather high yield names as Intelsat Corp. and Windstream Holdings, Inc.

Indexes

Indexes saw slight gains on Monday after all closed last week with cumulative losses.

The KDP High Yield Daily index added 3 basis points to close Monday at 70.65 with the yield now 5.27%. The index saw a cumulative loss of 47 bps on the week last week.

The CDX High Yield 30 index gained 35 bps to close Monday at 107.45. The index saw a cumulative loss of 30 bps on the week.

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