Primary falls silent in short pre-holiday session; new Springleaf notes busily traded

By Paul Deckelman and Paul A. Harris

New York, Nov. 26 – Junk market participants headed home for Thanksgiving turkey and stuffing after a short, lightly attended and uneventful pre-holiday session on Wednesday.

Although Wednesday was ostensibly and officially a regular session, the reality was that many traders and other junk marketeers either did not even bother coming in, or, if they did come in, they left early after reporting that not much was going on ahead of the holiday (fixed-income markets in the United States were slated to be closed on Thursday in observance of Thanksgiving, and the Securities Industry and Financial Markets Association was recommending a 2 p.m. ET market close on Friday).

A major storm dumping a mixture of rain, frozen rain and snow on much of the Northeastern U.S. on Wednesday threw a further wet blanket over the day’s already quiet activity.

Primaryside sources said that no new deals priced during the session, and no prospective transactions were announced.

They said that nothing would be happening with offerings already on the forward calendar – from industrial equipment manufacturer EnTrans International, LLC, Canadian gaming operator Parq Resort and Casino and energy operator Westmoreland Coal Co. – until at least the upcoming week, at the earliest.

Among recently priced issues, Tuesday’s upsized offering of five-year notes from a subsidiary of consumer finance company Springleaf Holdings, Inc. was among the most actively traded paper on the day, although that wasn’t saying much, given the overall light market.

There was also some trading in KLX, Inc.’s eight-year notes, which had priced on Friday, and, going back a little further, in deals from earlier in the month from Scientific Games International, Inc. and MSCI Inc.

Away from the new issues, traders said that energy-related credits such as California Resources Corp. remained under pressure amid continued weakness in oil prices, with little help on that score anticipated from this week’s OPEC oil ministers’ meeting.

Amid light volume, statistical market performance measures were higher across the board after having been mixed – though just barely so – on Tuesday and, before that, higher all around on Friday and again on Monday.

Uneventful primary

The high-yield primary market passed a quiet pre-holiday Wednesday, market sources said.

No deals priced.

No deals were announced.

The week ahead will get underway with a slim active calendar.

Two of the deals on that calendar have been in the market since mid-November.

EnTrans International remains in the market with a $250 million offering of six-year senior secured notes (B2/B) via sole bookrunner Credit Suisse, talked last week to yield 8¾% to 9%.

And Parq Resort and Casino remains in the market with a $200 million offering of seven-year senior secured second-lien notes (Caa1/B-) via Credit Suisse and Dundee, talked last week with an 11½% coupon to yield 12%.

Timing on both deals remains to be determined, sources say.

Also, look for a couple of drive-by deals in the euro-denominated high yield in the Dec. 1 week, a source in London advised on Wednesday.

The post-holiday week should produce news on Westmoreland Coal's expected $400 million offering of senior secured notes due 2021 via BMO, according to a source familiar with the situation.

New Springleaf bonds active

In the secondary market, a trader said that he had not seen any traces of Springleaf Holdings’ new 5¼% notes due 2019.

However, at another desk, a market source said that the notes were among the busiest issues in Junkbondland, although overall volumes of everything were light.

He said that more than $14 million of the notes changed hands, going home at 100¼ bid.

Another trader called them ½ point better on the day at 100½ bid, 100 7/8 offered.

The Evansville, Ind.-based consumer loan company had priced $700 million of the notes at par on Tuesday in a quick-to-market offering via its indirect, wholly owned Springleaf Finance Corp. subsidiary. The deal priced after the issue was upsized from an originally announced $500 million. It came too late in the day on Tuesday for any aftermarket dealings at that time.

Monday deals near issue price

Among the deals that came to market on Monday, a trader said of CDW Corp.’s 5½% notes due 2024 that “those have been trading a little” on Wednesday morning.

He saw them “right at their deal price, wrapped around par.”

A second trader also saw the bonds exactly at the par bid level on relatively busy dealings of about $8 million.

That par level was about where the bonds had been seen on Monday after the Vernon Hills, Ill.-based technology solutions provider priced its quick-to-market $575 million issue via its CDW Finance and CDW LLC subsidiaries.

A trader saw Monday’s other significant pricing – Tibco Software Inc.’s 11 3/8% notes due 2021 – at 97½ bid on Wednesday morning.

He said he saw no further activity in the credit beyond that.

A second trader pegged the issue at 97½ bid, 98¼ offered.

The Palo Alto, Calif.-based provider of infrastructure and business software priced $950 million of those notes at a deeply discounted 97.1 issue price on Monday to yield 12% in a regularly scheduled forward calendar offering as part of the financing for Tibco’s upcoming LBO.

The bonds were not initially seen trading Monday after their pricing and were quoted in the 97½ bid area on Tuesday.

Some recent deals busy

Among other issues that have recently come to market, KLX’s 5 7/8% notes due 2022 were seen Wednesday trading at 102 1/8 bid on relatively brisk volume of over $7 million.

A second trader located them in a 102-to-102½ bid context.

KLX – being spun off from Wellington, Fla-based aircraft interiors producer B/E Aerospace, Inc. – priced $1.2 billion of the notes on Friday at par off the forward calendar.

The notes initially traded in a 100½-to-100¾ context on Friday afternoon but had jumped to around the 102 level by Monday on volume of over $49 million. They remained at that lofty altitude on Tuesday and Wednesday.

Scientific Games International’s 10% notes due 2022 were seen up ½ point at 94¼ bid, with over $9 million of the notes traded on the day.

However, a second trader quoted them in a 93¼-to-93¾ context.

The New York-based developer and manufacturer of technology products for the gaming industry priced $2.2 billion of those notes back on Nov. 14 as part of an overall $3.15 billion two-part forward calendar deal.

The notes priced at 89.865% to yield 12% but then steadily crept up after that to their current levels in the 93-to-94 region.

The other part of that offering – its 7% senior secured notes due 2021 – were seen by a trader at 100 5/8 bid, 101 1/8 offered, although on considerably less trading volume.

The company priced $950 million of those notes at par after upsizing the tranche from an originally announced $700 million.

That upsizing also enlarged the overall deal size to $3.15 billion from an originally planned $2.9 billion.

MSCI’s 5¼% notes due 2024 gained 3/8 point on Wednesday to go home at 103 7/8 bid on volume of over $9 million.

The New York-based provider of performance, risk management, and corporate governance products and services priced $800 million of the notes at par back on Nov. 5. They immediately jumped to a 101½-to-102 context when they were freed for aftermarket dealings, stayed above the 102 bid level for a while and gradually made their way up to current levels.

Energy names pressured again

Away from the new deals – which have recently dominated activity in the secondary market – a trader on Wednesday called high yield “very quiet – which was not a surprise” heading into a holiday break.

“There were a lot of people out, and I think the storm [that slammed the New York area and much of the rest of the Northeastern part of the United States with a mixture of snow in places and freezing rain] kind of compounded it.”

He saw “very light flows.”

Although he said that overall market was “OK,” he added that “oil was getting whacked again, so some of these energy names have sold off a little bit, giving back some of the gains they made earlier in the week.”

For instance, he said that Los Angeles-based oil and natural gas exploration and production operator California Resources’ 6% notes due 2024 were trading in a 95-to-96 context, “and they had been closer to 97.”

At another shop, the company’s 5% notes due 2020 were seen having dropped by 1¾ points on Wednesday – though in only moderate-volume dealings – to end the day at 94¾ bid.

Elsewhere in the energy sphere, a trader saw Houston-based E&P company Halcon Resources Corp.’s 9¾% notes due 2020 down 1 point, at 84¼ bid.

Traders noted that OPEC oil ministers were scheduled to meet on Thursday in Vienna, with world oil prices continuing to languish in the mid-$70s.

However, news reports on Wednesday indicated that it was unlikely that major producers like cartel members Saudi Arabia and Venezuela or non-members Russia or Mexico might cut their output in order to prop up world prices.

Indicators move higher

Overall dealings remained quiet on Wednesday ahead of Thursday’s Thanksgiving holiday.

Statistical indicators of junk market performance were higher across the board for the third time in the last four sessions after having turned mixed – though just barely so – on Tuesday.

The KDP High Yield Daily index improved by 7 basis points on Wednesday to end at 74.88; on Tuesday, it had edged downward by 1 bp, its first loss after two gains in a row.

Its yield fell by 2 bps to 5.41%, its fourth consecutive narrowing. On Tuesday, the yield had declined by 4 bps.

The Markit CDX North American High Yield Series 23 index was seen having posted its fifth straight gain on Wednesday, rising by 5/32 point to go out at 107 19/32 bid, 107 5/8 offered. On Tuesday, it had advanced by 1/16 point.

The Merrill Lynch U.S. High Yield Master II index also advanced on Wednesday, moving up by 0.043%. It was the index’s fourth straight gain, including Tuesday’s 0.09% rise. However, the index remained well down from its peak level for the year of 5.847%, recorded on Sept. 1.

According to the Finra-Bloomberg Active US High Yield Bond index, junk market volume fell to $1.154 billion on Wednesday from $2.97 billion at the close on Tuesday.

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