Junk primary prices $4.4 billion; TechnipFMC gains; Colgate Energy at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Jan. 25 – In the primary market the fourth week of the new year began in much the same way the previous three did: massively.

Amid a heavy flow of new issue news seven dollar-denominated issuers priced a $4.4 billion total face amount of notes, each completing a single junk-rated tranche.

Meanwhile, the secondary space was soft at the launch of the week with some opportunistic selling starting to take place, a source said.

While the overall market still had a good bid to it, there was some turnover in short-duration, high-quality names that “didn’t have much left to them,” a source said.

While outstanding issues were beginning to see some activity, new paper continued to dominate the tape.

TechnipFMC plc’s 6½% senior notes due 2026 (Ba1/BB+) continued to gain in active trading on Monday following a strong break.

While volume was light, Colgate Energy Partners III, LLC’s 7¾% senior notes due 2026 (B3/B) retained a slight premium to their discounted issue price.

AMC Entertainment Holdings Inc.’s capital notes jumped on the heels of the embattled movie theater chain’s report that it would be able to stave off bankruptcy.

Strong Monday

Although equity markets gyrated on concerns that mutant coronavirus strains may sideline the global economy longer than had been hoped at the turning of the year, the junk bond market continued to go from strength to strength on Monday, sources said.

Despite the Dow Jones industrial average dropping 300 points early Monday (it ultimately came back to close just 36 points lower), a trader was marking high-yield bonds as much as ¼ point higher on the day, specifying, however, that Monday's action was very much a sector-to-sector story.

Monday’s deals

Six of the seven deals that came on Monday were brought through the drive-through window (four with add-ons). And all six of those upsized their deals, some sizably.

Executions were on the money, with all seven of Wednesday's issuers pricing their bonds at the tight- or rich ends of talk.

Meanwhile the active forward calendar saw a substantial build (see related stories in this issue).

TechnipFMC gains

TechnipFMC’s 6½% senior notes due 2026 continued to gain in active trading on Monday after a strong break the previous session.

The 6½% notes gained 1 point and were changing hands in the 102 3/8 to 102 7/8 context throughout Monday’s session, a source said.

There was more than $24 million in reported volume.

They closed out Friday at 101 3/8 bid, 101 7/8 offered.

TechnipFMC is a high-quality credit.

While the company is from the energy sector, it is not an exploration and production company but rather a services company, a source said.

The company has not been under the same pressure as other E&P companies, which saw their junk bonds sell off over the past few sessions following the moratorium that was placed on new oil and gas drilling permits.

TechnipFMC priced an upsized $1 billion, from $850 million, issue of the 6½% notes at par last Friday.

Pricing came at the tight end of the 6½% to 6¾% yield talk.

The deal was heard to be heavily oversubscribed and played to at least $3.6 billion of orders.

Colgate at a premium

Colgate Energy’s 7¾% senior notes due 2026 continued to trade at a slight premium to their discounted issue price.

The notes continued to trade at 99½ bid, par offered; a level reached shortly after the notes broke for trade.

The issue was small and the name is not well-known in the high-yield market, a source said.

The company is also an E&P company.

The deal experienced some pushback during bookbuilding with the notes’ tenure revised from seven years to five years.

Colgate priced a $300 million issue of 7¾% notes at 98.97 to yield 8%. The coupon and yield came on top of revised talk.

Earlier talk had the notes coming to yield in the 7¾% area.

AMC jumps

AMC’s outstanding issues jumped on Monday on the heels of news that it has enough liquidity to stave off bankruptcy.

The struggling movie-chain operator’s 12% senior notes due 2026 were the most active in the capital structure.

The 12% notes traded as high as 53½ but stood poised to close the day at 49.

There was more than $47 million of the bonds on the tape.

The 12% notes closed Friday at 40.

AMC’s 10½% notes due 2025 gained about 6½ points to close the day at 95½.

The 5¾% senior notes due 2025 were up more than 7 points to 33½.

AMC announced on Monday that the potential bankruptcy filing the company previously warned about was off the table.

“They have enough liquidity to make it through so the notes have some optionality,” a source said.

$526 million Friday outflows

The dedicated high-yield bond funds sustained $526 million of net daily outflows on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $480 million of outflows on the day.

High-yield ETFs sustained $46 million of outflows on Friday, the source said.

Indexes mixed

Indexes were mixed at the start of the week.

The KDP High Yield Daily index gained 1 point to close Monday at 69.39 with the yield now 4.22%.

The index posted a cumulative gain of 22 points on the week.

The ICE BofAML US High Yield index gained 4.8 bps with year-to-date returns now 0.489%.

The index gained 5.7 bps on the week last week.

The CDX High Yield 30 index sank 11 points to close Monday at 108.55.

The index posted a cumulative loss of 8 bps on the week last week.

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