Laredo Petroleum, CVR Energy price; Range Resources, Genesis Energy lag; Tegna improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 10 – The domestic high-yield primary market capped an active week with two issuers pricing $2 billion in four tranches.

CVR Energy, Inc. priced a downsized $1 billion (B1/BB-/BB-) and Laredo Petroleum, Inc. priced an upsized $1 billion amount of senior notes (B3/B+).

Both issuers came from the energy sector, which has been the dominate sector to tap the market in 2020.

The forward calendar is thin heading into the Jan. 13 week with Presidio Holdings Inc.’s $800 million two-tranche offering the sole deal in the market.

Meanwhile, the secondary space was largely flat on Friday with the market shrugging of the headlines about increasing geopolitical tensions.

While the majority of paper to price over the past week has performed well in the secondary space, the deals to price during Thursday’s session were not among them.

Range Resources Corp.’s 9¼% senior notes due 2026 (B1) and Genesis Energy, LP and Genesis Energy Finance Corp.’s 7¾% senior notes due 2028 (B1/B+) were both lagging their issue prices in the secondary space.

While Tegna Inc.’s 4 5/8% senior notes due 2028 (Ba3/BB) initially saw a tepid reception in the aftermarket, the notes popped up to a 101 handle over the past two trading sessions.

Outside of the new paper, Grubhub Inc.’s 5½% senior notes due 2027 continued to see active trading with the notes giving back some of their gains from the past two sessions.

Energy charges into 2020

In the early days of the new year issuers from the energy sector represent a sizable portion of primary market action.

Seizing on a dramatic recovery in oil prices that got underway in late 2019, seven of 2020's 14 issuers, to date, have emanated from the energy sector.

Of 2020's $10.25 billion of junk issuance, to Friday's close, $6 billion, or 58.5%, came out of the energy sector.

Both of Friday's issuers were energy companies.

CVR Energy priced a downsized $1 billion amount of senior notes in two tranches.

The deal, which was downsized from $1.1 billion, included a $600 million tranche of five-year notes which priced at par to yield 5¼%. The yield printed on top of yield talk, and in the middle of early guidance in the 5¼% area.

CVR Energy also priced a $400 million tranche of eight-year notes at par to yield 5¾%. The yield also printed on top of yield talk, and in the middle of early guidance in the 5¾% area.

The CVR book was heard to be at deal size, early Friday.

And Laredo Petroleum priced an upsized $1 billion amount of senior notes in two tranches.

The deal included $600 million of five-year notes which priced at par to yield 9½%. The yield came at the wide end of the 9¼% to 9½% yield talk, and in the middle of early guidance in the 9½% area.

Laredo Petroleum also priced $400 million of eight-year notes at par to yield 10 1/8%, at the wide end of yield talk in the 10% area, which was also the early guidance.

The overall amount of issuance was increased from $900 million.

There was an impression in the market that the Laredo bonds were priced to move, a trader said.

The week ahead

The Jan. 13 week will get underway to a small active calendar.

Presidio Holdings plans to start a roadshow on Monday for $800 million of notes backing the LBO of the company by BC Partners.

The secured tranche features $400 million of seven-year senior secured notes (B1/B) with initial talk in the 6% area.

The unsecured tranche features $400 million of eight-year senior notes with initial talk in the high 9% area.

Pricing is set for Thursday.

Range Resources lags

Range Resources’ 9¼% senior notes due 2026 were lagging their issue price in active trading on Friday.

The notes opened the day in the 99¼ to 99¾ context, which is where they remained.

“They probably should have priced at a discount,” a market source said.

The notes saw more than $43 million in reported volume during Friday’s session.

The petroleum and natural gas company announced that it was reducing its capital expenditure budget and shelving dividend payments on its common stock just days before the pricing of the senior notes.

While the issue was upsized, it priced at the wide end of talk.

Range Resources priced an upsized $550 million issue of the 9¼% notes at par on Thursday.

Pricing came at the wide end of the 9% to 9¼% yield talk.

The initial size of the deal was $500 million.

Genesis Energy down

While Genesis Energy’s 7¾% senior notes due 2028 were “not a disaster” in the secondary space, they were also lagging their issue price.

The 7¾% notes were changing hands in the 99 5/8 to 99¾ context in heavy volume on Friday.

With more than $73 million in reported volume heading into the market close, the notes were the most active of Friday’s session.

Genesis Energy priced a $750 million issue of the 7¾% notes at par on Thursday. Pricing came at the wide end of official talk for a yield of 7½% to 7¾%.

Tegna pops

After a tepid reception in the secondary space, Tegna’s 4 5/8% senior notes due 2028 popped up to a 101 handle over the past two sessions.

The notes shot up and were trading in the 101 5/8 to 101 7/8 context on Friday, a market source said.

While the notes were moving at a premium after breaking for trade on Tuesday, they’re level of par 3/8 to par 5/8 was underwhelming.

However, the notes slowly but surely gained steamed.

The issue was a large liquid one and Tegna, a Tysons, Va.-based broadcast and digital media company, is well known in the high-yield market, a source said.

Tegna priced a $1 billion issue of the 4 5/8% notes at par on Tuesday.

Grubhub gives back gains

Grubhub’s 5½% senior notes due 2027 gave back some of their gains on Friday.

While the notes improved heading into the market close, they were down 5 points early in the session, sources said.

The notes closed Friday at 98½, down more than 2 points from the previous session, another source said.

Grubhub’s 5½% notes rose more than 5 points since the start of the week on rumors the food delivery company was exploring a possible sale.

Rumors that several grocery chains were interested in bidding for the company helped push the notes higher.

However, the notes sold off on Friday after the company published a statement refuting the speculation that it was planning to sell.

$257 million Thursday inflows

The dedicated high-yield bond funds saw $257 million of net inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $197 million of inflows on the day.

Actively managed high-yield funds saw $60 million of inflows on Thursday, the source said.

The news of Thursday's daily fund flows follows a late Thursday afternoon report that the dedicated junk bond funds saw $1.121 billion of net inflows in the week to the Wednesday, Jan. 8 close, according to Lipper US Fund Flows.

Indexes

Indexes closed the week as they began it – mixed.

The KDP High Yield Daily index rose 2 points to 71.87 with the yield now 4.84%. The index was down 4 bps on Thursday, 2 bps on Wednesday and 6 bps on Tuesday after a 2 bps gain on Monday.

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

The ICE BofAML US High Yield index gained 7.2 bps with year-to-date returns now 0.466%.

The index gained 4.3 bps on Thursday, 3 bps on Wednesday, 6.5 bps on Tuesday and jumped 81 bps on Monday for a cumulative gain of 102 bps on the week.

The CDX High Yield 30 index was flat on Friday, closing the day at 109.76. The index gained 19 bps on Thursday and 12 bps on Wednesday, dropped 15 bps on Tuesday and rose 2 bps on Monday.

The index saw a cumulative gain of 18 bps on the week.

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