Pricing drought continues; Eldorado Resorts plans deal; energy mixed, but iron ore slides

By Paul Deckelman

New York, July 8 – The “Great July Pricing Drought” continued for an eighth straight day in Junkbondland, with prospective issuers still hugging the sidelines against a backdrop of all kinds of macroeconomic problems such as the continued slide in China’s stock market and the game of brinksmanship being played out in Europe between Greece and the other Eurozone countries.

Matters were not helped by a mysterious, more than three-hour-long halt to trading on the New York Stock Exchange officially attributed to technical problems, although there were rumors that the outage might be linked to cyberterrorism or even the Chinese financial market problems.

While nothing priced – either off the forward calendar or as a quick-to-market transaction – primaryside player saw another prospective deal added to the calendar.

Gaming operator Eldorado Resorts, Inc. unveiled plans for a $375 million issue of eight-year notes, although there was no definitive information immediately available about when that issue might actually come to market.

It joined prospective offerings announced this week by Charter Communications Inc. and TerraForm Power Inc., with timing and other information on those would-be deals equally nebulous at this point.

Away from the new-issue arena, the junk market remained mostly lower.

Iron ore miners such as Fortescue Metals Group Ltd. and Cliffs Natural Resources Inc. were the big losers, driven down by continued declines in ore prices.

However, recently battered oil and gas and coal mining credits such as California Resources Corp. and Peabody Energy Corp. decoupled from iron ore and appeared to have stabilized.

Statistical market-performance measures turned lower across the board on Wednesday after having been mixed on Tuesday; it was the indicators’ second down day in the last three sessions.

Eldorado unveils bond deal

There was one piece of news emerging Wednesday from an otherwise quiet primary market as Eldorado Resorts, a Reno, Nev.-based regional gaming company, announced plans to sell $375 million of senior notes due 2023 as part of a larger refinancing plan, which will also include new bank debt and a stock sale.

Details were not immediately available on the timing of the prospective Rule 144A and Regulation S deal, whether it would be marketed to potential investors via a roadshow, the precise features of the bonds to be sold or the investment banks involved in the financing.

Besides the bond issue, Eldorado plans to enter into a new $425 million term loan and $150 million revolving credit facility and raise an additional $60 million via a stock offering.

Proceeds from those transactions will be used to repurchase or redeem its $168 million of 8 5/8% senior secured notes due 2019 remaining outstanding from the $180 million sold in June of 2011 and to repurchase or redeem the $560.66 million remaining outstanding 11½% senior secured second-lien notes due 2019 originally issued by MTR Gaming Group Inc., which was merged into Eldorado last year.

Some $72.5 million of the proceeds will be used by Eldorado to buy out joint-venture partner MGM Resorts International’s 50% stake in the Silver Legacy casino resort in Reno, which the two companies, or their corporate predecessors, have operated together since 1995, as well as acquiring outright another MGM casino in Reno, the Circus Circus.

Eldorado will also repay the roughly $60 million outstanding on a net debt basis under the Silver Legacy joint venture’s credit facility.

Looking for details on deals

Besides the Eldorado offering unveiled on Wednesday, primaryside players were also looking for more information on a pair of other transactions that have surfaced in the market this week, in terms of likely timing, tenor, tranche sizes and other deal features.

These included Charter Communications’ massive $13.8 billion of secured and unsecured investment-grade and high-yield paper that the Stamford, Conn.-based based provider of cable, internet and phone service plans to sell as part of a $31 billion financing package to fund its pending acquisitions of sector peers TimeWarner Cable Inc. and Bright House Networks LLC.

They were also hoping for further information on TerraForm Power’s planned $300 million of new long-term bonds that the Bethesda, Md.-based producer of electric power through wind and solar generation plans to sell as part of the financing for its $2 billion acquisition of seven wind-power generating facilities from Invenergy Wind LLC.

The month of July meanwhile remained without any pricings so far in the high-yield space; the last junk pricing took place more than a week ago, on June 30, when Scottsdale, Ariz.-based aircraft maintenance and repair company StandardAero came to market with $485 million of 10% notes due 2023 via its indirect corporate parent, DAE Aviation Holdings Inc.

Iron ore miners mauled

Away from the new deals, traders saw iron ore mining companies as the big losers on the day, as prices for the metal continued to erode, falling another 2% overnight. Iron ore was being quoted at just over $44 per metric ton – its lowest price in over a decade. As recently as 2011, iron ore had been selling for as much as $191 per ton.

A trader said that “a pure-play name like Fortescue” was especially hard hit; he saw the Australian ore-mining company’s 9¾% notes due 2022 were down another 1½ points, to a 95-to-95½ bid context. It had eased by ¼ point on Tuesday, on top of Monday’s nosedive of 3¼ points.

At another desk, a market source saw those bonds ending the day at 95, but called that a drop of more than 3 points. He said that over $79 million had changed hands, making it the busiest junk issue of the day.

Fortescue’s 8¼% notes due 2019 fell even further, tumbling 5½ points to end at 75 bid, with over $31 million traded.

One of the traders meantime saw domestic iron-ore company Cliffs Natural Resources “weaker, down by multiple points across its capital structure.”

The Cleveland-based mining company’s 7¾% notes due 2020 fell by 4¼ points to 50¾ bid.

Its 8¼% secured notes due 2020 eased to 91½ bid, with over $14 million having changed hands.

Oils, coal steadier

While the iron-mining companies were getting buried, traders saw that oil names, and coal miners – which had been getting clobbered along with the ore miners over the last several sessions – seemed to steady, albeit at the lower levels to which they had been battered down in the past few days.

“Oil was off by more than half a dollar [per barrel], and [bonds] bounced around all over,” one of the traders said.

Benchmark West Texas Intermediate crude for August delivery ended lower for a fifth straight session on the New York Mercantile Exchange, down 68 cents per barrel, or 1.39%, to settle at $51.65 per barrel.

The trader opined that oil sector bellwether name California Resources “moved around with [oil prices], but they weren’t too much weaker. They hung in there.”

The Los Angeles-based exploration and production company’s 6% notes due 2024 were seen down 1 point at 82 bid on volume of more than $39 million, although its 5½% notes due 2021, knocked lower the past few days, actually ended higher Wednesday, up 1¾ points at 84 bid. Turnover was about $10 million.

Also seen better was St. Louis-based coal operator Peabody Energy, another name that has recently taken its lumps. Its 10% notes due 2022 firmed by 1/8 point to close at 57 bid, while its 6% notes due 2018 advanced nearly ½ point to finish at 40 bid.

One of the traders said Wednesday’s market saw “general weakness – but it was kind of a mixed bag on names, activity and how much things were down.”

Indicators turn lower

Statistical market-performance measures turned lower across the board on Wednesday after having been mixed on Tuesday; it was the indicators’ second down day in the last three sessions.

The KDP High Yield Daily index posted its third consecutive loss Wednesday, dropping by 9 basis points to end at 69.82, on top of plunges of 19 bps on Monday and 16 bps on Tuesday, when the index finished below the psychologically significant 70 for the first time since last Dec. 17, when it closed at 69.34. The index is moving toward its 52-week low of 69.01.

Its yield, meanwhile, moved up by 3 bps to 5.81%, its third straight widening. It had risen by 5 bps on Monday and another 4 bps on Tuesday.

The Markit Series 24 CDX North American High Yield index returned to the downside on Wednesday after having bucked the market’s generally negative tone on Tuesday.

It lost 9/16 point to close at 105 11/16 bid, 105¾ offered, after having gained 3/16 point on Tuesday and having retreated by nearly ½ point on Monday.

The Merrill Lynch North American Master II High Yield index ended lower for a third consecutive session, losing 0.133%, after having ended down by 0.182% on Tuesday, on top of Monday’s 0.268% setback. The current skid follows four consecutive sessions on the upside.

The latest loss dropped its year-to-date return to 2.176% from Tuesday’s 2.312%. It also remained well down from the 4.062% reading recorded on May 29, the index’s peak level for the year so.

© 2015 Prospect News.
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