Eldorado Resorts, Genesis drive-by price; new bonds busy; WPX on tap; funds gain $1.2 billion

By Paul Deckelman and Paul A. Harris

New York, July 16 – For a second consecutive session, the high-yield primary market saw a pair of new deals price on Thursday as the junk space continues to get busier after nearly two weeks in a summertime deep freeze.

Eldorado Resorts, Inc., a regional gaming operator, priced $375 million of eight-year notes in a regularly scheduled deal off the forward calendar. It was the first such roadshow deal to get done since the junk primary market began doing deals again this week following a long stretch since the end of June when nothing had been priced.

Thursday was the first session since June 24 in which total issuance for the day topped $1 billion. After Eldorado had priced, Genesis Energy LP, a midstream energy master limited partnership, brought a $750 million seven-year note issue to market. Like all of this week’s other new issues, save for Eldorado, Genesis was a quickly shopped transaction.

There was substantial trading at modestly higher levels in the new Eldorado Resorts notes.

Traders did not immediately see any aftermarket in the Genesis Energy paper.

There was brisk trading in some of the other new deals that have come to market this week, particularly Sunoco LP’s five-year deal, which had arrived too late in the day on Wednesday for any aftermarket action at that time.

Wednesday’s other new issue, from Blue Racer Midstream LLC, firmed in busy dealings.

Away from the deals that have actually priced, junk market players were anticipating Friday’s expected pricing of WPX Energy, Inc.’s $1.2 billion two-part offering. Assuming the deal goes off as planned, the oil and natural gas company’s issue would be the first billion-dollar-plus transaction Junkbondland will have seen since pharmaceuticals manufacturer Endo Ltd.’s $1.64 billion of eight-year notes priced back on June 24.

But WPX’s existing bonds moved lower in active trading.

Statistical market performance measures were better on Thursday after having been mixed on Tuesday and Wednesday following three consecutive upside sessions before that.

And high-yield mutual funds and exchange-traded funds saw $1.23 billion of net inflows from investors in the latest trading week – the second straight week that more money has come into the funds than left them, a positive indicator of overall junk market liquidity trends.

Genesis prices wide

Volume in the primary market remained somewhat muted on Thursday, with two issuers pricing single-tranche deals to raise a combined total of $1.1 billion.

One of the two deals came quick-to-market.

Neither was upsized.

One deal priced at the tight end of talk while the other came wide of talk.

Genesis Energy priced a $750 million issue of 6¾% seven-year senior notes (B1/B+) at 98.629 to yield 7%.

The yield printed 25 basis points beyond the wide end of the 6½% to 6¾% yield talk, according to market sources. Initial yield guidance was in the mid-to-high 6% range.

BofA Merrill Lynch was the left bookrunner for the acquisition deal. BMO Capital Markets, Wells Fargo Securities LLC, ABN Amro, BBVA, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets, Scotia, Capital and U.S. Bancorp Investments Inc. were joint bookrunners.

Eldorado prices tight

Eldorado Resorts priced a $375 million issue of eight-year senior notes (Caa1/B-) at par to yield 7%.

The yield printed at the tight end of the 7% to 7¼% yield talk. That talk came Wednesday on top of initial guidance.

J.P. Morgan Securities LLC, Macquarie Capital, Credit Suisse Securities (USA) LLC, U.S. Bancorp Investments and KeyBanc Capital Markets were the joint bookrunners for the debt refinancing and acquisition deal.

WPX $1.2 billion for Friday

WPX Energy set price talk in its $1.2 billion two-part unsecured bullet offer (Ba1/BB).

The deal includes tranches of five-year notes talked to yield 7¼% to 7½% and eight-year notes talked to yield 8% to 8¼%.

Tranche sizes remain to be determined.

Books close at 10 a.m. ET Friday, and the deal is set to price thereafter.

The energy sector was under pressure on Thursday and underperformed the rest of high yield, according to a trader who added that the WPX deal appeared to widen with the rest of the sector.

Talk on the five-year notes widened from earlier whispers in the high 6s to low 7s, said the trader.

Talk on the eight-year notes widened from whispers of low to mid 7s.

With that widening, the new deal appears to be coming cheap to some of the company's existing paper, the trader said.

Joint bookrunner Barclays will bill and deliver for the WPX Energy deal. Citigroup, JPMorgan, BofA Merrill Lynch, Wells Fargo, Credit Agricole and Scotia are also joint bookrunners.

Another possible Friday deal is Exterran Holdings Inc.'s $400 million offering of seven-year senior notes (B1/BB-) via Goldman Sachs, Wells Fargo, Credit Agricole, BofA Merrill Lynch, Citigroup, RBC and UniCredit.

No official price talk was available at press time on Thursday, a market source said, adding that early guidance is 8% to 8¼%.

Alliant for late July

Alliant Insurance Services Inc. is expected to launch a $535 million offering of eight-year notes during the final week of July.

UBS will lead the deal.

On Wednesday the company held a bank meeting for its $1.54 billion senior secured credit facility (B2/B), which is being led by Morgan Stanley, UBS, Jefferies, KKR, MCS, Macquarie and Nomura.

Proceeds will be used to help fund the purchase of a significant equity interest in the company by Stone Point Capital LLC, which is expected to close in early- to mid-August.

In the interim, there are a few opportunistic deals that could come pending market conditions, syndicate officials say.

“The market feels decent and appears to have stabilized a little,” a debt capital markets banker observed on Thursday morning.

New issues are coming a little cheaper, the banker added, specifying that investors believe there is a chance that bond prices might drop.

The new TerraForm Power Operating, LLC 6 1/8% “green”-eligible senior notes due June 15, 2025 (B1/BB-), which priced Tuesday at par in a $300 million issue, are a case in point, the banker said.

That had to come with a decent concession, which so far appears to be paying off, said the source who spotted the par-pricing paper at 101 3/8 bid on Thursday morning.

Right now the buyside is in the driver's seat, the banker conceded.

At Thursday's close, the TerraForm 6 1/8% notes due 2025 were 101¼ bid, 101¾ offered, according to a trader.

Eldorado trades actively

In the secondary market, traders saw brisk activity in the new Eldorado Resorts 7% notes due 2023, with one market source estimating that over $17 million of the Reno, Nev.-based casino and racetrack operator’s new issue had traded. He saw them ending the day up ¼ point from the par level at which the scheduled forward calendar offering had priced.

Another trader saw two-sided markets around par bid, 100½ offered.

And a third said the bonds were moving in a 100¼-to-100½ bid context.

Traders meantime did not report any immediate aftermarket dealings in Houston-based Genesis Energy’s quick-to-market 6¾% notes due 2022, which priced later in the session.

Sunoco, Blue Racer busy

One of the day’s most active credits was Sunoco’s new 5½% notes due 2020, with over $30 million of that paper seen having traded.

A market source pegged the Houston-based master limited partnership’s new bonds at 100 5/8 bid, up from the par level at which the $600 million drive-by offering had priced on Wednesday after it had been upsized from an originally announced $500 million. The bonds had been initially seen in the aftermarket on Wednesday.

A second trader said the bonds had moved around between par and 100 7/8 bid, while at another shop, they were being quoted at 100½ bid, 100¾ offered.

Wednesday’s other new deal – from Dallas-based energy operator Blue Racer Midstream – was seen having moved up from the levels at which it had traded on Wednesday following its pricing.

More than $21 million of the notes traded on Thursday, on top of the more than $36 million that had traded Thursday when the new issue moved into the aftermarket.

The quickly shopped $300 million add-on to the company’s existing $550 million of 6 1/8% notes due 2022 had priced at 101.5 to yield 5.791% and had moved up to above the 102 bid mark in initial trading.

On Thursday, two different traders saw the notes in a 102½-to-103 bid context.

WPX bonds off

The news that Tulsa, Okla.-based oil and natural gas operator WPX Energy will be bringing a $1.2 billion two-part offering of five- and eight-year notes to market for probable pricing on Friday cased investors in the company’s current bonds to shed that paper on Thursday.

A trader saw its existing 6% notes due 2022 fall 2¼ points on the day to 94¼ bid, with more than $40 million of that paper traded, tops among the purely junk-rated credits.

WPX’s 5¼% notes due 2024 were quoted down by 1 5/8 points at 87 5/8 bid, on volume of more than $12 million.

Energy names off

Overall, a trader said that “the E&P space was heavier this afternoon.”

He saw bellwether energy credit California Resources Corp.’s bonds “down 2 or 3 points,” with other oil and natural gas names like Swift Energy Co. and Energy XXI Gulf Coast Inc. following along.

“Energy, metals and coal were all very weak today,” a second trader declared.

Indicators seen firmer

Despite the slide in the natural-resources issues, statistical market performance measures were trending higher on Thursday after having been mixed on Tuesday and Wednesday following three consecutive upside sessions before that.

The KDP High Yield Daily index inched up by 1 basis point on Thursday to end at 69.99, its second straight gain. It had firmed by 4 bps on Wednesday after having eased by 2 bps on Tuesday. Thursday was the index’s third gain in four sessions.

Its yield meanwhile came in by 3 bps to 5.73% after having narrowed by 5 bps on Monday and then been unchanged Tuesday and Wednesday.

The Markit Series 24 CDX North American High Yield index rose by 5/16 point on Thursday, finishing at 106 31/32 bid, 107 offered. It had lost 1/16 point on Wednesday after having been unchanged Tuesday following three straight upside sessions before that.

While the other indexes were firmer, the Merrill Lynch North American Master II High Yield index ended Thursday unchanged on the session. On Wednesday, it had risen by 0.116%, its fifth advance in a row.

Thursday’s zero left its year-to-date return at Wednesday’s closing level of 2.699%, which had been up from 2.58% on Tuesday.

The year-to-date figure remained well down from the 4.062% reading recorded on May 29, the index’s peak level for the year so far.

Funds see big inflow

Another statistical gauge – flows of investor money into or out of high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – was solidly higher in the latest week, continuing to rebound from the funds’ biggest cash loss for the year so far, which was seen two weeks ago.

Some $1.23 billion more had come into those weekly-reporting-only funds than had left them during the week ended Wednesday – the second consecutive weekly improvement for the funds on top of the modest $45.08 million inflow reported for the seven-day period ended July 8.

The two inflows, totaling $1.28 billion, follow the $2.98 billion outflow reported for the week ended July 1 – the biggest outflow seen so far this year. (See related story elsewhere in this issue.)

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