Dollar junk market stays quiet, waiting on Ascent; Exterran, Chobani shop deals; hospitals sector gains

By Paul Deckelman and Paul A. Harris

New York, March 27 – The dollar denominated high-yield market saw its second consecutive restrained session on Monday, with no deals seen having priced by the closing.

However, there was activity going on beneath the seemingly placid surface.

Syndicate sources were watching energy operator Ascent Resources Utica Holdings, LLC’s $1.5 billion two-part offering, noting that guidance on both the planned five- and eight-year tranches had widened out and that there had been some tinkering with the deal’s covenants package to meet investor demands.

Two other dollar deals hopped aboard the forward calendar, from Exterran Corp., another energy-sector name, and from yogurt maker Chobani, LLC.

Away from the new-deal arena, traders said that the market seemed largely featureless, as investors continued to digest the glut of recently priced paper.

However, healthcare names such as hospital operators Tenet Healthcare Corp. and Community Health Systems Inc. remained robust, with several of their issues heard to have firmed smartly in active dealings in the wake of last week’s failure in Washington to make any changes to the nation’s current healthcare laws.

Statistical market performance measures turned lower on Monday after having been higher across the board on Friday, mixed on Thursday and lower all around for three straight sessions before that.

Ascent Resources widens

No deals were priced on Monday as the high-yield market was seen to back up, somewhat, on the heels of headline news regarding the political travails of Washington DC, weak energy prices and the ongoing digestive process of a market that has seen a massive amount of March new issuance.

A diminished appetite for risk was reflected in the yield of the 10-year Treasury which ended the Monday session just below 2.38%, having broken below 2.35% in intraday trading.

That's down from 2.62% on March 12, a portfolio manager pointed out, late Monday.

One deal, Ascent Resources Utica Holdings, LLC's $1.5 billion two-part offering of senior notes (B3/B-), had been in the market over the weekend and had been expected to price on Monday.

Guidance on the proposed tranche of five-year notes widened to the mid 8% area from earlier guidance of 7½% to 7¾%.

Meanwhile guidance on the proposed tranche of eight-year notes widened to the mid 9% area, from earlier guidance of 8% to 8¼%.

There are also covenant changes, sources said.

Tranche sizes remain to be determined.

Books for the $1.5 billion offer stood at $250 million late Monday morning, a source said.

No deal terms were available late Monday, sources said.

Exterran roadshowing $300 million

Both the dollar- and euro-denominated active forward calendars grew on Monday.

Exterran Corp. began a roadshow on Monday in New York for a $300 million offering of eight-year senior notes (expected ratings B3/B+).

The debt refinancing deal, via left bookrunner Wells Fargo, is expected to price on Thursday.

Chobani eight-year notes

Chobani, LLC plans to sell $530 million of eight-year senior notes later this week.

The deal was scheduled to be marketed on an investor conference call on Monday, a source said.

BofA Merrill Lynch and JP Morgan are the leads for the debt refinancing.

Loxam €810 million two-part deal

In the European market, Paris-based equipment rental company Loxam SAS began a roadshow on Monday in London for an €810 million two-part offering of high-yield notes.

The deal features €560 million of seven-year senior secured notes (preliminary BB-) and €250 million of eight-year senior subordinated notes (preliminary B).

Joint bookrunner Deutsche Bank will bill and deliver. Credit Agricole CIB, Natixis and SG CIB are also joint bookrunners.

Nets seven-year deal

Denmark-based Nets A/S was scheduled to begin meetings with fixed-income investors on Monday ahead of a possible €350 million offering of senior notes due 2024 (BB+).

Deutsche Bank and Nordea are the joint global coordinators. DNB Markets, Mizuho Securities, Nykredit Bankand SEB are the joint bookrunners.

Proceeds would be used to refinance a portion of Nets Group's three-year term loan.

Motor Oil starts Tuesday

Greece-based Motor Oil (Hellas) Corinth Refineries SA plans to start a roadshow on Tuesday for a €350 million offering of five-year senior notes.

Joint bookrunner HSBC Bank plc is the global coordinator. Alpha Bank, Citigroup, Credit Suisse, Goldman Sachs, ING, National Bank of Greece and Piraeus are also joint bookrunners.

The Athens-based refiner plans to use the proceeds, together with cash on hand, to redeem all €350 million of its 5 1/8% senior notes due 2019.

Stocks weigh on bond market

In the secondary market, a trader confirmed that no new issues had gotten done on Monday, having seen just “a couple of things on the calendar. We’ll see how things play out.”

He said that “when we came in in the morning, the market felt heavy, with stocks obviously off.”

Equities eventually cut their losses from early levels but still finished lower, with the bellwether Dow Jones Industrials down for an eighth consecutive session, its biggest losing streak since 2011.

Analysts questioned whether the failure of congressional Republicans to enact the much-ballyhooed repeal of the current Obamacare law and replace it with a bill that would have made some drastic changes in who gets covered and for how much, signaled that the so-called “Trump trade” rally that had carried both stocks and corporate bonds, including high yield, might be fizzling out, or, at least, was temporarily stalled.

Healthcare names healthy

But while the defeat for the administration and for its Congressional GOP allies such as house speaker Paul Ryan might signal the overall rally is in trouble, it continued to give a shot in the arm to the healthcare sector, which rose for a second consecutive session on the prospect that the status quo will be maintained, at least for now, and hospital operators assured of the same levels of payments they have now.

That helped the bonds of companies such as Dallas-based Tenet Healthcare; several series of its notes were seen among the most actively traded issues in Junkbondland on Monday and heading higher, continuing the momentum first seen on Friday in response to the news that the new American Health Care Act had been pulled from consideration for lack of support.

Tenet’s 6¾% notes due 2023 gained 1¼ points on the day to end at 99¼ bid, with over $23 million having changed hands.

Its 8 1/8% notes due 2022 were up by nearly 1½ points on the session, at 104 15/32, with over $12 million having traded.

And its 8% notes due 2020 edged up a little to the 102 bid mark, on volume of over $8 million.

Franklin, Tenn.-based sector peer Community Health Systems’ 6 7/8% notes due 2022 moved up by 1 point, going home at 87½ bid, with turnover of more than $16 million.

At another desk, Nashville-based hospital giant HCA Inc.’s 5 7/8% notes due 2026 were quoted up by 1 5/8 points, at 105 5/16 bid.

Its 5 7/8%notes due 2022 gained ½ point to end at 109¼ bid.

Hopes for improvement

Despite the market’s somewhat heavier tone on Monday, a trader said that “there’s cash around, and guys are sort of looking for opportunities.”

He noted that there had been “significant spread widening, with Treasuries moving higher,” as government yields had come in to around 2.37% on the 10-year paper from recent levels in the 2.60s.

“That’s a big move. Our stuff has rallied, to some degree, but on a spread basis, it looks pretty attractive. People are looking at the spread relationships and trying to gauge where the values are.”

Indicators turn lower

But statistical market performance measures turned lower on Monday after having been higher across the board on Friday, mixed on Thursday and lower all around for three straight sessions before that.

The KDP High Yield Daily index was unchanged at 71.36 on Monday after having gained 1 point to end at that level on Friday, its first rise after four straight losses before that, including Thursday’s 3 bps retreat.

For a second straight session, its yield came in by 1 bp on Monday, to 5.44%, matching Friday’s tightening, which had been its first narrowing after three straight sessions of having widened out, including Thursday’s 2 bps rise.

The Markit CDX Series 27 High Yield index turned southward after two straight sessions on the upside, ending Monday at 106 15/32 bid, 106½ offered, down nearly 23/32 point on Monday. It had firmed by 11/32 point on Friday and had been up more than 1/8 point on Thursday, its first upturn after three losses in a row.

The Merrill Lynch High Yield index also closed lower on Monday after having been up for two straight sessions on Thursday and Friday, retreating by 0.085%. On Friday, it had improved by 0.174%, on top of Thursday’s 0.16% upturn, its first advance after four straight losses.

Monday’s downturn cut its year-to-date return to 1.67% from 1.757% on Friday.

Those levels remain well down from the index’s 2017 peak level of 3.19%, which was established on March 1.

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