Whiting improves on exchange; Intelsat rises as tender oversubscribed; Primary awaits U.K. vote

By Paul A. Harris and Stephanie N. Rotondo

Seattle, June 23 – The high-yield primary market remained on hold Thursday as it continued to wait for the result of the U.K. vote on whether to leave the European Union. Meanwhile the secondary market moved up on Thursday, in part because of easing Brexit fears and in part because of credit-specific news.

The United Kingdom voted Thursday on whether or not to leave the European Union. Although final results were not expected until early Friday, polls done just prior to the start of the vote showed the country would opt to stay.

That optimism pushed up all the markets, including domestic crude oil. The commodity rose over 2% on the day, trading above the $50 mark for the first time in two weeks.

Crude’s gains also meant gains for oil and gas bonds, such as Chesapeake Energy Corp. A trader said the company’s 8% second-lien notes due 2022 ticked up ½ point to 87½.

“Everybody is up, up, up,” he said.

Also in the oil and gas space, Whiting Petroleum Corp.’s bonds jumped considerably after the Denver-based company said it had wrapped a $1.06 billion exchange of notes for mandatory convertible debt. One trader said the bonds were up “3 to 6 points, depending on the flavor.”

Meanwhile, Intelsat SA was also trending upward, as the company said a tender offer at its Intelsat Jackson Holdings SA unit was oversubscribed.

The company also extended the deadline for the tender for a third time.

Post-Brexit primary

A late Thursday afternoon rally in the stock market suggests that investors expect voters in the United Kingdom to elect to remain in the European Union following Thursday’s Brexit vote, high-yield market sources said.

The new issue market, meanwhile, remained inactive on Thursday, as it has for much of the present week, with no deals pricing and none announced on the day.

The most recent deal to clear the market came last Monday from AmeriGas Partners, LP, which priced $1.35 billion in tranches of 5 5/8% eight-year notes and 5 7/8% 10-year notes.

Although the primary market has been quiet, high yield has rallied persuasively over the course of the past week in the run-up to the Brexit vote, according to a portfolio manager who marks junk 1% higher since Monday.

Year-to-date the JP Morgan high yield index has returned 9.57%, the source added.

However a favorable outcome to the Brexit situation and a big rally in the high-yield secondary market notwithstanding, the active new issue calendar remained empty at Thursday’s close.

“It looks as though the stock market is telegraphing a ‘remain’ vote,” a debt capital markets banker said.

“If that happens you should start to see a decent pick up in new issues.”

However, the new deal activity that does materialize is apt to be situational because a lot of the sizable mergers and acquisitions financing has been done, the banker said.

Market pushes higher

The high-yield bond market did well on Thursday, according to market indicators.

The KDP High Yield Index moved up to 67.96, while the yield tightened to 6.06%. That compared to Wednesday’s reading of 67.75, with a 6.13% yield.

As for the CDX North American High Yield Series 26 Index, it improved by over ½ point to 103.37 bid, 103.46 offered.

The day’s gains were also visible in the “go-go” names of the market, a trader said.

For instance, Western Digital Corp.’s 10½% notes due 2024 were deemed a point better at 107¼.

“That’s got to be their all-time high [since pricing on March 30],” the trader said.

The company’s 7 3/8% notes due 2023 meantime edged up over ½ to 106.

Numericable SFR SA – another “go-go” name – was also better. A trader pegged the 7 3/8% notes due 2026 at par 5/8, up a point on the day. The 6% notes due 2022 were up a like amount at 98 5/8.

Whiting up on exchange

Whiting Petroleum’s debt got a boost Thursday as the oil and gas company said it had completed a $1.06 billion exchange of high-yield and convertible notes for mandatory convertible notes.

“The bonds were way up, all on heavy volume,” one trader said.

He saw the 5¾% notes due 2021 adding 5½ points to close at 93¼, while the 5% notes due 2019 ticked up 4 points to 95. The 6¼% notes due 2023 rose 6 points to 91¾ and the 6½% notes due 2018 increased over 3 points to 97¼.

Another trader said the 5% notes “settled in around 95-96.” The 5¾% notes were pegged in a 93 to 94 context.

Meanwhile, the 1.25% convertible notes due 2020 popped 5 points to 83.5, a market source reported.

The equity did not fare as well, dropping 78 cents, or 6.45%, to $11.32.

All told, the company exchanged $377 million of nonconvertible notes and $687.9 million of convertible notes for the new mandatory convertible notes maturing 2018 through 2023.

Intelsat tender oversubscribed

Intelsat bonds pushed upward on Thursday after the company said its tender offer for Intelsat Jackson-linked paper was oversubscribed.

A trader said the 7¾% notes due 2021 – a “LuxCo” issue, not a part of the tender – firmed nearly a point to 27.

Another trader said the LuxCo’s were “up about ½ point” at 27, while the 7¼% notes due 2020 – a Jackson issue but still not part of the tender – moved up a deuce.

At another desk, the 6 5/8% notes due 2022 – one of the three Jackson issues in the tender – were seen moving up ½ point to 68 bid.

The Luxembourg-based commercial satellite services provider announced the tender on May 12, offering to pay up to $625 million for three series of notes – the 6 5/8% notes, the 5½% notes due 2023 and the 7½% notes due 2021. In its latest update on the offer, the company said that holders had tendered a total of $2.1 billion in securities, or 52.9% of the total outstanding amount.

Additionally, the company again revised the deadline to 5 p.m. ET on June 29 from 11:59 p.m. ET on June 22.

Wex gains ground

A trader said WEX Inc.’s 4¾% senior notes due 2023 improved by over 3 points on Thursday as the company tightened pricing on a new seven-year term loan B.

He saw the paper climbing up to 96¾ from “93 and change” previously.

The South Portland, Maine-based provider of corporate payment solutions is shopping the new bank facility in order to pay for its planned acquisition of Electronic Funds Source LLC.

Pricing on the $1.21 billion term loan was reduced to Libor plus 350 basis points from Libor plus 400 bps. Also, the step-down was changed to Libor plus 325 bps when consolidated total leverage is less than or equal to 3.5 times from a step-down to Libor plus 375 bps at consolidated total leverage that was still to be determined, the source said.

In addition, the 101 soft call protection was extended to one year from six months and the 12 month MFN sunset was removed, setting the 50 bps MFN for the life of the deal.

Furthermore, the incremental allowance was revised to the greater of $375 million and 4 times total leverage from the greater of $450 million and 4 times total leverage, the source continued.

The term loan B still has a 0.75% Libor floor and an original issue discount of 99.

Bank of America Merrill Lynch, SunTrust Robinson Humphrey Inc., MUFG and Citizens Bank are the leads on the deal.

Recommitments were scheduled to be due at 2:30 p.m. ET on Thursday. Allocations are expected on Friday.

AK Steel firms

AK Steel Holdings Corp.’s debt was “fairly active” in Thursday trading, according to one trader.

He called the bonds “up a touch on the day.”

A second trader said the 7 5/8% notes due 2021 improved ½ point to 89½.

There was no fresh news out on the West Chester, Ohio-based steel manufacturer, though it did announce a price increase late Tuesday.

Commodities were generally better, however, given the positive tone of the market. Names like Denbury Resources Inc. got a little pop as oil prices gained ground.

A market source pegged Denbury’s 6 3/8% notes due 2021 at 71½ bid, up a point.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.