Market ends November quietly with no pricings; NGL, Mednax, Ball Corp., shopping deals

By Paul Deckelman and Paul A. Harris

New York, Nov. 30 – November came to a quiet end in Junkbondland on Monday as primaryside sources reported no pricings.

However, they were seeing several prospective deals joining the forward calendar.

Midstream energy entity NGL Energy Partners LP began shopping a $300 million five-year note issue, which is expected to price on Tuesday.

Physician services provider Mednax, Inc. will be hitting the road on Tuesday to market $500 million of split-rated eight-year notes.

From Europe came word that containers giant Ball Corp. is marketing €1.5 billion equivalent of five-year dollar- and euro-denominated notes and eight-year euro paper.

Meanwhile, Swissport Investment SA will roadshow a purely euro-denominated offering and Entertainment One Ltd. is doing a sterling deal.

Back in the dollar-denominated secondary market, Intelsat Luxembourg SA’s bonds were seen trading lower on busy volume, continuing to erode in the wake of its recently reported financial results, but with no other fresh news seen on the satellite communications company to explain the slide.

Spanish engineering and telecommunications company Abengoa SA’s notes remained under pressure in the wake of last week’s news of its insolvency filing.

Statistical measures of junk market performance were trending higher on Monday, after having turned mixed on Friday after two higher sessions before that.

However, another numerical indicator – flows of money into or out of high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – was decidedly negative, showed major net redemptions of some $501 million by investors in the latest reporting week.

NGL whisper is 9%

No deals were priced on Monday, trailing the extended Thanksgiving holiday weekend in the United States.

But there were deal announcements.

NGL Energy Partners LP and NGL Energy Finance Corp. circulated initial guidance in the 9% area for a $300 million offering of senior notes due Dec. 15, 2020 (expected ratings B2/BB-/BB-).

The Tulsa, Okla.-based diversified midstream master limited partnership is expected to price the deal on Tuesday.

BofA Merrill Lynch, RBC, Deutsche Bank, PNC, BNP, SunTrust, Wells Fargo, MUFG, Barclays, Goldman Sachs, Mizuho, UBS and HSBC are the joint bookrunners.

Proceeds will be used to repay debt and for general corporate purposes.

The November-December crossover week should see a decent amount of issuance, according to a syndicate official who is not expecting a dramatic calendar to develop.

Mednax plans split-rated deal

Mednax plans to start a roadshow on Tuesday for a $500 million offering of split-rated eight-year senior notes (expected ratings Ba2/BBB-).

The offer is expected to price on Thursday.

J.P. Morgan, BofA Merrill Lynch, US Bancorp and Wells Fargo are the joint bookrunners.

The Fort Lauderdale, Fla.-based physician services provider plans to use the proceeds to pay down its revolver and for general corporate purposes.

Ball roadshows €1.5 billion

The rest of Monday’s primary market news came from Europe.

Ball Corp. began a roadshow on Monday for an offering of €1.5 billion equivalent of non-callable senior notes in three tranches.

The short-maturity tranches features dollar-denominated and euro-denominated five-year notes. The dollar-denominated notes are in the market with early guidance of 4½% to 4¾%. The euro-denominated notes come with early guidance of 4%.

The long tranche features euro-denominated eight-year notes that are in the market with early guidance of 4½%.

The roadshow wraps up on Wednesday and the acquisition-financing deal is set to price thereafter.

Joint bookrunner Goldman Sachs will bill and deliver. Deutsche Bank, BofA Merrill Lynch, KeyBanc Capital Markets, Mizuho and Rabo are also joint bookrunners.

Swissport starts marketing

Swissport Investment started a roadshow on Monday for a three-part high-yield notes offer expected to come at a maximum overall size of €740 million.

The deal includes €400 to €450 million of six-year senior secured notes (expected ratings B1/B) and €290 million (CHF 315 million equivalent) of seven-year senior unsecured notes (expected ratings Caa1/CCC+).

Joint lead bookrunner Barclays will bill and deliver for the buyout deal. JPMorgan is also a joint lead bookrunner.

Entertainment One for Tuesday

Entertainment One plans to start a European roadshow on Tuesday for a £285 million offering of seven-year senior secured notes (expected ratings B1/B+).

The roadshow wraps up on Friday and the deal is set to price subsequently.

Global coordinator JP Morgan will bill and deliver.

Barclays and BofA Merrill Lynch are the bookrunners.

The Toronto-based international entertainment group plans to use the proceeds to refinance debt and for general corporate purposes.

No deals but a busier month

While no new deals were priced on Monday – the junk market’s last deal was homebuilder M/I Homes, Inc.’s $300 million five-year issue exactly a week ago – November still closed out having been considerably busier than October had been.

According to data compiled by Prospect News, issuance for the month came to $23.29 billion in 34 tranches, well up from the $9.45 billion that got done in 13 tranches during October.

It was the strongest month for new issuance since May, when $35.3 billion priced in 64 tranches.

Overall, year-to-date issuance of $258.54 billion in 403 tranches was running about 15.6% behind the new-deal pace seen at this time last year, when $306.56 billion had priced in 568 tranches by this point on the 2014 calendar.

A secondary market trader, noting the lack of any pricings on Monday, along with the day’s several new-deal announcements, speculated that “we probably have this week and next week to try to get stuff done – then after that, it’s probably going to be in a holding pattern until January.”

M/I notes slightly easier

That most recent junk issue – Columbus, Ohio-based builder M/I Homes’ 6¾% notes due in January 2021 – were seen little traded on Monday.

A trader noted just a handful of transactions in the credit, and only one that could truly be considered a round lot.

He quoted the notes down 1/8 point at 100¼ bid.

M/I Homes had priced $300 million of the notes at par in a quick-to-market transaction last Monday.

The notes had subsequently traded slightly above their issue price last week and again on Monday.

Intelsat loses more altitude

Away from the new deals, a trader noted relatively busy volume – considering the overall quiet day – in Intelsat’s two main issues of bonds.

The Luxembourg-based communications satellite operator’s 7½% notes due 2021 fell to around 40 bid, a loss of 1¾ points from where the bonds had been trading last week – on volume of over $15 million, making it one of the most active junk credits on the day.

“It was a fair amount of volume,” another market source said, noting that the bonds did firm on an intraday basis after opening around the 38 bid mark, getting as good as a 41½ to 42 context, but then trimming those gains to go home at 40½ bid.

Intelsat’s 6¾% notes due 2018 nosedived by 6 points on the day to end at 65 bid, with about $13 million traded.

“I don’t know what’s necessarily driving that,” he remarked. “Obviously, there’s some volatility in price action.”

A second trader was also puzzled as to what might be pushing the bonds lower – they had been on the slide last week as well – since there has been no real news about the company for several weeks.

At the end of October, Intelsat reported third-quarter results, actually beating market expectations by earning net income of $78 million, or 66 cents per share, on revenue of $580.8 million.

However, at an investor conference earlier in November, the company said that it had nearly $15 billion of outstanding debt.

Abengoa languishes at lower levels

Elsewhere, Abengoa Finance SAU’s 7¾% notes due 2020 “looked like they were hanging around 15½ to 16,” a trader said – well below the levels in the 40s at which those bonds had been trading as recently as mid-November.

A second market source said volume was brisk, at more than $14 million, with the bonds finishing around 15¾ bid.

The Seville, Spain energy, technology and telecommunications company’s bonds got hammered down into the mid-teens last week after it said that it had taken the preliminary steps for entering insolvency proceedings under Spanish law, seeking protection from its creditors, who hold more than $9 billion of debt from the parent and its various subsidiaries.

They had been at 45-46 at the end of October.

The company’s 8 7/8% notes due 2017 were also mired in the low teens, having plunged to those depths from recent levels around a 59-60 context, and from levels as high as 70 bid earlier in the month.

Abengoa had been hoping for a big infusion of fresh capital from Gonvarri Corporacion Financiera, a unit of Spanish industrial group Corporacion Gestamp.

Gonvarri had emerged as a potential savior of the troubled company earlier this month, agreeing on a preliminary basis to invest some $377 million into Abengoa, in exchange for a 28% stake.

However, Abengoa’s hopes for the capital infusion were dashed on Tuesday night as Gonvarri backed out of the deal, claiming conditions for the investment had not been met.

Abengoa was left with no choice but to announce that it had started talks with creditors on insolvency proceedings.

Muted market, selective action

A trader characterized Monday’s session as “fairly muted, with quiet trading,” whether because of “the hangover from the long holiday weekend,” or the fact that it was the end of the month, with nobody wanting to take any new risks with their accounts’ month-end positions.

“People just want to be able to say they contained the damage” done by the market’s continued volatility.

At another desk, a trader said that despite the end-of-month concerns and the lingering tryptophan-induced stupor that some people were no doubt feeling after a long holiday weekend spent feasting and overindulging, “there were things happening – but selectively.”

Indicators show improvement

Statistical measures of junk market performance turned higher across the board on Monday after having been mixed on Friday. It was their third higher session in the last four days.

The KDP High Yield Daily Index gained 9 basis points on Monday to end at 65.75, its second gain in the last three sessions. On Friday, the index had fallen by 4 bps.

Its yield held steady at 6.92% for a third consecutive session, its second straight unchanged reading after one narrowing and before that, four widenings, and its third unchanged session in the last eight trading days.

The Markit Series 25 CDX North American High Yield Index was up by 1/16 point Monday to end at 102 3/32 bid, 102 1/8 offered, its third straight gain. On Friday, it had risen by 3/32 point.

The Merrill Lynch North American Master II High Yield index advanced by 0.165% on Monday, its first gain after Friday’s 0.001% loss, and its third gain in the last four sessions.

The index’s year-to-date loss narrowed to 2.118% from 2.279% on Friday.

Those year-to-date losses still remain well above the index’s worst 2015 cumulative setback of 3.069%, recorded on Oct. 2.

Funds continue outflows

High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – showed major net redemptions by investors in the latest reporting week, their third consecutive downturn, following five consecutive weeks before that during which inflows had been consistently seen.

Some $501.147 million more left those weekly-reporting-only domestic funds than had come into them during the week ended this past Wednesday.

The data, which normally circulates in the market on Thursdays, was delayed this week due to the U.S. fixed-income market’s close on Thursday in observance of Thanksgiving Day (see related story elsewhere in this issue).

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