U.S. Steel notes pop after tender results released; new issues from Frontier start to climb again

By James McCandless and Paul A. Harris

San Antonio, March 20 – Traders reported a mild day in the high-yield secondary market, as newer issues continued to dominate.

U.S. Steel Corp.’s new issue popped up as the company announced the results of a tender offer Tuesday.

New issues from Frontier Communications Corp. had a day of respite after days of downward pressure.

WellCare Health Plans, Inc. new paper saw another active day after Monday news that investment firm Blackrock had increased its ownership position.

Intelsat SA and Northern Oil and Gas, Inc. provided much of the day’s volume.

The dollar-denominated primary market remained dormant on Tuesday.

However new issue business is expected before the close of the week, a syndicate banker said, adding that a deal could materialize so long as conditions in the capital markets remain reasonably supportive, as they were on Tuesday.

Although the dollar-denominated primary market has remained quiet since the beginning of the week, the European new issue market has generated considerable news.

Chicago-based LKQ Corp. started a roadshow on Monday for a €1 billion two-part offering of senior notes (Ba2/BB).

HSBC and BofA Merrill Lynch are managing the sale.

Italy-based TeamSystem Holding SpA is expected to price €750 million of senior secured floating-rate notes in two tranches on Thursday.

Goldman Sachs is leading the offer.

Travel and tourism company TUI AG is in the market with €400 million of seven-year notes.

Barclays, Commerzbank, HSBC and Credit Agricole CIB are managing the sale.

And Corestate Capital Holding SA is roadhsowing €300 million of non-callable five-year notes (S&P: BB+) through Wednesday.

Credit Suisse and Morgan Stanley are the bookrunners.

Monday inflows

The cash flows of the dedicated high-yield bond funds were positive on Monday, the trader said.

High-yield ETFs saw $125 million of inflows on the day.

Actively managed funds saw $20 million of inflows on Monday.

Dedicated bank loan funds were also positive on the day, the trader said.

The loan funds saw $105 million of inflows, $25 million of which came into bank loan ETFs.

U.S. Steel trades on tender news

Pittsburgh-based integrated steel producer U.S. Steel’s recent issues were active, traders confirmed, after the company announced Tuesday that it had received $483,912,000 of f its $780 million of 8 3/8% senior secured notes due July 1, 2021 by Monday’s deadline (see related story elsewhere in this issue).

“The new issues climbed more than I was expecting,” a trader said.

The 6¼% notes due 2026 gained about 1½ points to close just below 102 bid.

Frontier trends up

Norwalk, Conn.-based wireline telecom name Frontier Communications saw some relief for its $1.6 billion issue of eight-year second-lien secured notes Tuesday, as market sources confirmed that the issues trended back upward.

“It has been getting beat up over the past few days,” a trader said. “I don’t see any reason why it won’t happen again.”

Traders saw the 8½% issues due 2026 end up in the 97 to 97¼ range after sinking to almost 96 Monday.

WellCare active again

Tampa, Fla.-based health insurance provider WellCare was active a second day, traders confirmed. On Monday, its most recent SEC filings disclosed that investment firm BlackRock had purchased a 0.6% share in the company, bringing its total ownership share to 9.6%.

The 5¼% paper due 2025 rose ¼ point to close at 100¾ bid.

Volume favorites trade

Elsewhere in telecom, Luxembourg-based satellite communications company Intelsat continued to contribute to volume trading.

The Intelsat Jackson SA 5½% notes due 2023 lost about ¼ point to close at 80½ bid. The 7¼% notes due 2020 gained about 1 point to close just below 93¼ bid.

Minnetonka, Minn.-based independent oil and gas name Northern Oil and Gas saw its 8% issues due 2020 jump up about 1¾ points to close at 95 bid.

Indexes

The KDP High Yield Daily index lost 5 basis points to end at 70.27, inching closer to its year-to-date low of 70.17. Its yield gained 2 bps to end at 5.89%.

The Merrill Lynch High Yield index lost 3.2 basis points to close at a return of negative 0.816% for the year so far.

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