Goodyear Tire drives by, new bonds firmer; new NRG, Tesoro Logistics busy; energy issues gain

By Paul Deckelman and Paul A. Harris

New York, May 10 – The high yield primary market saw one dollar-denominated junk deal price on Tuesday, as Goodyear Tire & Rubber Co. did a quickly shopped $900 million of new 10-year notes.

Secondary traders said that the new bonds firmed when they hit the aftermarket.

High yield syndicate sources meantime said that liquefied natural gas company Cheniere Corpus Christi Holdings, LLC will be shopping a $1 billion eight-year issue around to potential investors.

They also said that foodservice distributor Performance Food Group, Inc. was hitting the road Tuesday with its $350 million eight-year offering.

Among recently priced credits, traders saw heavy trading, though at slightly lower levels, for Monday’s $1 billion 10-year issue from wholesale electricity producer NRG Energy, Inc.

They also saw a fair amount of trading in the day’s other new deal, energy gathering, processing, transportation and storage company Tesoro Logistics LP’s two-part transaction.

Away from the new deals, firmer oil prices helped boost oil and natural gas names such as Chesapeake Energy Corp.

Statistical market performance measures turned higher across the board on Tuesday, after having been mixed on Monday, which in turn had followed four straight sessions during which the indicators had been lower all around. Tuesday was the second higher session in the last nine trading days.

Goodyear drives by

In the Tuesday primary market Goodyear Tire & Rubber Co. priced a $900 million issue of 10-year senior notes (Ba3/BB/BB) at par to yield 5% in a drive-by.

The yield printed on top of yield talk and tight to initial guidance in the low 5% area, sources said.

A trader spotted the new Goodyear 5% notes due 2026 at par ¾ bid, 101¼ offered shortly after Tuesday's close.

Citigroup was the left bookrunner for the debt refinancing deal. Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, Goldman Sachs, JP Morgan, HSBC, BofA Merrill Lynch and Wells Fargo were the joint bookrunners.

Cheniere $1 billion secured

Cheniere Corpus Christi Holdings, LLC plans to price $1 billion of non-callable eight-year senior secured notes (Ba3/BB-) late this week, according to a syndicate source.

Early guidance has the deal yielding 7¼% to 7½%.

Morgan Stanley, BofA Merrill Lynch, BNP, Credit Suisse, Goldman Sachs, JP Morgan, Lloyds, MUFG, Mizuho, RBC, Scotia, SG, SMBC Nikko and Standard Chartered are the joint bookrunners for the debt refinancing deal.

There was only one other dollar-denominated deal on the active forward calendar at Tuesday's close.

Performance Food Group, Inc. was scheduled to start a roadshow on Tuesday for a $350 million offering of eight-year senior notes (B2/BB-).

The deal, set to price later this week via Credit Suisse, Barclays, Wells Fargo, BMO, Blackstone, JP Morgan and Morgan Stanley, comes with early guidance of 5¾ % to 6¼%.

Elsewhere in the market there is considerable buzz about expected mammoth issuance from Dell, in its effort to place debt backing its $67 billion acquisition of EMC. A benchmark offering of first lien notes from issuing entity Denali Holding Inc. was announced on Tuesday, a market source said. Dealers are seeking high grade ratings from all three ratings agencies for this secured piece, sources say.

A whopping $9 billion of unsecured junk – perhaps in pieces staggered in time, but increasingly likely all at once – should follow the high grade execution, they add.

CNH prints 3%

In the European primary market CNH Industrial Finance Europe SA priced a €500 million issue of 2 7/8% seven-year senior notes (Ba2/BB+) at 99.221 to yield 3% on Tuesday.

The yield printed on top of yield talk.

The deal came in a quick-to-market execution.

Joint bookrunner BNP Paribas will bill and deliver. Banca IMI, Barclays, Commerzbank, Santander and UniCredit were also joint bookrunners.

In the wake of CNH there is an active euro calendar.

Volvo Car AB is on the road with a €500 million offering of non-callable five-year senior notes (Ba3/BB).

The roadshow wraps up on Thursday.

Official price talk is pending, but the deal is being guided in the mid 3% context, a London-based investment banker said.

Elsewhere BiSoho SAS is roadshowing a €470 million two-part offering of senior secured notes.

The deal, in tranches of seven-year fixed-rate notes and 6.5-year floating-rate notes, is also set to price this week.

WEPA Hygieneprodukte GmbH started a roadshow on Monday for a €450 million offering of eight-year senior secured notes (expected ratings B1/BB) via Deutsche Bank and HSBC.

Barry Callebaut AG plans to start a roadshow on Wednesday for a €350 million offering of senior fixed-rate notes with a maturity of eight years to 10 years. It's being led by Credit Suisse, ING, Rabobank and SG.

DHX C$50 million tap

The Canadian dollar-denominated market generated news on Tuesday.

DHX Media Ltd. priced a C$50 million add-on to its 5 7/8% senior notes due Dec. 2, 2021 (/BB-/DBRS: BB low) at 97.50 to yield 6.416%.

RBC and Scotia were the bookrunners for the debt refinancing deal. Cannacord, CIBC, TD, BMO, Credit Suisse, GMP, HSBC and National Bank Financial were the underwriters.

Tide turns on ETF flows

High yield ETFs, which saw substantial outflows last week, including three daily outflows greater than $600 million between Friday, April 29 and Wednesday, May 4, are more recently seeing their cash flows moderate and even turn modestly positive, sources said on Tuesday.

A $91 million offers-wanted-in-competition (OWIC) list was making the rounds on Tuesday morning, signaling buying on the part of the ETFs, according to a trader on the East Coast of the United States.

High yield ETFs saw $95 million of inflows on Monday, the most recent session for which data was available at press time, according to a sellside source.

However actively managed funds sustained $50 million of outflows on Monday.

Bank loan funds were positive on the day, seeing $90 million of inflows.

Goodyear gains in aftermarket

In the secondary realm, traders saw strength in the new Goodyear 5% notes due 2026.

A trader quoted the new issue in a 100 7/8-to-101 bid context, while a second saw them trading between 100½ and 101, up from the par level at which the Akron, Ohio-based tire-making giant had priced its new deal.

Senior analyst Evan Mann of the Gimme Credit investment advisory service pointed out in a Tuesday research note that Goodyear will be using the new-deal proceeds to redeem its existing 6½% notes due 2021, calling the transaction “consistent with the company's previous steps to lower borrowing costs while pushing out debt maturities.”

With what he called “solid” liquidity and continued use of free cash flow to pay down some of its debt, Mann predicted that Goodyear’s credit ratios would likely continue to improve.

He noted that returning to an investment grade rating “remains a key company goal over the intermediate term.”

The 6½% notes being taken out using the proceeds from Tuesday’s deal meanwhile were seen about unchanged at 105¼ bid, on volume of about $3 million.

NRG heavily traded

Among recently priced issues, NRG Energy’s 7¼% notes due 2026 “was probably the most actively traded credit,” a trader said, estimating volume in those notes at over $92 million, on top of the more than $41 million that traded on Monday afternoon after the issue had priced and was freed for aftermarket activity.

He saw the notes finishing off by 7/16 point at 100 3/16 bid.

A second trader pegged the bonds in a 100¼ to 100¾ bid context.

NRG, a Princeton, N.J.-based wholesale power generator, priced $1 billion of those notes at par in a quick-to-market offering on Monday after the deal was upsized from an originally announced $700 million.

Traders saw the bonds up around 5/8 point in initial aftermarket dealings.

Tesoro stays busy

Monday’s other new deal – Tesoro Logistics’ $700 million two-part offering – also saw a fair amount of activity, although nowhere near the volume of the NRG deal.

A trader said that the add-on to the company’s 6 1/8% notes due in October of 2021 gained ¼ point on the day, to 101 3/8 bid, with over $18 million traded.

He saw the other half of that deal – the new stand-alone 6 3/8% notes due 2024 – ending down ¼ point, at 101 bid, with over $26 million having changed hands.

Another trader saw the add-on notes at 101 bid, 101½ offered, with the stand-alone notes at 100¾ bid, 101 offered.

Tesoro Logistics, a San Antonio, Texas-based company that gathers, processes, transports and stores crude oil, natural gas and refined products, priced its two-part drive-by deal on Monday after having upsized it from $600 million originally.

The $250 million add-on tranche to the existing $550 million of 6 1/8s priced at 100.25 to yield 6.069%, and over $20 million traded at 101 1/8 bid.

The $450 million tranche of 6 3/8% came to market at par, after having been upsized from an original $350 of the notes. They moved up to 101¼ bid in initial aftermarket trading, with over $34 million having changed hands.

Energy names gain

Away from the new issues, energy issues were seen doing better Tuesday as domestic crude prices rebounded.

The nearly 3% rebound came as wildfires in Canada – which have resulted in production disruptions amounting to about 2.5 million barrels per day – and ongoing attacks on Nigeria’s oil infrastructure have offset concerns about increasing inventories.

Chesapeake Energy Corp.’s 8% second-lien notes due 2022 benefitted from the crude rally, closing up over a point to 65, a trader said.

“They traded a bunch,” he added.

Another trader said the debt ended up a deuce for the day.

Platform Specialties pops

Elsewhere a trader said that Platform Specialty Products Corp.’s 6½% notes due 2022 gained 2½ points, to end at 88½ bid.

He said that the rise came when the West Palm Beach, Fla.-based specialty chemical maker reported better-than-expected first-quarter earnings.

Indicators turn higher

Statistical market performance measures turned higher across the board on Tuesday, after having been mixed on Monday, which in turn had followed four straight sessions during which the indicators had been lower all around. Tuesday was the second higher session in the last nine trading days.

The KDP High Yield Daily index snapped a six-session losing streak on Tuesday, rising by 8 basis points to 67.15, its fourth gain in the last 10 sessions. On Monday, it had eased by 1 bp, after having slid by 22 bps on Friday.

Its yield fell by 2 bps, to 6.33%, its first tightening after having been unchanged on Monday and after widening out for four consecutive sessions before that.

The Markit Series 26 CDX North American High Yield index put up its second straight gain on Tuesday, jumping by nearly ¾ point to 102 15/32 bid, 102 17/32 offered. It had gained 7/32 point on Monday to break a four-session skid before that.

The Merrill Lynch North American High Yield Master II index was also back in the black on Tuesday after having lost five successive sessions before that. Its 0.223% improvement Tuesday stood in contrast to Monday’s 0.021% setback.

Tuesday’s upside move raised the index’s year-to-date return to 6.63% from Monday’s 6.393%. The cumulative return still remains below last Monday’s close of 7.398%, the peak level for the year so far.

Stephanie N. Rotondo contributed to this review.

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