Tallgrass prices; Envision’s $1.625 billion offering on tap; Refinitiv weakens; energy names gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 24 – The domestic primary market remained active in the final week of September with one deal pricing and two more on tap, including Envision Healthcare Corp.’s closely watched $1.625 billion offering.

Tallgrass Energy Partners, LP and Tallgrass Energy Finance Corp. priced an upsized $500 million issue of five-year senior notes in a Monday drive-by. The notes were active after breaking for trade but were largely hovering around their issue price.

Envision Healthcare began a roadshow on Monday for its $1,625,000,000 offering of eight-year senior notes. The deal is the latest in a series of LBO financing deals.

Ascent Resources Utica Holdings, LLC also began a roadshow on Monday for a $600 million offering of eight-year senior notes.

The European primary market’s forward calendar also continued to grow with Getlink SE on the road with its €500 million offering of five-year senior secured green notes (expected ratings /BB/BB+).

Meanwhile, Refinitiv’s dollar-denominated tranches continued to weaken on Monday with trading activity surrounding the notes dying down.

AkzoNobel NV’s 8% senior notes due 2026 (Caa1/B-/B-) were unchanged on Monday with the notes trading more than 1 point above issue price.

AkzoNobel and Refinitiv were the latest LBO financing deals to price. BMC Software’s 9¾% senior notes due 2026 (Caa2/CCC+), also brought to market to finance KKR’s acquisition of the company, remained strong in the secondary market.

With the barrel price of West Texas intermediate crude oil for November delivery shooting to over $72 a barrel on Monday, energy names were in focus.

California Resources Corp.’s 8% senior secured second-lien notes due December 2022 were the most actively traded issue of the day with the notes gaining 1½ points.

Comstock Resources, Inc.’s 9¾% senior notes due 2026 (Caa1/B/B) were also active and making gains.

While most energy names were seeing gains on Monday, electricity generator Calpine Corp.’s 9¾% senior notes due 2025 continued to decline.

Tallgrass upsizes

Tallgrass Energy priced an upsized $500 million issue of five-year senior notes (Ba3/BB+/BBB-) at par to yield 4¾% in a quick-to-market Monday trade.

The issue size was increased from $400 million.

The yield printed at the tight end of the 4¾% to 4 7/8% yield talk.

Wells Fargo was the left bookrunner.

The Leawood, Kan.-based oil and natural gas pipeline company plans to use the proceeds to pay down its revolving credit facility.

The notes were active after breaking for trade with more than $34 million of the bonds on the tape by late afternoon. The 4¾% notes were seen trading between par and par ¼.

While a strong day for energy names, the low coupon and the upsized offering was most likely why the notes were hovering around par, sources said.

Envision Healthcare roadshow

Envision Healthcare started a roadshow on Monday in San Francisco and Los Angeles for a $1,625,000,000 offering of eight-year senior notes.

Initial price talk is in the high 8% area, a trader said.

Citigroup is the left bookrunner.

Proceeds will be used to help fund the buyout of the company by KKR for $46.00 per share in cash, or about $9.9 billion including the assumption or repayment of debt.

Ascent Resources two-day roadshow

Ascent Resources started a two-day roadshow on Monday in New York for a $600 million offering of eight-year senior notes.

Credit Suisse is the left bookrunner.

The Oklahoma City-based oil and gas company plans to use the proceeds to exercise the equity clawback for 35% of its existing 2022 notes, including the premium, and to pay down its credit facility.

Getlink €500 million green bond

Getlink began a roadshow on London's West End on Monday for a €500 million offering of five-year senior secured green notes (expected ratings /BB/BB+).

Joint global coordinator, joint bookrunner and green structuring adviser Goldman Sachs will bill and deliver. BNP Paribas is also a joint global coordinator, joint bookrunner and green structuring adviser.

Proceeds will be used to refinance the G2 bridge loan, finance capital expenditures in relation to the ElecLink electricity interconnector between the United Kingdom and France, and to finance other green-eligible assets.

Refinitiv weakens

The dollar-denominated tranches from Refinitiv’s $4.25 billion equivalent offering continued to weaken on Monday.

The 8¼% senior notes due 2026 were trading between par and par 1/8 on Monday, a market source said.

The notes were trading between par ¼ and par ½ on Friday. While not as active as last week, the notes continued to trade with about $18 million of the bonds on the tape by late afternoon.

Refinitiv’s 6¼% senior notes due 2026 were also seen slightly weaker on Monday. They were trading around par 7/8, a market source said.

About $13 million of the bonds traded during Monday’s session. On Friday, the 6¼% notes were trading between 101 1/8 and 101¼.

Both notes traded more than 1 point above their issue price last week but have since come in.

In an LBO financing deal, Refinitiv priced a $4.25 billion equivalent offering on Sept. 18.

The deal included a $1.25 billion tranche of the 6¼% first lien notes (B2/B/BB+) and a $1,575,000,000 tranche of the 8¼% notes, both of which priced at par.

Proceeds from the deal will be used to back the acquisition of a 55% stake in Thomson Reuters Financial & Risk by Blackstone, Canada Pension Plan Investment Board and GIC.

AkzoNobel unchanged

AkzoNobel’s 8% senior notes due 2026 were unchanged in light trading volume on Monday. The notes were seen at 101¼ bid, 101¾ offered with trades between 101 3/8 and 101 5/8, sources said.

AkzoNobel NV priced a downsized €1 billion equivalent amount of eight-year senior notes (Caa1/B-/B-) in two tranches on Sept. 20, which included a $605 million tranche of the 8% notes, issued by Starfruit US Holdco LLC, which priced at par.

The deal was the most recent LBO financing deal to price.

Proceeds will be used to help fund the buyout of AkzoNobel Specialty Chemicals by the Carlyle Group and GIC from AkzoNobel for an enterprise value of €10.1 billion.

BMC strong

BMC Software’s 9¾% senior notes due 2026 (Caa2/CCC+) remained strong in the secondary market.

The notes continued to trade more than 2 points above their issue price, despite a rocky start in the secondary space.

The 9¾% notes were seen at 102¼ bid, 102¾ offered on Monday. They have traded north of 102 since mid-September after largely hovering around par since pricing.

BMC Software priced a dual-currency two-tranche offering on Aug. 9 which included a $1.475 billion tranche of the 9¾% notes which priced at par.

Proceeds from the deal will be used to help fund the buyout of the company by KKR. The BMC deal is being looked to as an indicator as Envision Healthcare markets its LBO financing deal.

Energy gains

Energy names were in focus on Monday as oil futures again climbed after OPEC countries did not announce a formal plan to boost oil output.

California Resources 8% senior notes were “not surprisingly,” the busiest issue of the day, a market source said. The notes were seen trading up to 94½, about a 1½ point increase from Friday.

There were about $51 million of bonds on the tape by the late afternoon.

Comstock Resources 9¾% senior notes due 2026 were also on the rise in active trading. The notes were up about 1¼ point to trade at par, a market source said.

The notes priced at 95.988 to yield 10½% on July 20.

While California Resources 8% senior notes are the standard for tracking oil futures, Comstock Resources 9¾% also seem to also be moving with crude oil prices.

The 9¾% notes have also been active when California Resources 8% notes are in focus, a market source said.

West Texas intermediate crude oil shot up to $72.08 a barrel on Monday, an increase of $1.30 or 1.8%.

Calpine drops

While junk bonds from oil and gas companies were on the rise on Monday, Calpine’s 5¾% senior notes due 2025 continued their decline.

The notes were down another point to 88¾ on Monday with about $18 million of the bonds in play, a market source said.

The notes were trading in the 91 to 92 range last week. The wholesale power generation company operates natural gas and geothermal power plants in North America.

Friday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Friday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $103 million of outflows on the day.

Indexes mixed

Three benchmarks for the high-yield secondary market opened the week mixed. The KDP High Yield Daily index gained 5 basis points to close Monday at 70.41 with the yield now 5.84%.

The Merrill Lynch High Yield index slid 3.8 bps on Monday with the year-to-date return now 2.303%.

The CDX High Yield 30 index closed Monday at 107.29.

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