WildHorse, Jacobs, Trinidad deals price to cap $5 billion week, day’s deals move higher

By Paul Deckelman and Paul A. Harris

New York, Jan. 27 – The high-yield primary sphere saw a trio of new deals price on Friday – all of them $350 million in size and all regularly scheduled forward calendar offerings.

That new issuance was up from the mere $55 million which had priced in one quickly shopped add-on tranche on Thursday.

Two of the day’s new issues came from energy-related names – Canadian oilfield services company Trinidad Drilling Ltd.’s eight-year issue and domestic oil and natural gas exploration and production company WildHorse Resource Development Corp.’s transaction, also an eight-year piece of paper.

The day’s lone non-energy deal was casino operator Jacobs Entertainment Inc.’s seven-year senior secured second-lien notes.

The day’s $1.05 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers brought this week’s tally of new bonds to just under $5 billion in 14 tranches, according to data compiled by Prospect News – although that was well shy of the nearly $8.5 billion which priced in 11 tranches the week before.

But it continued to swell the year-to-date new-deal stats, which remain far ahead of year-ago levels, the data indicated.

Traders saw all three of the day’s new deals better in brisk aftermarket dealings, with the Jacobs and Trinidad deals showing particular strength.

Statistical market performance measures were mixed for a second straight session on Friday; they had turned mixed on Thursday after being higher across the board for two straight sessions.

The indicators were meantime higher all around versus where they had ended last Friday, when they had been lower than the week before. It was the indicators’ second strong week out of the last four.

Jacobs upsized, prices tight

Friday’s primary market session saw three deals price, each one sized at $350 million.

All three deals came at the conclusions of roadshows, although in one case the roadshow was concluded ahead of schedule.

Two of the three deals were upsized.

Two came at the tight end of talk while one came at the wide end.

Jacobs Entertainment priced an upsized $350 million issue of seven-year second-lien senior secured notes (B2/B) at par to yield 7 7/8%.

The issue size was increased from $340 million.

The yield printed at the tight end of yield talk set in the 8% area.

Heading into Friday there was $2 billion of orders for the deal, a market source said.

Credit Suisse, Capital One and Wells Fargo were the joint bookrunners.

The Golden, Colo.-based owner and operator of gaming properties plans to use the proceeds to retire its first- and second-lien term loans and to fund select acquisitions and development opportunities.

Trinidad prices tight

Trinidad Drilling priced a $350 million issue of eight-year senior notes (Caa1/BB-) at par to yield 6 5/8%.

The yield came at the tight end of yield talk that had been fixed in the 6¾% area.

Timing on the debt refinancing deal was accelerated; it was previously expected to remain in the market into the week ahead.

Joint bookrunner RBC will bill and deliver. Wells Fargo was also a joint bookrunner.

Wildhorse upsizes

WildHorse Resource Development priced an upsized $350 million issue of 6 7/8% eight-year senior notes (Caa1/B) at 99.244 to yield 7%.

The amount was increased from $300 million.

The yield printed at the wide end of the 6¾% to 7% yield talk.

Wells Fargo was the left bookrunner. BMO, Barclays, BofA Merrill Lynch, Citigroup and J.P. Morgan were the joint bookrunners.

The Houston-based independent oil and natural gas company plans to use the proceeds to repay the outstanding balance under its senior secured revolving credit facility and for general corporate purposes, including 2017 capital expenditures.

Vertiv PIK dividend deal

Just as wide pricings and postponed deals tend to betray a market gone cold, there are certain conspicuous measures of a market of a market that is hot.

One of the most prominent is the appearance of a PIK toggle dividend deal, market sources say.

One of those deals came into view late Friday.

Vertiv Intermediate Holding Corp. is scheduled to market a $600 million offering of five-year PIK toggle notes at a New York lunch and investor conference call on Monday.

The deal, proceeds from which will be used to pay a cash dividend to the company’s owner and repay $100 million of outstanding term loan debt, is also expected to price on Monday.

BofA Merrill Lynch, JP Morgan, Citigroup, Deutsche Bank, Goldman Sachs, Morgan Stanley, BMO and Credit Suisse are the joint bookrunners.

Elsewhere the January-February crossover week should see a reasonably active new issue market, sources said on Friday.

Thursday inflows

Cash flows for dedicated high-yield bond funds were positive on Thursday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $299 million of inflows on the day.

Actively managed funds saw $35 million of inflows on Thursday.

The news follows a Thursday afternoon report from Lipper US Fund Flows that dedicated high-yield bond funds sustained $532 million of outflows during the week to Wednesday’s close.

Meantime, as has often been the case with the daily cash flows for the leveraged markets since last autumn, the biggest Thursday flow was that of dedicated bank loan funds. These portfolios saw $330 million of inflows on the day, the trader said.

Week’s issuance slackens off

Friday’s troika of new deals brought to $4.99 billion in 14 tranches the amount of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers which had priced during the week, according to data compiled by Prospect News.

While respectably busy, that was still well down from the $8.47 billion which had come to market in 11 tranches last week, ended Jan. 20. – the heaviest new issuance week in more than a month, since the week ended Dec. 9, 2016, which saw $9.60 billion get done in 16 tranches. Last week’s issuance was all the more notable in that the week had one fewer trading session than usual, with the fixed-income markets in the United States being closed on Monday, Jan. 16 in observance of the Martin Luther King Jr. Day holiday.

This week’s primary activity brought year-to-date issuance for 2017 to $22.56 billion in 39 tranches – more than six times the $3.52 billion which had gotten done in eight tranches by this point on the 2016 calendar, the Prospect News data indicated.

Day’s deals trade up

In the secondary arena, a trader declared that “all three [of Friday’s new issues] did okay” when they moved over to the aftermarket.

He noted that the WildHorse Resource Development’s 6 7/8% notes were trading right around the par level, seeing them in a par to 100 1/8 context, but pointed out that the deal had priced below par, making the gain from the issue price nearly 1 point.

Another trader saw the bonds moving around between 99 5/8 and 100 1/8, finally going home right on the nose at par bid, with over $56 million changing hands during the session.

A market source said that the new Jacobs Entertainment 7 7/8% second-lien notes were even busier, with more than $68 million trading – the most of any purely junk-rated credit on Friday. He saw those notes finishing at 102¾ bid, well up from their par issue price.

Two other traders pegged the bonds in a 102½ to 103 bid context, while a third saw them get as good as a 102 5/8 to 103 3/8 bid range.

Calgary, Alta.-based oilfield services provider Trinidad Drilling’s 6 5/8% notes due 2025 saw considerably less aftermarket action, although its volume was still a relatively robust $26 million, a trader said, locating the new notes at 102¼ bid.

A second trader saw the bonds trade in a range of 102 to 102¾ bid before finally narrowing to 102 to 102¼ for the last prints of the day.

Yet another trader quoted a two-sided market at 102 bid, 102½ offered.

Recent deals stay busy

The traders saw recently priced junk offerings continuing to populate the Most Active list, among them Avolon Holdings Ltd.’s 5¼% notes due August 2022.

A trader said the notes were down ¼ point on the session to 102½ bid on volume of more than $18 million.

Avolon, a Hong Kong and Dublin-based aircraft leasing company, priced $1.75 billion of those notes at par last Friday after that tranche was upsized from an originally planned $1.5 billion. The company also priced $1.25 billion of 5½% notes due 2024 at par after that tranche was downsized from $1.5 billion.

The $3 billion regularly scheduled forward calendar deal was the biggest junk bond deal since last June.

Atotech BV’s 6¼% notes due 2025 inched up by 1/16 point on Thursday to end at 101 5/16 bid, with about $12 million trading.

The Berlin-based maker of specialty chemicals and plating equipment priced $425 million of those notes at par on Wednesday in a regularly scheduled transaction.

Nielsen Holdings plc’s 5% notes due 2025 were seen by a market source down 1/16 point Friday to exactly the par level on volume of over $10 million.

That was where the New York-based television ratings provider and performance-measurement company had priced its quick-to-market $500 million bond deal, also on Wednesday of this week.

Indicators mixed on day

Statistical market performance measures were mixed for a second straight session on Friday; they had turned mixed on Thursday after being higher across the board for two straight sessions.

The indicators were meantime higher all around versus where they had ended last Friday. It was the indicators’ second strong week out of the last four.

The KDP High Yield Index fell by 4 basis points on Friday to end at 71.95 versus its 8 bps rise on Thursday, which was its second consecutive gain.

Its yield widened out by 2 bps to 5.16% after having come in the previous three sessions, including Thursday’s 3 bps narrowing.

But Friday’s levels still compared favorably versus last Friday’s 71.90 index reading and 5.17% yield.

The Markit Series 27 CDX Index edged up by around 1/32 point Friday, closing at 106 11/16 bid, 106 23/16 offered after losing nearly 3/32 point Thursday.

The index was also up from last Friday’s 106 5.16 bid, 106 11/32 offered.

The Merrill Lynch High Yield Index rose for a fourth straight session on Friday after snapping a five-session losing streak. It was up by 0.083%, nearly matching Thursday’s 0.086% advance.

That raised its year-to-date return to 1.43%, a third consecutive new 2017 peak level. That was up from the previous zenith for the year of 1.346%, set on Thursday.

For the week, the index rose by 0.492%, a clear improvement over last week’s 0.139% weekly decline, which had been its first weekly loss after four consecutive weekly gains.

© 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.