Primary silent in shortened pre-holiday session; new Williams Scotsman busy, better; CalRes up as crude jumps

By Paul Deckelman and Paul A. Harris

New York, Nov. 22 – Junkbondland saw a quiet, abbreviated session on Wednesday heading into Thursday’s Thanksgiving Day holiday in the United States, when fixed-income markets would be closed.

As expected, no news came out of the primary market, whose forward calendar had mostly been cleared by several sessions of intense new-deal activity averaging some $2 billion of pricings per day at the end of last week and the beginning of this week.

The one dollar-denominated deal left over on the active calendar after that multi-session bond binge – a $500 million five-year secured issue from Pittsburgh-based vitamin and health supplements retailer General Nutrition Centers, Inc., which was marketed to potential investors via roadshow earlier in the month, but with nothing heard from since then – has now been pushed off to the coming week.

Several euro-denominated offerings were meantime seen as possible pricings in the coming days.

Tuesday’s new $300 million deal from Williams Scotsman International, Inc., a producer and provider of modular storage products, office trailers and temporary structures, was the sole recent offering seen trading on any kind of volume on Wednesday. Traders saw those five-year secured notes having firmed smartly by several points from their par issue price.

Elsewhere, energy sector bellwether name California Resources Corp.’s bonds were up sharply in heavy trading, coinciding with a renewed surge in world crude oil prices.

There was relatively active trading in telecommunications names such as Europe’s Altice and the domestic Frontier Communications Corp., which were mostly seen continuing their recent firming trend.

Statistical market performance measures were trending higher on Wednesday, their second straight session on the upside. They had strengthened across the board on Tuesday, after two consecutive mixed sessions before that.

Quiet primary

The new issue market was quiet ahead of Wednesday's early pre-Thanksgiving close.

Only one deal remained on the dollar-denominated active calendar.

GNC Holdings, Inc. has been attempting to place $500 million of five-year senior secured notes (Ba3/B), a deal that was announced on Nov. 8.

The most recent word on the offer was initial guidance of 10%, which came soon after it was announced.

Since then it has been radio silence.

Although there has been nothing official, the buzz in the market is that the bond deal will be pulled and the concurrent bank loan may be upsized and/or rejiggered, sources said on Wednesday.

Away from the dollar-denominated new issue market there is a modest euro-denominated calendar that could clear by the end of the week.

German refiner Raffinerie Heide GmbH is roadshowing a €250 million offering of five-year senior secured notes through Thursday.

And Berlin-based property management firm Adler Real Estate AG was set to commence marketing a euro-denominated dual-tranche offering of senior notes (S&P: BB+) on Thursday.

Although the market had no specific issuer names for the week ahead, in either the dollar- or the euro-denominated primary markets, the post-Thanksgiving pipeline is not believed to be vast, sources said on Wednesday.

Selloff overdone

The market's perception of the volatility that rocked stocks and junk a week ago is that it created a buying opportunity, said an investor who generally agrees with this assessment.

In the teeth of last week's selloff US high-yield spreads to Treasuries widened to 380 basis points, 30 bps wider than October's tights, the investor said.

“They spiked to 410 bps for a nanosecond, last Wednesday, but they have since tightened,” the source added.

“The selloff appears to have been overdone.”

Sure some deals were pulled, the investor allowed.

However, some of those were marginal.

Others were pulled by issuers who could bide their time.

An example of a deal in the latter category was NRG Energy, Inc. which recently abandoned plans to sell $870 million of 10.25-year senior notes due to market conditions.

The company came with a 5¾% interest rate target and was heard to have a deal wrapped up at 6%, but declined to take that higher rate even though it was only 25 bps above their target.

Since NRG was in the market to refinance its 6 5/8% senior notes due 2023, the company could probably afford to wait, the investor said.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield funds were mixed on Tuesday, the most recent session for which data was available at press time, according to a buyside source.

High-yield ETFs saw $260 million of inflows on the day.

Actively managed funds sustained $100 million of outflows on Tuesday, however.

A slower week

While Wednesday was officially a regular session, traders said the reality was that many people made an early exist ahead of Thursday’s holiday, which would see U.S. fixed-income markets closed. The Securities Industry and Financial Markets Association additionally recommended a 2 p.m. ET early close on Friday.

So with further pricing during the week not likely, the deals that had come to market on Monday and Tuesday totaled some $2.48 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers, pricing in seven tranches, according to data compiled by Prospect News.

The holiday-shortened week’s tally of new paper was down from the pace seen last week, ended Nov. 17, when $8.35 billion of such paper had priced in 16 tranches.

It was down as well from the $4.67 billion which got done in 10 tranches the week before, ended Nov. 10.

Still, the week’s new deals raised year-to-date issuance for 2017 so far to $253.29 billion in 469 tranches, running about 23.9% ahead of the $204.42 billion that had priced in 317 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Williams Scotsman trades actively

Tuesday’s new deal from Williams Scotsman was about the only recently priced issue generating any kind of volume on Wednesday, a trader said.

He saw those 7 7/8% senior secured notes due 2022 – officially issued by the company’s Algeco Scotsman Holdings Sarl subsidiary – up 7/8 point on the day, to 103 1/8 bid.

Another trader saw the notes in a 102¾-to-103¼ bid range, estimating volume at around $17 million.

The Baltimore-based producer of modular storage products, office trailers and temporary structures had priced $300 million of those notes at par on Tuesday in a regularly scheduled forward calendar offering.

The trader said that there had been perhaps around $3 million of initial aftermarket dealings in the new issue, pushing the bonds up to 102¼ going home, setting the stage for Wednesday’s further gains.

Other recent deals little seen

There was “very little” trading among other recently priced issues, one of the traders said.

For instance, he said that Everi Payments, Inc.’s 7½% notes due 2025 were holding steady in a par-to-100¼ bid context, with maybe around $4 million having traded on Wednesday.

The Las Vegas-based gaming technology company had priced $375 million of those notes at par on Monday in a regularly scheduled offering.

And he saw only 500 bonds – not even $1 million of volume – in the new Weight Watchers International, Inc. 8 5/8% notes due 2025.

The New York-based provider of diet foods and weight-loss programs had priced $300 million of those notes off the forward calendar on Monday – slimmed down from an originally announced $500 million.

The notes came at par and had fattened up to around 100 7/8 bid by the close Tuesday, when over $27 million traded, in contrast to Wednesday’s near total lack of any activity.

CalRes leads energy names

Elsewhere, traders said that Los Angeles-based California Resources Corp.’s 8% notes due 2022 – considered a benchmark issue for the whole energy sector and a reliable proxy for its movements – were up by more than 1 full point on the session, ending at just over 74 bid, on volume of more than $24 million.

Other sector names seen firming included Houston-based EP Energy Corp., whose 8% notes due 2025 were seen up 1 1/8 point on the day at just over 67 bid, and Calgary, Alta.-based MEG Energy Corp., whose 7% notes due 2024 closed at 91 bid, up 1 3/8 points.

The sector was helped by a continued firming on world crude oil markets, which were up for a second straight session on Wednesday.

West Texas Intermediate crude for January delivery shot up by $1.19 per barrel in New York Mercantile Exchange trading, settling at $58.02, on top of Tuesday’s 41-cent gain.

January-contract North Sea Brent crude firmed by 75 cents per barrel in London futures trading, to $63.32, building on Tuesday’s 35-cent rise.

Telecom names trade up

Traders said the communications sector continued to rebound from its recent weakness on Wednesday.

Netherlands-based cable and broadband service provider Altice’s bonds, issued by its various subsidiaries, denominated the Most Actives list.

Among them were its 6 5/8% notes due 2023, which firmed by 9/32 point to close at 104 9/32 bid, with about $8 million traded.

Its financing unit’s 5½% notes due 2026 ended at 102 bid, up 1/8 point, also on about $8 million traded.

But its 7½% notes due 2026 were seen by a trader to have bucked the generally positive sector trend, losing 3/8 point to end at 106 7/8 bid.

A trader saw Wind Tre SpA’s 5% notes due 2026 “pretty much sideways, with no change in levels,” ending at 96½ bid, as over $10 million traded.

He noted that the Italian telecom company’s paper “continues to trade” almost a month after it priced those notes as part of a giant-sized €7.33 billion equivalent four-part euro- and dollar-denominated offering that came to market on Oct. 24.

Among domestic names, Stamford, Conn.-based wireline provider Frontier Communications’ 9¼% notes due 2021 gained ¼ point, closing at 81½ bid, on volume of over $6 million.

Overland Park, Kan.-based wireless provider Sprint Corp.’s 6% notes due 2022 ended at 100 7/8 bid, up 3/8 point on the day, with around $8 million traded.

Indicators stay firm

Statistical market performance measures were trending higher on Wednesday, their second straight session on the upside. They had strengthened across the board on Tuesday, after two consecutive mixed sessions before that.

The KDP High Yield Daily Index jumped by 12 basis points Wednesday to close at 71.73, its fifth straight gain after seven consecutive sessions before that on the downside. It had also firmed by 6 bps on Tuesday and by 3 bps on Monday.

Its yield came in by 3 bps to 5.36%, its second straight narrowing. It had also tightened by 2 bps on Tuesday after having been unchanged on Monday. Before that, it had declined on Thursday and Friday, after having widened out for eight successive sessions.

The Markit CDX Series 29 index rose more than 3/32 point on Wednesday to end at 107 31/32 bid, 108 offered, its second straight gain. On Tuesday it had firmed by 5/16 point, its first gain after two consecutive losses. It had eased marginally on Monday, on top of a 1/16 point retreat on Friday.

And the Merrill Lynch North American High Yield Master II Index notched its fifth consecutive gain on Wednesday, advancing by 0.092%, on top of Tuesday’s 0.136% rise.

The latest improvement lifted the index’s year-to date return to 6.992% from Tuesday’s 6.893% close, although the year-to-date return still remains well down from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

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