Hess, Match, Five Point, Welltec cap $8.36 billion week; energy rise continues

By Paul Deckelman and Paul A. Harris

New York, Nov. 17 – The high-yield primary market finished off a rousing week Friday with four new deals worth more than $2 billion.

All of the day’s deals were brought off the forward calendar.

Two of the deals came out of the revived energy sector.

High-yield syndicate sources said that Hess Infrastructure Partners LP, a midstream crude oil and natural gas infrastructure company, priced $800 million of 8.25-year notes.

And Danish oilfield services company Welltec A/S did a $340 million five-year secured offering.

Away from energy came a pair of $450 million deals – an eight-year issue from real estate developer Five Point Operating Co., LP and a 10-year offering from Match Group, Inc., an operator of online dating and relationship services.

The day’s deals brought the amount of new dollar-denominated and fully junk-rated paper that priced this week to $8.36 billion in 14 tranches, up from last week’s pace. Year-to-date issuance remains robust versus last year’s totals.

Traders said that the Hess and Match Group issues were among the most actively traded Junkbondland credits and said that Hess and Five Point both firmed smartly when they hit the aftermarket.

They also saw a fair amount of trading in recent issues from Teleflex, Inc. and Valeant Pharmaceuticals International, Inc.

Away from the new or recent deals, energy credits such as California Resources Corp. and EP Energy Corp. continued to rise against a backdrop of a big gain Friday in world crude oil prices.

On the downside, international cable and telecommunications operator Altice SA’s various bond issues turned lower, giving up gains notched earlier in the week.

Statistical market performance measures turned mixed on Friday, after moving higher across the board on Thursday for the first time since Oct. 19, breaking a streak of seven consecutive losses.

The indicators were meantime mixed versus where they had finished last Friday, Nov. 10, when they had been lower all around from the week before. It was the second mixed week in the last three.

Hess prices 8.25-year notes

The signals along the new issue track suddenly flashed green on Friday.

Volatility that rocked the primary market earlier in the week – replete with postponed deals, downsized deals and outflows – gave way to a fair-weather Friday that saw one deal upsize, another price at the tight end of talk and one deal, a pre-marketed €500 million issue from Volvo Car, blow through talk with an eye-popping 2% print.

In the dollar-denominated market, Hess Infrastructure Partners priced an $800 million issue of 8.25-year senior notes (Ba2/BB) at par to yield 5 5/8%.

The yield printed in the middle of the 5½% to 5¾% yield talk.

JP Morgan, Citigroup, Wells Fargo, Morgan Stanley and MUFG managed the sale.

The midstream crude oil and natural gas infrastructure company, a division of New York-based Hess Corp., plans to use the proceeds to repay debt and fund a distribution to shareholders.

Five Point upsizes

Five Point Operating priced an upsized $450 million issue of eight-year senior notes (B3/B) at par to yield 7 7/8%.

The amount was increased from $400 million and the yield printed in the middle of the 7¾% to 8% talk.

Citigroup was the left bookrunner. JP Morgan was the joint bookrunner.

The Aliso Viejo, Calif.-based planner and developer of mixed-use, master-planned communities plans to use the proceeds for general corporate purposes, which may include funding development activities at its communities.

Match prices tight

Match Group priced a $450 million issue of 5% 10-year senior notes (Ba3/BB-) at 99.027 to yield 5 1/8% in a quick-to-market trade on Friday.

The yield printed at the tight end of yield talk that was set in the 5¼% area.

The deal was playing to $1 billion of orders at the tight end of the 5¼% to 5½% initial guidance, a trader said early Friday.

JP Morgan was the lead.

The Dallas-based courtship services provider plans to use the proceeds, together with cash on hand, to redeem its 6¾% senior notes due 2022.

Welltec at a discount

Allerod, Denmark-based oilfield services provider Welltec priced its $340 million offering of 9½% five-year senior secured notes (B2/B-) at 99.026 to yield 9¾%.

The yield printed at the wide end of the 9½% to 9¾% talk. The reoffer price came in line with price talk which specified approximately 1 point of original issue discount.

Official talk was wide of earlier guidance of 8¾% to 9%, a trader said.

The notes become callable on Dec. 1, 2019 at 107.125. A special call provision that would have allowed the issuer to redeem 10% of the notes annually at 103 during the non-call period was struck from the deal.

Joint bookrunner Goldman Sachs will bill and deliver for the debt refinancing deal. DNB and Credit Suisse were also joint bookrunners.

The week ahead

The foreshortened pre-holiday week ahead will be active in the dollar-denominated primary market, sources say.

In addition to an existing calendar that carries across the weekend, there are likely to be deals launched that were sidelined by the Nov. 13 week’s volatility, sellsiders said on Friday.

Some of those will come as drive-bys while others could be in the market overnight, a syndicate banker said, professing no visibility on pending pre-Thanksgiving offers of conspicuous size.

Meanwhile some market sources disclosed plans to take off work during the three market sessions that precede the extended holiday weekend ahead.

“Deals that were sidelined last week might still come before Thanksgiving,” an investment banker said early Friday afternoon, but added that some of those sidelined issuers might elect to wait until after the holiday.

Volvo’s 2% print

In the euro-denominated market, Volvo Car priced a €500 million issue of senior notes due Jan. 24, 2025 (Ba2/BB+) at par to yield 2%.

The yield printed 12.5 basis points beneath the tight end of the 2 1/8% to 2¼% final price talk, the source said, adding that at the tight end of that talk orders came to €2.3 billion. The deal was launched into the market earlier Friday with initial guidance of 2 3/8% to 2½%.

Citigroup, Deutsche Bank, ING and JP Morgan were the physical bookrunners.

ETFs see Thursday inflows

High-yield ETFs broke an extended string of consecutive negative daily flows on Thursday, posting $269 million of inflows on the day, a trader said.

Actively managed high-yield funds, however, remained well into the red, as they sustained $505 million of outflows during the Thursday session.

Those numbers appear in the wake of a report on Thursday afternoon from Lipper US Fund Flows that dedicated junk funds sustained a whopping $4.44 billion of outflows in the week to last Wednesday.

New-deal pace picks up

Friday’s four issues raised the amount of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers that priced in the week to $8.36 billion in 14 tranches, according to data compiled by Prospect News.

That was well up from the pace seen last week, ended Nov. 10, when $4.67 billion priced in 10 tranches, and was up as well from the $6.7 billion which priced in 12 tranches the week before, ended Nov. 3.

The week’s new deals raised year-to-date issuance for 2017 to $249.92 billion in 462 tranches, running about 22.8% ahead of the $203.42 billion which had priced in 315 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Hess deal busy and better

In the secondary market, traders said that the offering of new 5 5/8% notes from Hess Infrastructure Partners was one of the day’s most actively traded issues, with over $35 million changing hands.

They also said that the new deal was “well received” when it hit the aftermarket, as one put it.

He saw the notes at 101¾ bid, well up from their par issue price.

Two other traders saw that 8.25-year issue in a 101½ to 102 bid context.

Five Point firms up

A trader said that Five Point Operating’s 7 7/8% notes due 2025 were also solidly better when they were freed for secondary market dealings.

He saw the company’s new deal closing out in a 101 to 101½ bid context, versus its par issue price, though on considerably less volume than the new Hess Infrastructure notes had generated.

Match, Welltec little moved

A trader said that along with the Hess issue, Match Group’s 5% notes due 2027 were among the most actively traded names on the day, with more than $31 million of turnover.

He saw those bonds going home in a range of 99¾ and 100¼ bid, up just slightly from their 99.027 issue price.

A trader said that the Welltec 9½% senior secured notes due 2022 were closing out the day between 99½ and 100¼ bid, versus their 99.26 pricing level, on “not very much volume.”

Valeant, Teleflex active

Among deals which came to market earlier in the week, Valeant Pharmaceuticals’ 5½% notes due 2025 were actively traded, with over $12 million moving around.

A trader saw the notes closing at 101¼ bid, calling that down 1/8 point on the session.

The Laval, Que.-based drug manufacturer had priced its regularly scheduled $750 million add-on to its existing $1 billion of those 5½% notes on Tuesday at par

And the new Teleflex 4 5/8% notes due 2027 continued to firm for a second straight session, rising by ¾ point to end at 101¾, also on about $12 million of volume.

The Wayne, Pa.-based medical technologies provider priced its $500 million quick-to-market issue at par on Thursday.

The new issue rose more than 1 point in heavy initial aftermarket trading later that same session.

Crude gain lifts energy names

Away from the new or recently priced deals, traders saw continued firmness in the energy sector, noting that for the first time in several days crude oil prices were sharply firmer on increased geopolitical tensions in the Middle East

West Texas Intermediate jumped by $1.41 per barrel on the New York Mercantile Exchange, settling at $56.55 after three straight losses.

And North Sea Brent crude broke out of a five-session slump, rising by $1.36 per barrel in London futures trading to end at $62.72.

That was favorable news, a trader said, for names such as California Resources, whose 8% notes due 2022 improved by 5/8 point to end at 71 15/16 bid, with over $32 million of the Los Angeles-based exploration and production company’s benchmark issue traded.

A trader saw Houston-based sector peer EP Energy’s 9 3/8% notes due 2020 climb by more than 1½ points on the day, ending at just over 78 bid, with over $19 million traded.

Altice paper pummeled

On the downside, traders saw Netherlands-based telecommunications company and cable operator Altice’s bonds and those of its various subsidiaries uniformly lower.

That paper had firmed earlier in the week after company executives had assured investors that they were getting serious about trying to reduce Altice’s estimated €50 billion equivalent ($59 billion equivalent) net debt load, declaring that the company would shelve its heretofore aggressive acquisition strategy to concentrate on deleveraging.

But by Friday, traders said that the investors were again skeptical

That pushed Altice’s bonds lower in active dealings, including its 6 5/8% notes due 2023, seen off ¼ point at 103 5/8 bid, with over $20 million traded.

Its 7 5/8% notes due 2025 swooned by 1¾ points, ending at 97½ bid on over $18 million of volume.

Bonds of Altice’s French subsidiary SFR Group SA were lower as well, with its 7 3/8% notes due 2026 plunging more than 2 points on the day to 102½ bid, with over $25 million changing hands.

Indicators turn mixed

Statistical market performance measures turned mixed on Friday, after moving higher across the board on Thursday for the first time since Oct. 19, breaking a streak of seven consecutive losses.

The indicators were also mixed versus where they had finished last Friday, Nov. 10, when they had been lower all around from the week before. It was the second mixed week in the last three.

The KDP High Yield Daily Index firmed by10 basis points on Friday to end at 71.52, its second straight gain after seven consecutive sessions before that on the downside.

It had also jumped by 18 bps on Thursday, in contrast to Wednesday’s 28 bps freefall and Tuesday’s 16 bps nosedive.

Its yield came in by 3 bps to 5.41%, its second straight tightening. On Thursday, the yield declined by 6 bps, after widening out for eight successive sessions. On Wednesday it had risen by 9 bps on top of Tuesday’s 6 bps gain.

For the week, though, those levels compared unfavorably with last Friday’s 71.74 index reading and 5.34% yield.

The Markit CDX Series 29 High Yield Index could not sustain Thursday’s positive momentum, easing by more than 1/16 point to settle at 107 9/16 bid, 107 7/8 offered. On Thursday, it had seen its first gain after seven losses in a row, improving by more than 9/16 point.

For the week, though, the index was better, up from last Friday’s 107 13/32 bid, 107 7/16 offered.

The Merrill Lynch North American High Yield Master II Index made it two straight gains on Friday, advancing by 0.054%, on top of Thursday’s 0.567% rise, which had been its first upturn after 10 straight setbacks.

The latest gain lifted the index’s year-to date return to 6.63% from Wednesday’s 6.572%, 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.

For the week, the index rose by 0.042%, in contrast to last week’s big 0.798% loss.

With 46 weeks of 2017 now in the rear-view mirror, the index has risen in 36 of those weeks while declining in the other 10.

© 2015 Prospect News.
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