JBS prices, Ensign Drilling on tap; Frontier active; Hexion jumps on bankruptcy agreement; energy gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 1 – The domestic high-yield market was active on Monday with one upsized drive-by deal pricing and another joining the forward calendar.

JBS priced an upsized $1 billion issue of 10-year senior notes (Ba3/BB-) at par to yield 6½% in a quick-to-market trade.

Ensign Drilling Inc. is marketing a $700 million offering of five-year senior notes with pricing expected later the week.

The European primary market was also active with Loxam Group and SGL Carbon SE both beginning roadshows for euro-denominated offerings.

Meanwhile, the secondary space launched the week on firm footing although the space was quiet with trading volume light, sources said.

However, what did trade was trading higher, sources said.

The new paper from last week drifted from focus on Monday with Darling Ingredients Inc.’s 5¼% senior notes due 2027 (Ba3/BB+) and Surgery Center Holdings, Inc.’s 10% senior notes due 2027 (Caa2/CCC) largely flat in light volume.

Frontier Communications Corp.’s 8% senior notes due 2027 (B2/B/BB) were in focus with the notes reaching their highest level since pricing in mid-March.

Hexion Inc.’s 6 5/8% senior notes due 2020 jumped in high-volume activity after the company reached a deal with noteholders for a pre-packaged bankruptcy filing.

Monday marked a strong day for the energy sector with crude oil futures on the rise as the prospects for global growth improved.

California Resources Corp.’s bellwether 8% senior notes due 2022 gained as crude oil futures reached their highest level in 2019.

JBS upsizes

In Monday's primary market session, JBS priced an upsized $1 billion issue of JBS USA Lux SA, JBS USA Food Co. and JBS USA Finance, Inc. 10-year senior notes (Ba3/BB-) at par to yield 6½% in a drive-by.

The debt refinancing deal was increased from $650 million.

The yield printed at the tight end of yield talk in the 6 5/8% area.

Initial talk was also in the 6 5/8% area, a trader said.

Lead left bookrunner Barclays will bill and deliver. BMO, RBC, BBS, Bradesco and Santander were the joint bookrunners.

The market also heard that parent JBS SA, of Sao Paolo, Brazil, planned to place a $300 million add-on to its 7% senior notes due Jan. 15, 2026 on Monday.

The tap came with initial guidance in the 101 area, according to a trader who added that no deal terms had been circulated on the JBS SA add-on, at press time.

Ensign Drilling roadshow

Ensign Drilling is expected to price a $700 million offering of five-year senior notes during the April 1 week.

An investor call was scheduled to take place on Monday.

Initial talk has the deal shaping up with a yield in the 9% area, a trader said.

BMO is the left physical bookrunner for the debt refinancing deal. JP Morgan is the joint physical bookrunner.

Loxam two-part deal

Paris-based equipment rental company Loxam Group began a roadshow on Monday for a €465 million two-part offering of notes.

The debt refinancing deal includes €265 million of seven-year senior secured notes (BB-) and €200 million of eight-year senior subordinated notes (B).

The roadshow wraps up on Wednesday, and the notes are set to price thereafter.

BNP Paribas is the left lead bookrunner. Credit Agricole and Deutsche Bank are the joint bookrunners.

SGL Carbon roadshow

SGL Carbon began a roadshow on Monday for a €250 million offer of 5.5-year senior secured notes (B2).

Left global coordinator Deutsche Bank will bill and deliver for the debt refinancing. Commerzbank is the joint global coordinator. BNP Paribas, Credit Agricole, HSBC, LBBW and UniCredit are the joint bookrunners.

Last week’s paper

The new paper to price during the final week of March was slow to trade during Monday’s session with much of it drifting from focus.

Darling’s 5¼% senior notes due 2027 and Surgery Center’s 10% senior notes due 2027 were largely flat in light trading volume.

Darling’s 5¼% notes continued to trade hands around 101½, a market source said.

Darling priced a $500 million issue of the 5¼% notes at par on March 28.

Surgery Center’s 10% senior notes due 2027 continued to trade hands at 102, a market source said.

However, there were only four prints of the notes by the mid-afternoon on Monday.

Surgery Center priced a $430 million issue of the 10% notes at par on March 28.

Frontier’s new heights

Frontier’s recently priced 8% senior notes due 2027 reached their highest level since hitting the secondary space on Monday.

The 8% notes were quoted at 103 7/8 bid, 104 3/8 offered on Monday and closed the day at 104, sources said.

More than $34 million of the bonds were on the tape by the late afternoon.

The 8% notes were at 103 1/8 bid, 103½ offered last Friday.

The notes have steadily climbed since breaking for trade in mid-March, which sources attributed to their first-lien secured status in Frontier’s capital structure.

Frontier priced a $1.65 billion issue of the 8% notes at par on March 12.

Hexion gains

Hexion’s 6 5/8% senior notes due 2020 jumped in high-volume activity after the company’s prepackaged Chapter 11 bankruptcy filing.

The 6 5/8% senior notes rose 2½ points to 89 3/8 on Monday, according to a market source.

More than $22 million of the bonds were on the tape by the late afternoon.

Hexion’s 10% senior notes due 2020 were changing hands around 87 1/8 on Monday with about $13 million of the bonds on the tape.

However, Hexion’s 9% senior notes due 2020 were not active on Monday.

The notes were last trading around the 25 level.

Both the 6 5/8% senior notes and 10% senior notes are first-lien while the 9% are second-lien.

Under the prepackaged bankruptcy agreement, Hexion will raise $300 million in new equity, will receive a $1.6 billion committed credit facility, and secured $700 million in debtor-in-possession financing.

The first-lien holders will receive $1.45 billion in cash and 72.5% of the proceeds from the new equity. Second-lien and unsecured note holders will receive a 27.5% share of the new equity offering. (See related article in this issue.)

The bankruptcy filing comes ahead of an April 15 interest payment on its 6 5/8% senior notes and 10% senior notes.

Hexion’s prepackaged bankruptcy plan puts an end to the ongoing struggle of second-lien noteholders who retained counsel in October 2018 to negotiate in anticipation of the upcoming maturity.

Energy gains

Monday marked a strong day for the energy sector with crude oil futures reaching their highest levels in 2019 and further solidifying above $60 a barrel.

California Resources 8% senior notes due 2022 were posting gains alongside crude oil futures in active trading.

The 8% notes rose 1 7/8 points to 81¼ by the late afternoon, according to a market source. More than $13 million of the bonds were on the tape by the late afternoon.

After closing last Friday above $60, the barrel price of West Texas intermediate crude oil for May delivery settled at $61.77, an increase of $1.63, or 2.71% on Monday.

Crude oil futures were on the rise as the demand outlook improved amid improved economic data from China.

ETFs see big Friday inflow

High-yield ETFs saw an impressive $839 million daily inflow of cash on Friday, according to a trader.

High-yield ETFs saw a whopping $13 billion of inflows in the first quarter of 2019, the source added, noting that 2019 quarter one is the biggest quarter for the junk ETFs since the third quarter of 2012, during which they saw $13.8 billion.

Actively managed high-yield funds saw $35 million of inflows on Friday, the trader said.

Indexes gain

Indexes launched the week on firm footing on Monday.

The KDP High Yield Daily index rose 14 bps to close Monday at 70.29 with the yield now 5.81%.

The index was mixed throughout last week but closed with a cumulative loss of 3 bps on the week.

The ICE BofAML US High Yield index continued to skyrocket above the 7% threshold.

The index gained 22 bps with the year-to-date return now 7.602%.

The index saw a cumulative gain of 42.8 bps on the week last week, surpassing 7% returns on March 26.

The index initially crossed the 7% threshold on March 21 but sank below it the following day.

The index just recently passed 6% year-to-date returns on March 11.

The CDX High Yield 30 index gained 35 bps to close Monday at 107.

The index saw a cumulative gain of 54 bps on the week last week.

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