Earthstone jumps on acquisition; Tenneco improves; MultiPlan weaker

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 21 – The high-yield primary market sat idle on Monday.

New issue activity is expected to be sparse ahead of the Labor Day holiday weekend, which gets underway following the Sept. 1 close.

Opportunistic financings and smaller offerings from off-the-run issuers are among the deals that occasionally appear during the market’s late-August Dog Days.

However the backdrop for such trades is presently far from ideal, sources say.

Risk-free rates have been on the move, and are spiking, making it difficult to price new issues, they add.

A trader pointed to the 10-year Treasury bond, which was yielding 4.34%, heading into Monday’s close, perched near its highest levels in the past a decade-and-a-half.

Meanwhile, the secondary space saw a soft open on Monday as Treasury yields climbed.

However, buyers again appeared mid-session to lift the market into the close, which ended the day largely unchanged.

With the primary market pipeline drying up, trading activity was light with topical news the driving force of activity in the space.

And news surrounding Earthstone Energy Holdings, LLC’s acquisition was the focus of the market.

Earthstone’s senior notes (B3/BB-) jumped following reports of Permian Resources Corp.’s $4.5 billion acquisition of the company.

Tenneco Inc.’s recently priced 8% senior secured notes due 2028 (B1/B) continued to improve in heavy volume although they remained well below their discounted issue price.

MultiPlan Corp.’s senior notes saw some selling pressure on Monday with the highly levered company continuing to decline since reporting earnings in early August.

Earthstone’s acquisition

Earthstone’s senior notes were the major movers of an otherwise uneventful day in the secondary space, jumping 3 to 6 points following news of the company’s acquisition.

The 8% senior notes due 2027 were among the most actively traded issue in the secondary space, rising 3 points.

They closed the day wrapped around 102 with the yield about 7 1/8%, a source said.

There was $29 million in reported volume.

The 9 7/8% senior notes due 2031 climbed 6 points to a 109-handle.

They closed the day at 109¼ with the yield about 7½%.

There was $17 million in reported volume.

Earthstone’s senior notes soared following news Permian Resources would acquire the company in an all-stock transaction with an enterprise value of $4.5 billion.

Tenneco improves

Tenneco’s recently priced 8% senior secured notes due 2028 continued to improve in heavy volume on Monday although they remained well below their deeply discounted issue price.

The 8% notes were up 3/8 to ½ point.

They were marked at 82¼ bid, 83 offered and closed the day wrapped around 82½, sources said.

There was $23 million in reported volume.

The notes have made steady gains over the past two sessions after trading down to an 81-handle last Thursday.

The $1.9 billion issue priced at 85 to yield 11.933% on Aug. 15.

MultiPlan under pressure

MultiPlan’s senior notes were under pressure on Monday with selling in the name accelerating after a disappointing earnings report earlier in the month.

The 5½% senior secured notes due 2028 (B1/B) fell 1 point to break below an 83-handle.

They closed the day in the 82 5/8 to 83 context with the yield rising to just shy of 10%, according to a market source.

The notes were wrapped around 87 heading into their Aug. 2 earnings report.

MultiPlan’s 5¾% senior notes due 2028 (Caa1/CCC+) were down 1½ to 1¾ point, now on a 72-handle.

They were changing hands in the 72¼ to 72½ context heading into the market close with the yield rising to 13¼%, a source said.

There was $7.5 million in reported volume.

The notes were wrapped around 76 heading into earnings.

The notes have been on a steady decline since reporting earnings in early August with the company’s leverage increasing as its EBITDA decreases, a source said.

Indexes

The KDP High Yield Daily index was down 12 bps to close Monday at 49.61 with the yield now 7.83%.

The index posted a cumulative loss of 50 bps on the week.

The ICE BofAML US High Yield index shaved off 6.4 bps with the year-to-date return now 5.654%.

The CDX High Yield 30 index gained 16 bps to close Monday at 101.86.

The index posted a cumulative loss of 98 bps on the week.

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