New Pinnacle bonds firm smartly; GCP hits the road with deal; energy angst continues

By Paul Deckelman and Paul A. Harris

New York, Jan. 12 – New-issue activity in the high yield market was seen to have slackened on Tuesday, with no dollar-denominated and fully junk-rated issues having priced. The sole pricing action came from the euro-denominated segment of the market, with an add-on offering from France-based commercial services and supplies company La Financiere Atalian SA.

But primaryside sources said that GCP Applied Technologies Inc. is slated to begin a roadshow Wednesday for its planned dollar-denominated seven-year deal, the first prospective junk transaction of the year that will be marketed to potential investors via a roadshow rather than just coming to market in a same-day drive-by issue, of which there have been several.

One of those quick-to-market offerings, from Pinnacle Foods Inc., was the busiest credit in Junkbondland on Tuesday, moving up solidly from Monday’s par issue price.

Traders also saw the other recent same-day deal – last week’s 7.25-year issue from semiconductor manufacturer Microsemi Corp., to have added to the already hefty gains it has notched since pricing last Thursday, although on only very constrained volume.

Away from the new-deal world, crude oil prices continued to slide lower on Tuesday, producing a ripple effect that dragged down the bonds of such energy-related credits as Transocean Inc., Oasis Petroleum Inc., Jones Energy, Inc. and EP Energy Corp.

Statistical measures of junk market performance were mixed for a third consecutive session on Tuesday. They had turned mixed on Friday versus where they had ended on Thursday, after having been down across the board for two straight sessions and alternating between higher and lower for several sessions before that. Monday was the third mixed session out of the last eight.

Pinnacle pops up

In the secondary arena, “energy and new issues were the big drivers in terms of price movement and volume.”

For instance, traders saw strong turnover and good price action on the new Pinnacle Foods 5 7/8% notes due 2024.

“It was pretty active, for sure,” one of the traders said, quoting the new issue going out around 102 bid, well up from the par level at which the Parsippany, N.J.-based producer of such familiar consumer foods brands as Duncan Hines cake mixes. Vlasic pickles and Mrs. Paul’s and Van de Kamp frozen seafood had priced its $350 million quick-to-market issue on Monday.

A second trader confirmed the hectic pace of activity in the new Pinnacle paper, seeing more than $54 million, having changed hands, easily topping the day’s Most Actives list.

At another desk, a trader saw the bonds moving around between a low bid of 101 3/8 and a high at 102½, with the last few trades of the day within a narrower 101 7/8-to-102 1/8 bid.

He opined that he was “surprised that they priced Pinnacle at 5 7/8%.

“I guess people might think it’s a BB credit – but it’s just a single-B credit.”

Microsemi bonds firm again

The only other syndicated junk bond deal to have come to market so far since the start of the new year – Thursday’s offering of 9 1/8% notes due in April of 2023 from Microsemi Corp. – remained well-bid for on Tuesday, though only in very light trading.

A trader saw their last print on the day at 104½ bid, up from Monday’s level in a 103½-to-104 bid context.

“There was only very light volume, but obviously, they were trading better.”

“Wow,” a second trader exclaimed, as he pegged the issue as moving around between 103 7/8 and 104½ bid.

However, he noted that fewer than $3 million of the new notes had changed hands during the day.

Microsemi, an Aliso Viejo, Calif.-based producer of semiconductors and other high-tech electronic and computer components, priced its drive-by offering at par on Thursday; the deal had seen considerable reverse inquiry from potential investors and was two times oversubscribed.

The new bonds had moved up to 101½ bid in initial aftermarket dealings later that same session, with some $9 million changing hands by the close, setting the stage for Friday’s busier session – over $15 million traded – when the bonds had moved up to around 103½.

The price gains continued on Monday and again on Tuesday, though on greatly reduced volume, as indicated.

Energy off again

Away from the new issues, one of the traders said that “the energy names were getting beat up again,” in line with the continued slide in world crude oil prices, which were down for a seventh straight session Tuesday and for an eighth time in the last nine trading days.

The February contract for the benchmark U.S. crude oil grade, West Texas Intermediate, dipped below the psychologically potent $30 per barrel mark for the first time since December of 2003; after bottoming at $29.93 per barrel in intraday dealings, it came off the lows but still settled down 97 cents, or 3.1%, at $30.44 on the New York Mercantile Exchange.

Meanwhile, the February contract for the benchmark international Brent crude grade fell by 69 cents, to $30.86 per barrel, on the London ICE Futures Exchange.

Against that somber backdrop, the trader said that Jones Energy’s 6¾% notes due 2022 was one of the biggest losers, falling by 6 points on the session, to 38½ bid. More than $6.5 million of the notes changed hands on the day.

He also saw EP Energy’s 9 3/8% notes due 2020 off by some 5½ points on the day, going home at 52 bid, on volume of over $9 million.

The Oasis Petroleum 6 7/8% notes due 2022 dropped by more than 4½ points, to 57¾ bid, on very busy volume of almost $17 million.

Besides the oil and natural gas exploration and production names, oilfield service credits, such as offshore oil driller Transocean Inc. were lower; its 7 1/8% notes due 2021 closed down 7/8 point at 61 1/8 bid, with nearly $29 million having been traded.

Indicators stay mixed

Statistical measures of junk market performance were mixed for a third consecutive session on Tuesday. They had turned mixed on Friday versus where they had ended on Thursday, after having been down across the board for two straight sessions and alternating between higher and lower for several sessions before that. Monday was the third mixed session out of the last eight.

The KDP High Yield Daily Index was down 7 basis points on the session Tuesday, ending at 63.55, its third loss in the last four sessions, including Monday’s 12-bps fall. That followed a 10-bps gain on Friday, after having slid by 21 bps on Thursday.

Its yield rose by 2 bps for a second consecutive session, to 7.14%, its third widening in the last four sessions, after having tightened by 4 bps on Friday, which followed a 7-bps increase on Thursday.

However, the Markit Series 25 CDX North American High Yield Index stayed on the upside for a second straight day with a 5/32 point gain, closing at 99 9/32 bid, 99 11/32 offered. It was the third gain in the last six sessions. The index had turned positive on Monday with a 1/16 point improvement, its first such advance after three straight losses before that, including Friday’s 13/32 point setback.

The Merrill Lynch North American Master II High Yield index, on the other hand, retreated by 0.18% on Tuesday, its second straight loss and its fourth deficit in the last five sessions. It had also fallen by 0.268% on Monday, in contrast to its 0.110% rise on Friday.

The loss extended its year-to-date loss to 0.719% from Monday’s 0.540% downturn.

It was the second straight new biggest year-to-date loss seen so far in 2016, surpassing Monday’s red-ink level.

© 2015 Prospect News.
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