Purely junk market quiet, though split-rated Cenovus, emerging Borets price; Park-Ohio on tap; Hertz hurting

By Paul Deckelman and Paul A. Harris

New York, April 4 – Things turned quiet on Tuesday in terms of purely rated high-yield names, with no new dollar-denominated and fully junk-rated offerings from domestic or industrialized-country borrowers seen having priced during the session.

That is not to say that nothing that might be of at least some interest in Junkbondland came to market during the session.

Canadian oil producer Cenovus Energy Inc. priced a $2.9 billion split-rated three-part offering of U.S. dollar senior notes, which traded briskly when the new bonds hit the aftermarket.

Emerging markets-oriented Borets International Ltd., a maker of electric submersible pump systems for the energy industry, did an upsized $330 million five-year notes deal.

Away from those credits that actually launched and then came to market on Tuesday, syndicate sources said that Wednesday would likely be a busy day in the junk precincts, with pricings anticipated from Park-Ohio Industries Inc. and USI Insurance Services.

In the secondary realm, traders said both halves of Monday’s big two-part deal from Anglo American Capital plc were actively traded, although they ended not much moved from their par issue price.

Apart from new-deal names, the traders saw considerable activity in Hertz Global Holdings Inc. bonds, with several of the vehicle rental industry leader’s different bonds seen having skidded by more than a point, on busy volume.

Statistical market performance measures turned mixed on Tuesday after having improved across the board on Monday. The indicators had also been quoted ending mixed on Friday following three more consecutive sessions on the upside.

Park-Ohio talk 6¾% area

A generally quiet Tuesday saw developments on an active forward calendar that foretells a busy back half of the April 3 week, much like the week that preceded it.

Park-Ohio Industries, Inc. talked its $350 million offering of 10-year senior notes (B3/B) to yield in the 6¾% area.

Books close at noon ET on Wednesday, except for accounts taking part in the roadshow on the West Coast of the United States, and the deal, via lead left bookrunner Barclays, is set to price thereafter.

Elsewhere, USI Insurance Services is also expected to price its offering of eight-year senior notes (Caa2/CCC+) on Wednesday, according to market sources who add that initial price talk is in the 7% area.

Late Tuesday word circulated the market that USI upsized its term loan by $90 million. However there was no word as to whether the loan upsize impacts the bond size, last heard at $705 million, sources said.

Petra pricing Wednesday

Much of the remainder of Tuesday's news had at least one foot planted in the emerging markets.

Petra Diamonds Ltd. expects to price its $600 million offering of five-year senior secured second lien notes (B2/B+) on Wednesday.

Formal price talk remains to be announced. However initial price talk is in the 7½% area.

The deal has been marketed by means of a two-team emerging markets-style roadshow which was set to wind up Tuesday in Boston, Toronto and the on West Coast of the United States.

It is playing to both emerging markets and high-yield accounts, sources say.

Joint global coordinator Barclays will bill and deliver. RBC is also a joint global coordinator. BMO is the joint bookrunner.

In another dollar-denominated deal with a definite emerging market cache, Borets International Ltd. launched and priced an upsized $330 million issue of non-callable five-year notes (B1/expected BB-) at par to yield 6½% on Tuesday, according to a market source.

The issue size increased from $300 million.

The yield printed through final yield talk in the 6¾% area. Initial price talk was 6¾% to 7%.

The deal garnered some attention from European high-yield accounts, a source said.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were notably mixed on Monday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $72 million of outflows on the day.

However actively managed funds saw $305 million of inflows on Monday.

Dedicated bank loan funds were also positive on the day, with $80 million of inflows.

Anglo American trades actively

In the secondary arena, traders said that the $1 billion two-part deal that priced on Monday from London-based mining concern Anglo American plc via its Anglo American Capital plc financing subsidiary dominated the Most Actives list on Tuesday.

A trader said that more than $67 million of the company’s 4¾% notes due 2027 changed hands, firming slightly on the session to 100 3/8, up from 100¼ bid late Monday.

Another market source, noting the lack of real price movement in the notes, sarcastically remarked “great performance.”

The company had priced $700 million of that paper at par on Monday in a non-deal roadshow transaction, along with $300 million of 3¾% notes due 2022.

The latter bonds were also trading around the 100 3/8 level Tuesday, on volume of more than $42 million.

Cenovus seen busy

A trader remarked that the new three-part Cenovus Energy deal was “very active all around” after the Calgary, Alta.-based split-rated (Ba2/BBB/BBB-) offering priced.

Its $1.2 billion of 2027 were trading at the equivalent of just over 99¾ bid, on volume of more than $30 million.

Its $1 billion of new 5.40% long bonds due 2047 were slightly above 100¼ bid, with over $25 million traded, while its $700 million issue of 5¼% bonds due 2037 were pegged at 99 11/16 bid, with some $15 million of turnover.

The company’s already outstanding 6¾% bonds due 2039 finished slightly easier at 114 7/8 bid, with volume a brisk $36 million.

Aston Martin rise continues

A trader said that Friday’s dollar-denominated offering from British luxury carmaker Aston Martin continued to firm on Tuesday, gaining another ¼ point to end at 101¾ bid, with around $14 million traded.

The company had priced $400 million of the 6 ½% senior secured notes due 2022 at par, as part of a larger dual-currency deal that also included a sterling component.

Hertz gets hit

Traders saw active trading on the downside in car-rental giant Hertz’s several issues of high-yield bonds, but saw no firm news out about the company that might explain the move.

Its 5 7/8% notes due 2020 skidded by 1¾ points to end at 93¼ bid, with about $16 million traded.

Its 6¼% notes due 2022 likewise dropped 1½ points, to 92½ bid, on $13 million of volume.

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday after having improved across the board on Monday. The indicators had also been quoted ending mixed on Friday following three more consecutive sessions on the upside.

The KDP High Yield Daily index was unchanged on Tuesday at 71.83, after having edged up by 1 basis point to that level on Monday, its fifth straight gain after one loss.

For a second consecutive session, its yield was unchanged at 5.28%, after six consecutive tightenings, including Friday, when it had come in by 1 bp.

The Markit CDX Series 28 index rose for a second straight session on Tuesday, firming by 1/8 point to 107 5/16 bid, 107 11/32 offered, after having edged marginally higher on Monday, in contrast with Friday’s narrow loss.

But the Merrill Lynch North American High Yield index suffered its first loss after five consecutive gains, easing by 0.011%; on Monday, it had firmed by 0.027.

Tuesday’s setback cut the index’s year-to-date return to 2.725% from Monday’s close at 2.736%.

Those levels remain below the 2017 peak of 3.19%, set on March 1.

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