Primary quiet with no pricings, though Tapstone slates, GFL on tap; new USG stays busy, better

By Paul Deckelman and Paul A. Harris

New York, May 2 – The high-yield primary sphere finally took a breather on Tuesday, with syndicate sources reporting no pricings of any new U.S. dollar-denominated paper for the first time in more than two weeks, since April 17.

That having been said, there was activity going on behind the scenes.

Oil and gas operator Tapstone Energy LLC was heard to be getting ready to hit the road to market a $300 million issue of five-year notes to prospective investors.

Meanwhile, Canadian waste management services provider GFL Environmental Inc. is expected to price $350 million of five-year paper on Wednesday.

Among recently priced issues, building products manufacturer USG Corp.’s new 10-year issue, which priced as a drive-by deal on Monday, was busily traded in the aftermarket for a second straight session, modestly firming from the strong levels seen in its initial secondary activity on Monday.

But traders saw only reduced volume levels in other recent new deals such as Friday’s issue from Covey Park Energy LLC and Thursday’s offering from Pharmaceutical Product Development LLC.

Statistical market performance measures turned mixed on Tuesday after having been higher across the board for three straight sessions on Thursday, Friday and again on Monday. It was the second mixed session in the last five trading days.

GFL pricing Wednesday

The primary market put up a goose egg on Tuesday, as no deals were priced.

In Tuesday news, GFL Environmental Inc. plans to price $350 million of five-year senior notes (B3/B-) on Wednesday.

While the market awaits official talk, early guidance is in the 6% area, a sellside source said.

Barclays is the lead left bookrunner. BMO, Credit Suisse and Macquarie are the joint bookrunners.

The Vaughan, Ont.-based waste management services company plans to use the proceeds to refinance its 7 7/8% senior notes due 2020, fund certain acquisitions, repay drawn amounts under its revolving credit facility and to put cash on its balance sheet for general corporate purposes.

Tapstone roadshow

Tapstone Energy LLC plans to start a roadshow on Wednesday for a $300 million issue of five-year senior notes.

BofA Merrill Lynch is leading the debt refinancing deal.

Primary market activity has been light for the past two weeks, sources have been noting.

Part of the reason is an earnings blackout that is delaying some potential issuers who are waiting their turns to put up fresh financial numbers.

However beyond that blackout that May pipeline is not vast, sources say.

Norican secured notes

Activity has also been muted in the European market where the Tuesday session represented the first day back to work following the extended May Day holiday weekend, for many workers.

Denmark's Norican Group plans to price €340 million of six-year senior secured notes (B2/B) in the middle of the present week, trailing an investor roadshow.

JPMorgan is managing the offer.

The Herlev Municipality, Denmark-based provider of metal parts machining and preparation equipment and services plans to use the proceeds to repay bank debt.

There may be one or two new deal announcements this week, a London-based sellside source said on Tuesday.

However the deals in question might just as easily first appear during the week ahead, the source said.

Monday outflows

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

High yield ETFs sustained $42 million of outflows on the day.

Actively managed funds sustained $145 million of outflows on Monday.

Dedicated bank loan funds remained in the green on Monday, with $25 million of inflows, the source said.

USG gains continue

In the secondary market, a trader remarked that USG Corp.’s new 4 7/8% notes due 2027 “added to their gains” that they had notched in initial aftermarket trading on Monday, moving up by another 1/8 point, closing at 101 3/8 bid.

Earlier in the day, a trader had seen the bonds “wrapped around 101.”

And at another desk, a market source said that the new paper had moved around during the day between a low of 100¾ and a high of 101 3/8 bid.

The Chicago-based building products manufacturer’s quick-to-market $500 million offering had jumped to around the 101¼ mark in initial aftermarket dealings after pricing at par on Monday.

A market source said that USG’s issue was active for a second straight session, racking up more than $43 million traded on Tuesday around that 101 3/8 bid level.

On Monday, the new deal had topped the high yield Most Actives list, with over $47 million having changed hands.

Recent deals less busy

While there was ample investor interest in the new USG issue for a second day in a row, traders reported a fall-off in dealings in some of the other recently priced names.

For instance, he saw just $7 million of Covey Park Energy’s 7½% notes due 2025, pegging those bonds in a 101½-to-101 7/8 bid context.

That followed two straight sessions of considerably more activity in the Dallas-based oil and natural gas exploration and production company’s $450 million issue.

It had priced at par on Friday, in a regularly scheduled deal off the forward calendar. Funding subsidiary Covey Park Energy Finance Corp. was a co-issuer on the deal along with the parent company.

When the bonds moved into the aftermarket later Friday, they jumped to around the 101½ bid level, on market-leading volume of over $43 million.

And that brisk pace continued on Monday, when another $23 million of the new deal was heard to have moved around, building on its initial gains to close at 101¾ bid.

The first trader also saw only modest volume in Thursday’s issue of 7 5/8% PIK toggle notes due 2022 from Pharmaceutical Product Development, a Wilmington, N.C.-based provider of contract research services to the pharmaceutical and biotech industries.

He saw the bonds going home in a bid range of 102 1/8 to 102½, but with only around $7 million of turnover on the day.

That was well down from the more than $35 million which traded on Thursday after that $550 million tranche – officially brought to market by funding subsidiary Eagle Holding Co. II LLC -- priced at par in a scheduled forward calendar transaction.

Those bonds initially climbed to 101 5/8 bid, a trader said, and had continued to firm on Friday to just below the 102 bid level, with over $32 million having changed hands that day.

But activity fell off the charts on Monday, and was not much stronger during Tuesday’s session.

Talen trades off

Among other deals that have come to market over the past few weeks, a market source said that Talen Energy Supply LLC’s 9½% notes due 2022 were trading at around the 90 bid level, down some 2¾ points on the day, with over $12 million of volume.

The Allentown, Pa.-based energy and power generation company’s offering has struggled from the get-go, with that $400 million regularly scheduled issue pricing at a deeply discounted 97 bid back on April 6, after having been downsized from $500 million originally.

Traders said the issue “never really caught on,” as one put it, continuing to deteriorate from that already low issue price down to current levels in the days and weeks that followed.

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday after having been higher across the board for three straight sessions on Thursday, Friday and again on Monday. It was the second mixed session in the last five trading days.

The KDP High Yield Daily index rose by 6 basis points on Tuesday to end at 72.26, after having been unchanged on Monday following six consecutive gains before that, including Friday’s 3 bps rise.

Its yield came in by 2 bps on Tuesday to 5.12%, after having widened by 2 bps on Monday – its first such rise after six straight sessions in which the yield had tightened.

But the Markit CDX Series 28 index was marginally lower on Tuesday, after having firmed for two consecutive sessions before that, including Monday’s 5/32 point improvement.

The Merrill Lynch North American High Yield index, though, continued to roll unstoppably on, finishing up by 0.091%, its 10th successive advance. On Monday, it had gained 0.012%.

Tuesday’s upturn lifted the index’s year-to-date return to 3.979%, its seventh straight new year-to-date high point, surpassing the previous 2017 peak level of 3.888% set on Monday.

© 2015 Prospect News.
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