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Energy Companies Dominate Junk Bond Issuance in Week to July 17

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Pricing trends

Junk bond issuers returned to the primary market in the week ended July 17 as the situation in Greece stabilized, but remained cautious due to market volatility. Most of the eight issues were rated BB.

ETFs like the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) invest in junk bonds.

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Deal highlight of the week

WPX Energy (WPX) is an independent natural gas and oil exploration and production company. It issued senior notes worth $1.0 billion last week. The two-tranche issue, rated Ba1/BB, consisted of:

  • $500 million in 7.5% senior notes due on August 1, 2020. The notes were issued at 100% of the aggregate principal amount at a yield to worst of 7.5%.
  • $500 million in 8.25% senior notes due on August 1, 2023. The notes were issued at 100% of the aggregate principal amount at a yield to worst of 8.25%.

WPX Energy raised the quantum to finance the acquisition of RKI Exploration & Production.

Issuance by Solera Holdings

Solera Holdings (SLH) provides risk and asset management software and services to the auto and property industries. Via its subsidiary Audatex North America, it raised junk bonds worth $850 million last week. The bonds were rated B1/BB- and carried a coupon of 6.125%. The bonds, which will mature on November 1, 2023, were issued at 99.5% of the par value with a yield to worst of 6.201%. Among other things, Solera intends to pay for purchasing equity interests in its Service Repair Solutions joint venture.

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Issuance by Genesis Energy

Genesis Energy (GEL) is a diversified midstream energy master limited partnership. It issued senior notes worth $750 million last week. The bonds were rated B1/B+, and carried a coupon of 6.75%. The junk bonds, which will mature on August 1, 2022, were issued at 98.63% of the par value with a yield to worst of 7.0%. Genesis Energy will use proceeds of the sale for the acquisition of the offshore pipelines and services business of Enterprise Products Operating.

Issuance by Sunoco

Sunoco (SUN) is an MLP that distributes motor fuel to convenience stores, independent dealers, commercial customers, and distributors. It issued senior notes worth $600 million last week. The bonds were rated Ba3/BB, and carried a coupon of 5.5%. The junk bonds, which will mature on August 1, 2020, were issued at 100% of the par value with a yield to worst of 5.5%. Sunoco will use proceeds of the sale for the acquisition of Susser Holdings from two wholly owned subsidiaries of Energy Transfer Partners (ETP).

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