High yield investors have been spoilt for choice so far this year, with a broad range of issuers hitting the market either side of the Martin Luther King, Jr holiday weekend. But the deals on offer are also an indication of investors’ desperation for yield, as spreads continue to grind tighter.

The strong start to the year saw nearly USD 7bn in deals priced during the first full week of January.

Two transactions in particular—a debut high yield bond from Texas oil driller Moss Creek Resources and a PIK note from Irish packaging company Ardagh—exemplify both investors’ appetite for risk and their concerns about just how bullish the market has become, several market sources told Debtwire.

“Coming into the New Year, [investor] cash balances were significant,” said a buysider. “The amount of cash that is potentially going into the high yield market has been rather dramatic.”

Moss Creek priced its upsized USD 700m eight-year deal on Friday, but only after it gave into pressure from investors to tighten the deal’s covenant package to restrict the incurrence of additional debt and limit the equity clawback to publicly issued stock, among other revisions.

The recent rise in oil—WTI closed at USD 63.73 per barrel on Tuesday, compared to USD 50 at the start of 4Q17—cracks open the door for many new issuers in the sector, said buysiders.

“If oil stays over USD 60, we will see quite a bit of issuance, and some new issuers as well,” said a second buysider. At those price levels, “some of these credits actually start to work.”

However, Moss Creek’s deal showed that buysiders still have some discipline when it comes to energy names, and are keen to avoid a repeat of the loose documentation that enabled many bondholders to be primed during the commodities rout of 2014 and 2015.

“Investors are so motivated that at first glance it seems like they’ve forgotten everything from 2014,” said a third buysider. “But when something more speculative like Moss Creek or Lonestar comes along, they want protections.”

Sole lead BMO launched Moss Creek’s deal as a USD 650m transaction with whispers in the 7% area early last week. After the covenant revisions and price talk of 7.25%-7.5% were announced on Thursday, the deal was upsized to USD 700m and priced at 7.5% and par on Friday, according to a source close to the transaction. The notes were trading at around 103 on Tuesday, according to a buysider.

Other deals in the energy sector have fared well lately, with buyside and sellside sources both pointing to rising oil prices as a catalyst for more issuance from the energy sector.

This week, Nabors Industries priced an USD 800m 5.75% senior bond due 2025, upsized from USD 600m.

Last week, Sunoco priced a well-received USD 1.75bn multi-tranche senior deal, and offshore drilling services provider Ensco came to market with an upsized USD 1bn eight-year non-call life deal to fund a tender of its existing 2019, 2020, and 2021 notes.

Ensco’s deal was upsized from its initial target of USD 500m, and priced on Thursday at 7.75% and par, inside talk of 8%, according to a source close to the transaction. The deal was trading at 101 on Wednesday, according to MarketAxess.

“Oilfield services was the weak link in the energy food chain,” said the second buysider. “But they managed to upsize their deal. We’ll see more of these energy companies coming to market.”

One banker said that amid the rise in oil prices, their institution had renewed talks with several debut high yield issuers in the energy sector who were unable to print deals last year because of volatility in the sector.

However, some buysiders cautioned that investors should not rely on rising oil prices for a change in fortune at companies they wouldn’t have touched not too long ago: “I don’t think you want to rely on that as your protection,” the second buysider said of the uptick in oil.

PIK your poison

Meanwhile, a PIK deal from Ardagh gave investors another option for risk, from a well-known company but at the deeply subordinated entity of the capital structure. The USD 350m notes due 2023 were issued out of newly formed subsidiary ARD Securities Finance.

The notes—which are PIK for life rather than having a toggle—priced at 8.75%, well inside initial whispers of 10% circulated earlier in the week, according to sources familiar with the situation.

“It’s a good company and they’re pretty resilient, but that’s a difficult capital structure,” said the second buysider. “We like the assets, but this new bond is highly subordinated.”

Several other deals priced. BofA ML-led deals for chemical manufacturer Ingevity and retailer L Brands fared well in the primary market last week.

Ingevity’s USD 300m senior unsecured notes due 2026 launched on Monday (8 January) and priced the next day at 4.5% and par, while L Brands’ USD 500m senior unsecured guaranteed note due 2028 announced Monday morning and priced later that day at 5.25% and par, the tight end of talk, Debtwire reported.

Goldman Sachs also launched a USD 1.15bn senior unsecured note due 2028 for food service provider Aramark on Wednesday, which priced at 5% and par, the tight end of talk of 5%-5.125%, the next day.

Among deals due to price this week, Arby’s is roadshowing a USD 485m senior unsecured note deal to finance the acquisition of Buffalo Wild Wings. Commitments for the loan portion of the financing are expected today.

And Crown is holding an investor call today for a USD 750m note offering to help finance its acquisition of Signode Industrial Group. The multi-currency financing includes dollar and euro tranches in both loans and bonds.

2018 Debtwire