Six issuers sell $3.8 billion; new notes struggle in secondary; funds add $1.24 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 18 – Six issuers brought a combined seven tranches of speculative-grade, dollar-denominated issuance, pricing a combined total face amount of $3.8 billion, as the June junk jam continued on Thursday.

All eyes were on PG&E Corp. as it priced a downsized $2 billion amount of senior secured notes (B1/BB-/BB) in two tranches as part of the financing for its exit from bankruptcy.

Also on Thursday, Gartner, Inc. priced an upsized $800 million, Brink's Co. priced a $400 million issue, Abercrombie & Fitch Management Co. priced an upsized $350 million issue, and Century Aluminum Co. priced $250 million of PIK notes.

Just two days after pricing a $400 million issue of 5 5/8% notes due 2028, Dana Inc. returned to price a $100 million tap of its 5 3/8% senior notes due Nov. 15, 2027 (expected ratings B2/BB-/BB+) at par.

Meanwhile, the secondary space was soft on Thursday with several recent deals falling flat or lagging their issue prices in the aftermarket.

Iron Mountain Inc.’s three tranches of senior notes (Ba3/BB) and Scientific Games Corp.’s 8 5/8% senior notes due 2025 (Caa2/B-) closed Thursday’s session below par.

DCP Midstream Operating, LP’s 5 5/8% senior notes due 2027 (Ba2/BB+/BB+), Viasat, Inc.’s 6½% senior notes due 2028 (Caa1/B/BB-) and DPL Inc.’s 4 1/8% senior notes due 2025 (Ba1/BB) were largely wrapped around their issue prices in active trading.

Energizer Holdings, Inc.’s 4¾% senior notes due 2028 (B2/B+) held onto a nominal premium in active trading.

However, Radio Systems Corp.’s 6¾% senior notes due 2025 outperformed with the notes shooting up in high-volume activity.

While the market was soft on Thursday, cash continued to enter the space with high-yield mutual and exchange-traded funds seeing inflows of $1.239 billion for the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flows report.

Thursday’s primary

Six issuers brought a combined seven tranches of speculative-grade, dollar-denominated issuance, pricing a combined total face amount of $3.8 billion, as the June junk jam continued on Thursday.

Issuers saw tight executions, with yields sometimes coming dozens of basis points inside of initial guidance.

In a deal the market had been focused on for the past two weeks, PG&E Corp. priced a downsized $2 billion amount of senior secured notes (B1/BB-/BB) in two tranches, as part of the financing for its exit from bankruptcy.

The deal included $1 billion of eight-year notes which priced at par to yield 5%, at the tight end of the 5% to 5¼% yield talk, and deep inside of the 5¾% to 6% initial guidance.

It also included $1 billion of 10-year notes which priced at par to yield 5¼%, at the tight end of the 5¼% to 5½% yield talk and, again, deep inside of the 6% to 6¼% initial guidance.

The notes offer was downsized from $3.75 billion with the shift of $1.75 billion of proceeds to the term loan, increasing its size to $2.75 billion from $1 billion.

With the downsize, a proposed tranche of five-year notes was withdrawn from the market.

Timing was accelerated. It had been announced earlier in the week as expected Friday business.

The new paper was performing well in the secondary space with the 5% notes closing Thursday’s session at par ¾ and the 5¼% notes closing the day at 101½.

Elsewhere, Gartner priced an upsized $800 million issue of eight-year senior notes (Ba3/BB) at par to yield 4½% in a drive-by.

The issue size increased from $500 million.

The yield came at the tight end of the 4½% to 4¾% yield talk. Initial was in the 4¾% area.

Brink's priced a $400 million issue of five-year senior notes (Ba3/BB-/BB+) at par to yield 5½% in a drive-by.

The yield printed at the tight end of yield talk in the 5 5/8% area. Initial talk was in the high 5% area.

Abercrombie & Fitch Management priced an upsized $350 million issue of five-year senior secured notes (Ba2/BB-) at par to yield 8¾%.

The issue size increased from $300 million.

The yield printed at the tight end of the 8¾% to 9% yield talk. Initial guidance was in the 9% area.

And from the high beta reaches of the high-yield credit spectrum Century Aluminum Co. priced $250 million of five-year senior secured PIK notes (Caa2/B) with an all-in coupon of 12%, at an issue price of 99.

The notes bear interest at 10% for cash payment. That rate steps up by 2% for PIK payments.

The coupon and price came on top of talk.

Iron Mountain struggles

Iron Mountain’s three tranches of senior notes were struggling in the aftermarket with each tranche closing the day below par.

The 5% senior notes due 2025 closed Thursday at 99 5/8 with about $58 million in reported volume, according to a market source.

The 5¼% senior notes due 2028 closed the day at 99 3/8.

The large liquid tranche was among the most actively traded issues in the secondary space with more than $86 million in reported volume.

The least active of the tranches, the 5 5/8% senior notes due 2032 closed the day at 99 7/8.

Iron Mountain priced a $500 million tranche of the 5% notes, a $1.3 billion tranche of the 5¼% notes and a $600 million tranche of the 5 5/8% notes at par on Wednesday.

The deal was initially launched as a two-tranche $1.8 billion offering with the 12-year tranche subsequently added on.

Scientific Games below par

Scientific Games’ 8 5/8% senior notes due 2025 sank further below par in active trading on Thursday.

After a weak break, the notes traded off another ¾ point to close Thursday at 99, according to a market source.

The notes remained active with more than $27 million on the tape.

They were wrapped around par after breaking for trade on Wednesday.

The notes priced tight and the company is a weak credit, a source said, in explanation of their weak trading level.

Scientific Games priced an upsized $550 million issue of the 8 5/8% notes at par on Wednesday.

The issue size increased from $350 million.

The yield printed at the tight end of the 8 5/8% to 8¾% yield talk. Initial talk was 8¾% to 9%.

Flat

DCP Midstream’s 5 5/8% senior notes due 2027, Viasat’s 6½% senior notes due 2028, and DPL’s 4 1/8% senior notes due 2025 all fell flat in the aftermarket.

DCP Midstream’s 5 5/8% senior notes due 2027 were largely wrapped around par during Thursday’s session.

While flat, the notes were active with about $46 million in reported volume, according to a market source.

DCP Midstream priced an upsized $500 million issue of the 5 5/8% notes at par on Wednesday.

The yield printed at the tight end of yield talk in the 5¾% area. Initial talk was in the 6% area.

The issue size was increased from $400 million.

Viasat’s 6½% senior notes due 2028 were also largely wrapped around par in active trading on Thursday.

The notes closed the day at 99 7/8 with about $21 million in reported volume, according to a market source.

Viasat priced a $400 million issue of the 6½% notes at par on Wednesday.

Pricing came on top of talk for a yield in the mid-6% area.

DPL’s 4 1/8% senior notes due 2025 were also trading on either side of par during Thursday’s session.

The 4 1/8% notes closed the day at par 1/8 with $27 million on the tape, according to a market source.

DPL priced a $415 million issue of the 4 1/8% notes at par on Wednesday.

The yield printed at the tight end of yield talk in the 4¼% area.

Energizer at a premium

Energizer’s 4¾% senior notes due 2028 held onto a nominal premium in high-volume activity on Thursday.

The notes closed the day at par ¼ with more than $111 million in reported volume.

Energizer priced a $600 million issue of the 4¾% notes at par on Wednesday.

The yield printed at the tight end of the 4¾% to 5% yield talk. Initial talk was in the low-5% area.

Radio Systems outperforms

Radio Systems’ 6¾% senior notes due 2025 soared in high-volume activity on Thursday.

The notes traded up to a 103-handle, closing the day at 103¾, according to a market source.

The notes had more than $113 million in reported volume.

Radio Systems priced a $625 million issue of the 6¾% notes at par on Wednesday.

Indexes down

Indexes were soft on Thursday after spending most of the week mixed.

The KDP High Yield Daily index dropped 20 bps to close Thursday at 66.21 with the yield now 6.24%. The index was up 3 bps on Wednesday and 56 bps on Tuesday after dropping 7 bps on Monday.

The ICE BofAML US High Yield index dropped 37.2 bps on Thursday with the year-to-date return now negative 3.202%.

The index was down 2.2 bps on Wednesday, jumped 133.6 bps on Tuesday and dropped 10.1 bps on Monday.

The CDX High Yield 30 index dropped 55 bps to close Thursday at 100.78. The index was down 30 bps on Wednesday and 9 bps on Tuesday after a 115 bps gain on Monday.

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