Primary prices $4.75 billion in six tranches; Fresh Market, Antero gain in uncertain market

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 23 – As forecast, a sleepy beginning to the Sept. 21 week gave way to a massive Wednesday which saw five issuers price a total of six tranches, in high-yield executions, to raise a combined $4.75 billion.

Meanwhile, losses continued to mount for the secondary space with selling pressure driving down the overall market, sources said.

There were large bids-wanted-in-competition lists circulating the market on Wednesday, a source said.

Following a $1.1 billion outflow from the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) on Monday alone, one of the largest outflows in its history, high-yield ETF and mutual funds were poised for a multibillion-dollar outflow on the week.

“There’s a lot of uncertainty in the market right now,” a source said.

However, while the overall market was heavy, some names were posting gains.

Antero Resources Corp.’s 5 3/8% senior notes due 2021 (B3/B) were on the rise following a ratings upgrade.

Fresh Market Inc.’s 9¾% senior notes due 2023 (Caa1/CCC+) were among the major gainers of Wednesday’s session with the notes up more than 3 points in active trading.

Recent deals continued to dominate the tape.

Energizer Holdings, Inc.’s 4 3/8% senior notes due 2029 (B2/B+) saw renewed attention in the secondary space with the notes slightly weaker in high-volume activity.

Wednesday summary

Of the six tranches to price on Wednesday, four of the five issuers appeared at the drive-through lane.

Three of the five upsized their offerings.

However, against a backdrop of a substantial sell-off in the stock market, with the Dow falling 525 points on the day, executions were a mixed bag.

Three of Wednesday's six tranches came at the tight ends of talk, while two came in the middle and one came at the wide end.

Two megadeals

Two megadeals cleared the market.

In a split-rated deal that received a high-yield execution, Centene Corp. priced a $2.2 billion 3% 10-year senior bullet (Ba1/BBB-/BB+) in the middle of talk.

The deal attracted high-grade investors and crossover accounts, a trader said, adding that prior to the stock market sell-off high-yield observers were watching for an upsize (perhaps substantial), and anticipating a two-handle coupon.

And at the other end of the vast expanse of the high-yield credit curve, at the conclusion of a roadshow, Carvana Co. priced an upsized $1.1 billion (from $1 billion) of senior notes (Caa2/CCC+) in two tranches.

The “triple-hooks” deal included $500 million of 5 5/8% five-year notes and an upsized $600 million (from $500 million) of 5 7/8% eight-year notes, both pricing at the tight ends of talk.

The deal was at least three-times oversubscribed at its original size, a trader said.

Primary backdrop

As mentioned, Wednesday's burst of new-issue action took place as a sell-off was underway in the stock market.

In high yield, cash bonds slid ¼ to ½ point, at trader said, adding that “volumes are picking up.”

Given substantial outflows from the high-yield asset class (see below), and weakness in the broader capital markets, traders saw substantial bids-wanted-in-competition orders (BWICs) from the high-yield ETFs. However, one trader reported also seeing a “decent size OWIC” (offers wanted in competition).

Wednesday's primary market action also saw modest growth in the active forward calendar, which ended the session at $2.25 billion, all of it expected to clear ahead of the weekend (see related stories in this issue).

Antero upgraded

Antero Resources’ 5 3/8% senior notes due 2021 were on the rise on Wednesday following a Moody’s Investors Service upgrade.

The 5 3/8% notes rose 1¼ points to close the day at 96¼ with the yield to maturity now 9%.

With the unsecured notes upgraded, investors were growing more confident the company would be able to cover the notes, which mature in a little over one year, a source said.

Short-dated paper with high yields have also been in demand.

Moody’s raised Antero Resources’ corporate family credit rating to B2 from B3 and raised its unsecured debt to B3 from Caa1, Prospect News reported.

The upgrade was the result of the natural gas and oil company’s reduced refinancing risk and improved cost structure, the ratings agency said.

The Fresh Market

Fresh Market’s 9¾% senior notes due 2023 were making large gains on an otherwise heavy day for the market.

The 9¾% notes were up 3½ points to close the day at 90, a source said.

The notes were active with $9 million in reported volume.

Sources queried were unsure about the cause of the activity.

Energizer active

Energizer’s 4 3/8% senior notes due 2029 saw renewed attention in the secondary space with the notes slightly weaker in high-volume activity.

The 4 3/8% notes dropped about ¼ point. They were changing hands in the 99¾ to 99 7/8 context heading into the market close, a source said.

There was more than $34 million of the bonds on the tape during Wednesday’s session.

The notes have largely been wrapped around their issue price since Energizer priced the $800 million issue at par on Sept. 16.

$1.77 billion Tuesday outflows

The cash flows of the dedicated high-yield bond funds remained deeply negative on Tuesday, the most recent session for which data was available at press time, according to a market source.

The combined funds sustained $1.77 billion of net outflows on the day, following Monday's net outflows of $1.16 billion.

Also, for the second consecutive day high-yield ETFs disgorged in excess of $1 billion on Tuesday.

Tuesday's $1.63 billion of daily outflows from the ETFs follows Monday's $1.3 billion of outflows, the source recounted.

Actively managed funds saw $140 million of outflows on Tuesday.

With four straight sessions of outflows the combined funds are tracking $3.4 billion of net outflows on the week to Wednesday's close, with Wednesday's funds flows numbers still pending at press time, according to the market source.

A report on the weekly cash flows of the various asset classes, prepared by the Refinitiv Lipper Fund Flow Report Newsline, customarily surfaces each Thursday afternoon.

Notwithstanding the pending Wednesday fund flows number, at negative-$3.4 billion on the week to the Tuesday close the combined funds are already tracking their biggest weekly outflows since the week ending July 1, which saw $5.55 billion of net outflows, the market source said.

Indexes down again

Indexes continued their downward spiral on Wednesday.

The KDP High Yield Daily index dropped 22 basis points to close Wednesday at 66.24 with the yield 5.64%.

The index was down 32 bps on Tuesday and 27 bps on Monday.

The ICE BofAML US High Yield index continued its descent into negative territory on Wednesday.

The index was down 16.1 bps with the year-to-date return now negative 0.513%.

The index was down 14.3 bps on Tuesday after dropping 69.6 bps on Monday.

The CDX High Yield 30 index sank 104 bps to close Wednesday at 104.56.

The index was down 18 bps on Tuesday and 71 bps on Monday.

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