Twitter in focus; Select Medical and Carriage Services add-ons price; Clearway up; Michaels sinks

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 5 – The domestic high-yield primary market saw another active session with one new deal and two add-ons pricing and the forward calendar continuing to grow.

All eyes were on Twitter, Inc. as the social media company priced its debut high-yield bond deal, an upsized $700 million issue of eight-year senior bullet notes (Ba2/BB+).

In drive-by action, Select Medical Corp. priced an upsized $675 million add-on to its 6¼% senior notes due Aug. 15, 2026 (B3/B-) and Carriage Services, Inc. priced a $75 million add-on to its 6 5/8% senior notes due June 1, 2026 (B3/B) at 104 to yield 3.87%.

Friday also promises to be an active session with Moog Inc. expected to price a $400 million offering and Dycom Industries, Inc. its $300 million offering.

The forward calendar also continued to grow with Cox Media Group’s $1.16 billion offering of eight-year senior notes (Caa1/CCC+) and EnerSys’ $300 million offering of eight-year senior bullet notes (Ba3/BB+).

Meanwhile, the secondary space was largely flat on Thursday with Twitter’s newly priced offering in focus.

Clearway Energy Operating LLC’s 4¾% green senior notes due 2028 (Ba2/BB) were also active with the notes holding on to their large premium.

Michaels Stores, Inc.’s 8% senior notes due 2027 (B1/B) were under pressure on Thursday following an earnings miss.

Sinclair Broadcast Group Inc.’s two tranches of senior notes issued by Diamond Sports Group LLC and Diamond Sports Finance Co. rebounded on Thursday after hitting their lowest point since pricing in the previous session.

Three-handle for Twitter!

On a big Thursday in the primary market Twitter held the spotlight.

At the conclusion of a roadshow for its debut high-yield bond deal, the social media company priced an upsized $700 million issue of eight-year senior bullet notes at par to yield 3 7/8%.

The issue size increased from $600 million.

The yield printed at the tight end of yield talk in the 4% area. Official talk came tight to earlier guidance in the 4 1/8% area. Initial guidance had the notes coming to yield in the mid-4% area.

The deal was five-times to six-times oversubscribed at 4%, according to a trader who added that a lot of accounts put in stop orders at 4%.

Nevertheless it came inside 4%, the trader conceded, adding that at 3 7/8% it seemed “priced to perfection,” but was regardless trading above the new issue price in the secondary at par ¼ bid, late Thursday afternoon, indicating that a lot of investors decided to stay in even though pricing came through the 4% bogey.

With more than $60 million in reported volume on the tape by the late afternoon, the 3 7/8% notes were the most actively traded issue in the secondary space.

Drive-by primary

Elsewhere Thursday, Select Medical priced an upsized $675 million add-on to its 6¼% senior notes due Aug. 15, 2026 at 106 to yield 5.178% in a drive-by.

The issue size increased from $625 million.

The issue price came at the rich end of the 105.5 to 106 price talk. Initial talk was in the 105 to 105.5 area.

The deal was heard to be two-times oversubscribed early in the afternoon.

Also in a drive-by, Carriage Services priced a $75 million add-on to its 6 5/8% senior notes due June 1, 2026 at 104 to yield 3.87%.

The issue price came at the rich end of the 103.5 to 104 price talk.

Friday

The new issue market figures to be active on Friday.

In announced business, Moog Inc. is expected to price a $400 million offering of eight-year senior notes (Ba3/BB).

Pending official talk, initial guidance has the coming offering to yield in the 4½% to 4¾% area.

Dycom Industries is also expected to price its $300 million offering of eight-year senior notes (Ba3/BB).

Pending official talk, the early guidance is in the 5% area.

The calendar

Pre-Thanksgiving forecasts from around the market maintained that new issue activity would remain active through the first two weeks of December.

The December 2 week shaped up accordingly.

A substantial calendar is forming for the Dec. 9 week, which some junkland prognosticators say will be the final big week of 2019.

On Thursday, Cox Media Group rolled out $1,165,000,000 of eight-year senior notes which are expected to price during the Dec. 9 week.

EnerSys also disclosed on Thursday that it is in the market with a $300 million offering of eight-year senior bullet notes.

Initial talk has the deal coming to yield in the 4½% to 4¾% area, and pricing in the week ahead, a trader said.

Business in the Dec. 9 week is also expected to include AmWINS Group, Inc.'s $250 million add-on to its 7¾% senior notes due July 1, 2026 (existing ratings B3/B-).

Clearway Energy

Clearway Energy’s 4¾% senior notes due 2028 held onto their large premium in active trading on Thursday.

The notes were marked at 101 3/8 bid, 101 5/8 offered on Thursday, a market source said, flat from Wednesday’s close.

The bonds saw $12 million in reported volume by the late afternoon.

The 4¾% notes saw a strong break and traded up to 101 3/8 bid, 101 5/8 offered shortly after pricing.

Clearway Energy priced a $600 million issue of the 4¾% notes at par in a Wednesday drive-by.

Michaels trades down

Michaels’ 8% senior notes due 2027 were under pressure on Thursday following third-quarter earnings miss.

The 8% notes dropped 3¾ point in high volume activity and stood poised to close the day at 91, according to a market source.

More than $21 million of the bonds were on the tape during Thursday’s session.

The arts and crafts retailer reported a year-over-year decrease in net sales and operating income and lowered its forward guidance.

Diamond Sports

Sinclair Broadcast’s two tranches of senior notes issued by Diamond Sports saw a minor reprieve on Thursday after hitting their lowest level since pricing the previous session.

Diamond Sports’ 6 5/8% senior unsecured notes due 2027 rose 1½ points to close Thursday at 94½, according to a market source.

The 5 3/8% senior secured notes due 2026 rose about 3/8 point to close Thursday at 99.

The large liquid tranches were among the most active in the secondary space with each tranche seeing more than $25 million in reported volume.

The notes hit their lowest point since pricing during the previous session with the 6 5/8% notes down to a 93 handle and the 5 3/8% notes down to a 98 handle.

Sinclair Broadcast priced a $1.83 billion tranche of the 6 5/8% notes and a $3.05 billion tranche of the 5 3/8% notes at par in July.

The notes have steadily traded down since Sinclair reported third quarter earnings in early November.

Prior to the earnings report, the 6 5/8% senior notes were on a 103 handle and the 5 3/8% notes were on a 105 handle, according to Trace data.

Indexes

Indexes were mixed on Thursday.

The KDP High Yield Daily index continued to gain with the index rising another 8 points to 70.92 and the yield now 5.18%.

The index was up 6 bps on Wednesday after sinking 5 bps on Tuesday and 7 bps on Monday.

The ICE BofAML US High Yield index rose further above the 12% return threshold on Thursday. The index gained 8.5 bps with the year-to-date return now 12.264%. The index rose 28.5 bps on Wednesday after sinking 8.8 bps on Tuesday and 8.7 bps on Monday.

The CDX High Yield 30 index slid 3 bps to close Thursday at 107.56. The index gained 23 bps on Wednesday after sinking 10 bps on Tuesday.

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