Junk secondary rallies on cease-fire optimism; EQT upgraded; Nielson jumps on buyout

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 29 – The domestic high-yield primary market remained quiet on Tuesday despite a strong session for risk assets with just one deal on the forward calendar.

Clydesdale Acquisition Holdings Inc. is marketing $1.98 billion of sustainability-linked notes backing the buyout of Novolex Holdings LLC by Apollo.

The deal was heard to be playing to heavy demand with pricing expected on Wednesday.

Meanwhile, it was an active day in the secondary space as the market jumped ¾ to 1 point on optimism surrounding a Russian-Ukrainian cease-fire, sources said.

Several badly battered names saw significant gains as buyers returned to the space.

However, with the two-year and 10-year Treasury yield curve inverting and fresh inflationary data due on Wednesday, several sources questioned whether the rally would have staying power.

EQT Corp.’s senior notes were in focus as the natural gas production company received its second investment-grade rating.

While active and nominally improved, the rate-sensitive notes did not see much price appreciation as a result of the upgrade, a source said.

Merger and acquisition activity continued to be a major driver of gains in the space with Nielsen Holdings plc’s senior notes jumping 2 to 5 points on news the company would be acquired.

Michaels Cos., Inc.’s senior notes were also on the rise in active trading following a better-than-expected earnings report.

Novolex eyed

With no primary market news on Tuesday, the active forward calendar finished the session sporting just one offering.

Clydesdale Acquisition Holdings is marketing $1.98 billion of sustainability-linked notes backing the buyout of Novolex Holdings by Apollo.

The deal includes $750 million of seven-year senior secured notes (expected ratings B2/B). Initial guidance has the secured notes coming to yield in the low 7% area with an expected original issue discount, and $1.23 billion of eight-year senior unsecured notes (expected ratings Caa2/CCC+). Initial guidance on the unsecured notes has them pricing 250 to 290 basis points behind the secured notes, also with an expected original issue discount.

Demand for the secured paper is already heard to be well in excess of the proposed tranche size, a sellside source told Prospect News.

Books are expected to close on Wednesday, the sellsider added.

EQT’s upgrade

EQT’s senior notes were active following S&P Global Ratings’ upgrade of the natural gas production company to investment grade.

While the notes were active following the news, they did not see much price appreciation with the rate-sensitive notes already trading tight to the BBB index, a source said.

EQT’s 3.9% senior notes due 2027 rose about ½ point to trade in the 98¾ to 99¼ context heading into the market close.

There was $36 million in reported volume.

The 7½% senior notes due 2030 were largely unchanged to close the day at 116¼ with a yield of about 4½%, according to a market source.

There was $30 million in reported volume.

The 3 1/8% senior notes due 2026 were up about ¼ point to close the day at 96¾ with a yield just shy of 4%.

There was $19 million in reported volume.

S&P upped EQT’s issuer and unsecured debt rating to BBB- from BB+ due to the company’s debt reduction initiative and higher natural gas prices. (See related article in this issue.)

Fitch Ratings also upgraded EQT to BBB- from BB+ about two weeks ago.

EQT’s notes will switch hands as a result of the ratings upgrade with several high-yield accounts unable to hold investment grade rated paper.

Nielsen’s buyout

Merger and acquisition activity continued to be a boon to the high-yield market with Nielsen’s senior notes jumping 2 to 5 points following news it would be acquired.

Nielsen’s 5 5/8% senior notes due 2028 jumped 2¼ points to close Tuesday at par 1/8, according to a market source.

There was $17 million in reported volume.

Nielsen’s 5 7/8% senior notes due 2030 were also up 2¼ points to close Tuesday wrapped around par.

While less active, the 4¾% notes due 2031 jumped 5 points to trade in the 99¾ to par ¼ context, according to a market source.

The 4½% notes due 2029 were also up 5 points to trade in the 99½ to par context.

News broke Tuesday that a consortium of private equity investors would acquire the media and marketing analytics firm in an all-cash transaction with an enterprise value of $16 billion.

The notes were most likely trading up to their takeout price with a poison put which would require the redemption of the notes at 101 in the event of a change of control, a common covenant in the indenture of senior notes, a source said.

Michaels’ earnings

Michaels’ senior notes were on the rise in active trading following a better-than-expected earnings report.

The arts and crafts retailer’s 7 7/8% senior notes due 2029 rose 1½ points to close the day at 84¾, according to a market source.

While improved on Tuesday, the notes were still struggling with a yield of about 11%, a source said.

There was $23 million in reported volume.

The company’s 5¼% first-lien notes due 2028 (Ba3/B) were up 1 7/8 points to close the day at 93. The yield on the notes was 6 5/8%.

There was $17 million in reported volume.

The notes jumped following earnings, which were released Monday evening, a source said.

Michaels was taken private by Apollo Global Management in 2021 with the $1.3 billion tranche of the 7 7/8% notes pricing at par to fund the acquisition.

$385 million outflows on Monday

The dedicated high-yield bond funds sustained $385 million of net outflows on Monday, according to a market source.

High yield ETFs had $290 million of outflows on the day.

Actively managed high-yield funds sustained $95 million of outflows on Monday, the source said.

Indexes

The KDP High Yield Daily index rose 40 points to close Tuesday at 61.42 with the yield 5.5%.

The index shaved off 2 basis points on Monday.

The CDX High Yield 30 index jumped 87 bps to close Tuesday at 105.82. The index fell 35 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.