GFL Environmental, Howmet Aerospace; Aramark price; Netflix eyed; new issues in focus

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 22 – Razor-sharp executions continued in the domestic high-yield primary market on Wednesday with the three deals to price, upsizing and coming tighter than talk.

Aramark Services, Inc. priced an upsized $1.5 billion issue of five-year senior notes (B1/BB-).

In a split-rated deal, Howmet Aerospace Inc. priced an upsized $1.2 billion split-rated issue.

And GFL Environmental Inc. priced an upsized $500 million issue.

The tight executions are expected to continue on Thursday with Netflix, Inc. in the market with a $1 billion equivalent dual-currency offering.

Meanwhile, the secondary space firmed on Wednesday with equity markets and crude oil futures rebounding.

New paper continued to dominate trading activity with the majority of the deals that priced during Tuesday’s session putting in strong performances in the secondary space.

Kaiser Aluminum Corp.’s 6½% senior notes due 2025 (B1/BB+/BB) and Univision Communications Inc.’s 9½% senior notes due 2025 (B2/B) outperformed with both issues trading up to a 102-handle.

Builders FirstSource Inc.’s 6¾% senior notes due 2027 were active following Tuesday’s add-on and trading several points above their reoffer price.

As one of the larger issues, Navistar International Corp.’s 9½% senior notes due 2025 saw high-volume activity on Wednesday with the notes trading at a premium.

While less active, Sally Beauty Holdings, Inc.’s 8¾% senior notes due 2025 (Ba2/BB-) and Performance Food Group Inc.’s 6 7/8% senior notes due 2025 (B2/B) were also putting in strong performances.

However, SeaWorld Entertainment, Inc.’s 8 ¾% senior notes due 2025 (B3/B-) largely fell flat in aftermarket activity.

Razor-sharp executions

Razor-sharp executions continued apace in the high-yield new issue market on Wednesday, with drive-by issuers pricing upsized deals tight to talk and dozens of basis points inside of initial guidance.

Aramark Services priced an upsized $1.5 billion issue of five-year senior notes (B1/BB-) at par to yield 6 3/8%.

The issue size increased from $1.25 billion.

In a split-rated deal, Howmet Aerospace priced an upsized $1.2 billion split-rated issue of 6 7/8% five-year senior bullet notes (Ba3/BBB-).

The issue size increased from $1 billion.

Price talk was in the 7% area. Initial price talk was in the 7¾% area.

And GFL Environmental priced an upsized $500 million issue of five-year senior secured notes (Ba3/BB-) at par to yield 4¼%.

The issue size increased from $400 million.

The yield printed at the tight end of the 4¼% to 4½% yield talk. Initial talk was in the 4½% area.

April...must be time for Netflix

As it has every April since 2017, Netflix showed up Wednesday with a big junk deal.

The Los Gatos, Calif.-based media services provider plans to price $1 billion equivalent of five-year senior bullet notes (Ba3/BB-) on Thursday.

The deal features a tranche of dollar-denominated notes talked in the 3¾% area, inside of the 4% to 4 1/8% early guidance. Books for the dollar-denominated notes close at 10 a.m. ET Thursday.

The deal also features a tranche of euro-denominated notes with early guidance in the 3½% area. Official talk on the euro-denominated notes will be announced on Thursday morning.

Tranche sizes remain to be determined.

Smaller sizes

While eight issuers tapped the high-yield primary market on Tuesday, the total new deal volume was less than $3 billion – a smaller dollar amount than the three deals to clear the primary on Wednesday.

“A lot of the one-off names are coming under $500 million,” a source said.

With several companies tapping global capital markets to boost their liquidity, they were raising only the capital that was needed and nothing more.

Even with the recent rebound in the market, the companies were not going to get great pricing on their deals.

“They’re doing what they need to do,” a source said. “Most of these deals are cash for the balance sheet.”

While companies were practicing discretion with the amount raised, new deals remained in demand with most oversubscribed, pricing tight and performing well in the aftermarket, a source said.

102-handle

Kaiser Aluminum’s 6½% senior notes due 2025 (B1/BB+/BB) outperformed in the secondary with the notes trading up to a 102-handle.

While volume in the small issue was light, they were marked at 102 bid, 102½ offered heading into the market close, a source said.

Kaiser priced a $300 million issue of the 6½% notes at par in a Tuesday drive-by.

Pricing came tight to the 6½% to 6¾% yield talk and tighter than initial guidance in the 7% area.

Univision’s 9½% senior notes due 2025 also rose to a 102-handle, despite pricing at a discount.

The notes were marked at 102½ bid, 103 offered heading into the market close.

The notes saw more than $40 million in reported volume during Wednesday’s session.

Univision priced a $370 million issue of 9½% at 99.026 to yield 9¾% in a Tuesday drive-by.

The yield printed at the tight end of the 9¾% to 10% yield talk. Initial talk was in the low 10% area.

Active

Navistar’s 9½% senior notes due 2025 were putting in a strong performance in high-volume activity on Wednesday.

The notes were marked at 101 bid, 101½ offered.

They were changing hands at 101 3/8 heading into the market close.

With the issue size the largest out of the slew of deals that cleared the primary market on Tuesday, the notes were active with more than $43 million in reported volume.

Navistar priced a $600 million issue of the 9½% notes at par in a Tuesday drive-by.

Builders FirstSource’s 6¾% senior notes due 2027 were also active following the pricing of an add-on with the notes trading well above the reoffer price.

The 6¾% notes were changing hands at 101 heading into the market close with more than $33 million in reported volume, according to a market source.

Builders priced an upsized $350 million add-on to its 6¾% notes at 98.75 to yield 6.974%.

The issue size increased from $250 million.

The issue price came at the rich end of the 98.5 to 98.75 price talk.

101-handle

While volume was light, Sally Beauty’s 8¾% senior notes due 2025 and Performance Foods 6 7/8% senior notes due 2025 were performing well in the aftermarket with both trading up to a 101-handle.

Sally Beauty’s 8¾% senior notes were marked at 101 bid, 101½ offered, according to a market source.

The coupon was good for secured second-lien paper from a double B credit, a market source said.

Sally Beauty priced a $300 million issue of the 8¾% notes at par. Pricing came at the midpoint of talk for a yield in the 8¾% area.

Performance Foods 6 7/8% notes were marked at 101 bid, 101½ offered. While the notes performed well, they were not active with the issue size one of the smaller ones to clear the market, a source said.

Performance Foods priced an upsized $275 million issue of the 6 7/8% notes at par in a Tuesday drive-by.

The issue size increased from $250 million.

Pricing came tight to talk for a yield in the 7% area.

SeaWorld flat

SeaWorld’s 8¾% senior notes due 2025 largely fell flat in the aftermarket.

The notes were marked at par bid, par ½ offered heading into the market close. At some points in intraday trading, they fell below par, a source said.

However, while the notes had a lackluster reception in the secondary space, volume was light.

SeaWorld priced a $227.5 million issue of the 8¾% notes at par in a Tuesday drive-by.

$469 million Tuesday outflows

The dedicated high-yield bond funds sustained $469 million of daily outflows on Tuesday, the latest session for which data was available at press time, according to a market source.

Tuesday was the first session to see negative cash flows since the Federal Reserve Bank announced on April 9 that under certain conditions it would buy corporate bonds rated as low as Ba3 by Moody's Investors Service, and BB- by S&P Global Ratings, the source notes.

High-yield ETFs sustained $594 million of outflows on the day.

However actively managed funds were positive on Tuesday, with $125 million of inflows, according to the source.

With only Wednesday's fund flow numbers remaining to go into the tally the combined high-yield funds are tracking $2.2 billion of net inflows on the week to Wednesday's close, the market source said.

Indexes mixed

Indexes were mixed on Wednesday after launching the week on soft footing.

The KDP High Yield Daily index dropped another 19 basis points to close Wednesday at 62.90 with the yield 7.31%.

The index sank 90 bps on Tuesday and 24 bps on Monday.

The ICE BofAML US High Yield index gained 0.8 point on Wednesday with the year-to-date return now negative 10.011.

The index sank 113.9 bps on Tuesday and 41.8 bps on Monday.

The CDX High Yield 30 index gained 74 bps to close Wednesday at 93.64.

The index sank 123 bps on Tuesday and dropped 213 bps on Monday.

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