Match prices add-on; CommScope mixed; Clear Channel up; Mattel, Coty jump on earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 8 – Following the biggest day for the high-yield primary market in nearly two years, new deal activity was muted on Friday with the forward calendar thin.

Match Group, Inc. priced an upsized $350 million issue of 10-year senior notes (Ba3/BB) at par to yield 5 5/8% in a drive-by.

The forward calendar is thin with Getty Images Inc.’s $400 million offering the sole deal that remains on it.

Meanwhile, the secondary space was largely unchanged on Friday after a strong start to the week was followed by a soft day on Thursday.

New paper remained in focus on Friday, although with mixed results.

In stark contrast to the demand for secured paper seen during book building, CommScope Inc.’s secured tranches were trading down on Friday while its unsecured tranche was posting gains.

Clear Channel Outdoor Holdings, Inc.’s 9¼% senior notes due 2024 remained at a steep premium to their issue price on Friday.

Outside of the new paper, Mattel, Inc.’s 6¾% senior notes due 2025 (B1/BB-/BB) and Coty Inc.’s 6½% senior notes due 2026 jumped in high-volume activity after the companies reported earnings beats.

Match upsized and tight

Match Group priced an upsized $350 million issue of 10-year senior notes (Ba3/BB) at par to yield 5 5/8% in a drive-by.

The issue size was increased from $300 million.

The yield printed in the middle of the 5½% to 5¾% yield talk. Initial guidance was 6%.

BofA Merrill Lynch was the left bookrunner.

Issuance robust, but lagging

Thursday's $6.24 billion burst of issuance, including megadeals from CommScope ($3.75 billion) and Clear Channel ($2.24 billion), was the biggest daily issuance total in the high-yield market in almost two years, according to Prospect News data.

The last time a bigger total cleared the market in a single day was March 9, 2017 with $6.64 billion, including deals from Aramark Services. Inc., American Axle & Manufacturing Inc., Charter Communications, Inc., New Enterprise Stone & Lime Co., Inc. and Valeant Pharmaceuticals International Inc.

The new issue freeze-out that took place in December, when an entire month came and went without a single new issue clearing the market, seems like a distant memory, sources say.

Junk issuance is once more on the march, with $28.83 billion so far in 2019 to Friday's close.

Although it's a more robust total than some were expecting, as they looked ahead from last December's chill in the capital markets, 2019 issuance is still down 7.7%, on a year-over-year basis.

By the Feb. 8, 2018 close, the market had priced $31.05 billion.

Thin calendar

Heading into the Feb. 11 week just one deal is parked on the active forward calendar.

Getty Images is on the road with a $400 million offering of eight-year senior notes (CCC+) set to price in the middle part of the week ahead.

Initial price talk has the deal coming to yield in the 10½% area.

Other opportunistic issuers are expected to step forward, sources say.

Investors are laden with cash to put to work in junk and are on the lookout for another build-up of the new issue calendar.

In the week ahead, one or two companies will clear their issuance blackout periods, intervals during which issuers want to post fresh earnings numbers ahead of any new capital markets transactions.

Such companies are candidates to bring deals in the near term, according to a syndicate banker who declined to volunteer any names, in a late Friday telephone conversation with Prospect News.

CommScope mixed

CommScope’s three tranches of senior notes were mixed in high-volume activity in the secondary space with the secured tranches trading down to settle around par while the unsecured tranche traded at a premium to its issue price.

CommScope’s 8¼% senior unsecured notes due 2027 were among the most actively traded issue in the secondary space with more than $63 million on the tape by the late afternoon.

The unsecured notes continued to perform well in secondary trading.

They were quoted at 101 5/8 bid, 102 offered with most trades between 101¾ and 102, sources said.

However, the secured tranches were not faring as well.

The 6% notes due 2026 were quoted at par 1/8 bid, par ¼ offered. The notes were trading between par and par 3/8 during Friday’s session.

The 5½% notes due 2024 were quoted at par bid, par 1/8 offered and were largely wrapped around par, sources said.

The secondary market performance of the notes was in stark contrast to the demand seen during book building with buyers chasing the secured tranches.

CommScope priced an upsized $3.75 billion of senior notes over three tranches on Thursday.

The network infrastructure provider priced an upsized $1.25 billion tranche of five-year senior secured notes (Ba1/BB) at par to yield 5½%.

The yield printed in the middle of yield talk in the 5½% area, which had been revised tighter from 5½% to 5¾%. Initial talk was in the 6% area.

The tranche was upsized from $1 billion.

The company priced an upsized $1.5 billion tranche of seven-year senior secured notes (Ba1/BB) at par to yield 6%.

The tranche was upsized from $1 billion.

The yield printed in the middle of yield talk in the 6% area, which had been revised tighter from 6% to 6¼%. Initial talk was in the 6½% area.

A $1 billion tranche of eight-year senior unsecured notes (B1/B+) priced at par to yield 8¼%.

The yield printed in the middle of yield talk in the 8¼% area, which had been revised tighter from the 8½% area.

Initial talk was in the high 8% area.

The $2.75 billion in the two secured tranches played to $5.4 billion of demand, an investor said.

There were $1.9 billion of orders in the book for the $1 billion of unsecured paper, the source added.

Clear Channel up

While trading of the notes tapered on Friday, Clear Channel’s 9¼% senior notes due 2024 continued to trade at a large premium to their issue price

The notes were largely unchanged from Thursday. They were quoted at 102½ bid, 102¾ offered.

They were changing hands around 102 5/8 in the late afternoon with more than $20 million on the tape, according to a market source.

The notes skyrocketed after freeing for trade on Thursday.

Clear Channel priced an upsized $2.235 billion issue of the 9¼% notes at par on Thursday.

The yield printed at the tight end of the 9¼% to 9½% yield talk. Earlier guidance had been in the 9½% area. Initial talk was in the 10% area.

The issue size increased from $2.2 billion.

The deal was heard to have played to $7 billion of orders.

Mattel jumps

Mattel’s 6¾% senior notes due 2025 jumped in high-volume activity on Friday following an earnings beat.

The 6¾% notes were up 1¼ points to 99 in the late afternoon, a market source said. More than $40 million of the bonds were on the tape during Friday’s session.

While less active, Mattel’s 3.15% senior notes due 2023 rose 2½ points to 89¼.

Mattel reported a solid earnings beat, a market source said.

Mattel reported fourth-quarter revenue of $1.524 billion which beat analyst expectations for revenue of $1.437 billion.

Mattel reported EBITDA of $186.3 million which beat analyst expectations for EBITDA of $95.6 million. EBITDA increased 374% year-over-year.

Strong Barbie doll and Hot Wheels car sales helped fuel the toy maker’s earnings surprise.

Coty’s earnings

Coty’s 6½% senior notes due 2026 were also posting gains after an earnings beat. The notes rose 2½ points to close the day at 92½.

More than $37 million of the bonds were on the tape during Friday’s session.

Coty beat on both the top and bottom lines with its second-quarter earnings report.

The multinational beauty company reported earnings per share of 24 cents versus analyst expectations for earnings per share of 22 cents.

Revenue was $2.51 billion which beat analyst expectations for revenue of $2.47 billion.

Mixed Thursday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time, according to a trader.

High-yield ETFs sustained $269 million of outflows on the day.

However, actively managed high yield funds saw $105 million of inflows on Thursday, the trader said.

News of Thursday's daily flows follows a Thursday afternoon report that the combined junk funds saw $3.86 billion of net inflows in the week to Wednesday's close, according to Lipper US Fund Flows.

That's the biggest weekly inflow since the week that ended July 13, 2016, which saw $4.4 billion of inflows, a trader said.

Indexes mixed

Indexes were mixed on Friday. While all started the week strong, some posted cumulative gains and others posted losses for the week.

The KDP High Yield Daily index dropped 15 basis points to close Friday at 69.48 with the yield now 6.26%.

The index was down 12 bps on Thursday after posting gains of 8 bps on Wednesday, 21 bps on Tuesday and 6 bps on Monday.

The index saw a cumulative gain of 8 bps on the week last week.

The ICE BofAML US High Yield index dropped 8.1 bps on Friday with the year-to-date return now 4.886%.

The index was down 38.3 bps on Thursday after gaining 10.4 bps on Wednesday, 41 bps on Tuesday and 11.7 bps on Monday.

The index posted a cumulative gain of 16.7 bps on the week.

The index sank below the 5% threshold on Thursday, shooting past it just two days earlier on Tuesday.

The index surpassed 4% year-to-date returns on Jan. 30.

The CDX High Yield 30 index gained 6 bps to close Friday at 105.65.

The index dropped 45 bps on Thursday and 27 bps on Wednesday after rising 19 bps on Tuesday and 22 bps on Monday.

The index dropped a cumulative 25 bps on the week.

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