Viasat, Chuchill Downs price; Kodiak Gas on tap; Power Solutions weakens; California Resources gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 20 – The domestic high-yield primary market saw two upsized deals price during Wednesday’s session and one more join the forward calendar.

Churchill Downs Inc. priced an upsized $600 million issue of eight-year senior notes (expected ratings Ba3/B+) at par to yield 5½% in a Wednesday drive-by.

Viasat, Inc. priced an upsized $600 million issue of eight-year senior secured notes (B1/BB+) at par to yield 5 5/8%.

Freedom Mortgage Corp. was expected to price its $350 million offering of five-year senior notes and Kosmos Energy Ltd. its $600 million offering of seven-year senior notes.

However, final terms were not available as of press time.

Kodiak Gas Services LLC is marketing a $400 million offering of eight-year senior notes (S&P: B-) with pricing expected before the end of the week.

Meanwhile, new paper remained in focus in the secondary space with Power Solutions’ dollar-denominated tranches continuing to denominate.

However, the notes were weaker in active trading on Wednesday after skyrocketing during the early part of the week.

Wednesday was a strong day for oil and gas names with California Resources Corp.’s bellwether 8% senior notes due 2022 making gains as crude oil futures broke past $60 a barrel in intra-day trading.

After taking a hit late last week, Community Health Systems, Inc.’s junk bonds continued to rebound on Wednesday as the operator of acute care hospital presents at a health care conference.

Churchill Downs upsizes

The final primary market session of winter 2019 saw Churchill Downs price an upsized $600 million issue of eight-year senior notes (expected ratings Ba3/B+) at par to yield 5½% in a quick-to-market trade.

The issue size increased from $400 million.

The yield printed in the middle of the 5 3/8% to 5 5/8% yield talk and at the tight end of the 5½% to 5 5/8% initial guidance.

JP Morgan, PNC, US Bancorp, Fifth Third and Wells Fargo were the joint bookrunners.

The Louisville, Ky.-based gaming and entertainment company plans to use the proceeds, including the additional proceeds resulting the $200 million upsizing of the deal, to repay debt and for general corporate purposes.

Viasat prices, trades higher

Viasat priced an upsized $600 million issue of eight-year senior secured notes (B1/BB+) at par to yield 5 5/8%.

The issue size increased from $500 million.

The yield printed at the tight end of yield talk in the 5¾% area and inside of initial guidance in the 6% area.

The deal was driven into the market by $250 million of reverse inquiry, a trader said.

The new Viasat 5 5/8% notes due 2027 were trading at par ¾ bid, 101 offered, a market source said.

They were among the most actively traded issues in the secondary space with more than $128 million of the bonds changing hands.

JP Morgan managed the sale.

The Carlsbad, Calif.-based satellite communications company plans to use the proceeds to pay off its existing revolving credit facility and for general corporate purposes, which may include financing costs related to the purchase, launch and operation of satellites, potential acquisitions, joint ventures and strategic alliances, working capital or capital expenditures.

Pending

Freedom Mortgage was also expected to price $350 million of five-year senior notes (B2/B-) on Wednesday.

That deal, via JPMorgan, has been flying just above the radar, according to market sources who added that the early guidance is in the high 10% area.

No terms were available at press time, market sources said.

And Kosmos Energy was expected to sell $600 million of seven-year senior notes (expected ratings BB-/BB) on Wednesday.

The deal, with initial guidance in the 7% area, is playing to a mix of high yield and emerging markets accounts, sources say.

Terms were also unavailable at press time.

Kodiak Gas $400 million notes

Kodiak Gas Services took a place aboard the active forward calendar with a $400 million offering of eight-year senior notes (S&P: B-) expected to price before the end of the week.

Initial guidance has the deal shaping up with a yield in the 8½% to 8¾% area, a trader said.

The active calendar also includes ADT Corp. with a $2.75 billion three-part deal.

There are two secured bullet tranches (Ba3/BB-) sized at $750 million apiece, including five-year notes whispered in the 5½% area and seven-year notes whispered in the 6% area.

A sole $1.25 billion tranche of eight-year non-call-three unsecured notes (B3/B-) comes with talk in the 7½% to the 7¾% area. Pricing is expected Thursday.

And Nexeo Solutions, Inc. (Neon Holdings, Inc.) is selling $410 million seven-year senior secured notes (B3/B) with initial guidance of 9½% to the 10% area.

All are expected to price before Friday's close.

Power Solutions weakens

After skyrocketing throughout the early part of the week, Power Solutions’ dollar-denominated tranches were weakening in active trading in the secondary space.

Power Solutions 8½% senior notes due 2027 (B3/B/B-) were quoted at par ½ bid, par ¾ offered on Wednesday.

The notes were changing hands at par ½, about a ½ point drop from Tuesday, sources said.

With more than $172 million of the bonds on the tape, the 8½% notes were the most actively traded issue in the secondary space.

While weaker on Wednesday, Power Solutions’ 6¼% senior notes due 2026 were still outpacing the unsecured tranche in the secondary space.

The 6¼% notes were quoted at 101¾ bid, 102¼ offered. They were seen changing hands around 101 5/8, about a 5/8 point drop from Tuesday’s close, according to a market source.

More than $58 million of the bonds were on the tape by the late afternoon.

Some holders of the notes may have gotten cold feet, a market source said.

Power Solutions priced a $1 billion tranche of the 6½% notes at par and a $1.95 billion tranche of the 8½% notes at par on Monday.

The notes skyrocketed after breaking for trade with the 8½% notes trading as high as 101 1/8 and the 6½% notes trading as high as 102¼ on Tuesday.

Energy gains

Wednesday marked a strong day for the energy sector with crude oil futures reaching their highest point of 2019.

California Resources’ 8% senior notes due 2022 were active and making gains alongside crude oil futures.

The 8% notes were quoted at 79 bid, 80 offered on Wednesday after closing the previous session at 77½ bid, 78 offered, a market source said.

The notes were seen changing hands at 79½ with more than $22 million of the bonds on the tape by the late afternoon.

The barrel price of West Texas intermediate crude oil for April delivery broke $60 in intra-day trading before settling at $59.83, an increase of 80 cents or 1.36%.

The jump came after a reported decline in crude oil inventories signaled decreasing supply.

Community Health rebounds

Community Health’s junk bonds continued to rebound on Wednesday after the hospital chain operator’s capital structure took a hit last Friday.

The 8% senior notes due 2026 rose 5/8 points to 96¼ on Wednesday, according to a market source. More than $21 million of the bonds were on the tape by the late afternoon.

The notes have nearly recouped their losses after dropping 2¼ points to close last week at 94½.

Community Health’s 11% senor notes due 2023 rose 1½ points to 82¼.

The notes were on the rise as Community Health presented at the Oppenheimer Healthcare Conference.

They were trading down last Friday after a whistleblower lawsuit was unsealed.

The lawsuit alleged the company had submitted false claims for federal incentive payments regarding the use of certified electronic health records technology.

Tuesday inflows

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

High-yield ETFs saw $136 million of inflows on the day.

Actively managed high-yield funds saw $238 million of inflows on Tuesday, the trader said.

With only Wednesday's flows remaining to be tallied into the current week's total, the combined funds were tracking $1.3 billion of inflows in the four sessions encompassed by Thursday's open and Tuesday's close, the trader said.

Indexes gain

Indexes saw nominal gains on Wednesday after a mixed day on Tuesday.

The KDP High Yield Daily index rose 2 basis points to close Wednesday at 70.02 with the yield now 5.93%.

The index was up 5 bps on Tuesday and 6 bps on Monday after a cumulative gains of 41 bps on the week last week.

The ICE BofAML US High Yield index gained 4.5 bps with the year-to-date return now 6.898%.

The index gained 11.3 bps on Tuesday and 6 bps on Monday after a cumulative gain of 84.8 bps on the week last week.

After sinking below 6% year-to-date returns on March 9, the index popped back above it on March 11.

The index initially shot past 6% returns on Feb. 25 after passing 5% returns on Feb. 12.

The CDX High Yield 30 index gained 9 bps to close Wednesday at 106.56. The index dropped 6 bps on Tuesday after gaining 6 bps on Monday.

The index saw a cumulative gain of 97 bps on the week last week.

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