Ball Corp. on a 2-handle; Wyndham, Iron Mountain, CDW price; forward calendar swells

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 10 – The Aug. 10 week got underway at a torrid pace in the high-yield primary market with four deals and one add-on pricing.

The forward calendar also swelled.

Ball Corp. priced an upsized $1.3 billion with the tightest yield seen in the junk bond market since the global financial crisis.

Iron Mountain Inc. also priced an upsized $1.1 billion, CDW LLC priced an upsized $700 million, and Wyndham Hotels & Resorts, Inc. priced an upsized $500 million.

And Cascades Inc. priced an upsized $300 million (from $200 million) tap of its 5 3/8% senior notes due Jan. 15, 2028 (Ba3/BB-).

The forward calendar also swelled with LogMeIn, Inc., Veritas, Xenia Hotels & Resorts, Inc., and Clearwater Paper Corp. in the market with offerings.

Windstream Communications also set price talk for its $1.4 billion offering of eight-year first-lien senior secured notes (B3/B) with pricing expected on Tuesday.

Meanwhile, the secondary space was largely unchanged on Monday with new paper continuing to dominate activity.

However, with pricing of new paper coming increasingly tighter, more and more deals were falling flat in the aftermarket.

Level 3 Financing, Inc.’s 3 5/8% senior notes due 2029 (Ba3/BB/BB) became the latest new deal to get stuck at par.

DaVita Inc.’s recently priced 3¾% senior notes due 2031 (Ba3/B+) and ADT Inc.’s recently priced 3 3/8% senior notes due 2027 (Ba3/BB-) also continued to trade around par in heavy volume on Monday.

However, Standard Industries Inc.’s split-rated 3 3/8% senior notes due 2031 (Ba2/BBB-) continued to gain in active trading in the secondary space, a source said.

Monday’s session

The Aug. 10 week got underway at a torrid pace, as forecast, in the high-yield primary market on Monday.

Dealers continued to turn out sharp and ultra-sharp executions in a big slate of drive-by deals which upsized and priced tight to talk or through talk.

And for those enquiring about the present temperature of the junk bond new issue market, the session included the tightest coupon – 2 7/8% – seen in the dollar-denominated high-yield market since the era when the major U.S. carmakers sustained credit downgrades in the wake subprime mortgage blowup and the recession that followed the catastrophic failure of Lehman Brothers in September 2008.

That coupon was printed on bonds priced Monday by Ball Corp. in an upsized $1.3 billion (from $1 billion) issue of 2 7/8% 10-year senior bullet notes (Ba1/BB+), which came at the tight end talk.

Demand for the paper was heard to be “insane,” a market source said.

However late Monday the par-pricing deal was wrapped around par, according to a trader who surmised that some investors dropped out when pricing fell below 3%.

Ball Corp.'s 2 7/8% coupon is the lowest since deals from entities related to General Motors Corp. and Ford Motor Co. brought junk-rated deals in the 2009 to 2012 time-frame, according to Prospect News data.

The most recent credit to print a coupon below 3% was Lennar Corp., which priced an issue of 2.95% senior notes due 2020 in November 2017.

Elsewhere Monday, Iron Mountain priced an upsized $1.1 billion (from $850 million) issue of 4½% 10.5-year senior notes (Ba3/BB-) at the tight end of talk.

CDW LLC priced an upsized $700 million (from $630 million) of 3 3/8% 8.5-year senior notes (Ba2/BB-) at the tight end of talk.

Wyndham Hotels & Resorts priced an upsized $500 million (from $350 million) issue of 4¾% eight-year senior notes (Ba2/B+) 12.5 basis points through the tight end of talk. The order book was heard to be six times deal size early Monday afternoon.

Cascades priced an upsized $300 million (from $200 million) tap of its 5 3/8% senior notes due Jan. 15, 2028 (Ba3/BB-) at 105.25, the rich end of talk.

The forward calendar

Looking ahead, bankrupt Windstream Communications talked its $1.4 billion offering of eight-year first-lien senior secured notes (B3/B) to yield in the 8% area. The exit financing was heard to be playing to $3 billion of demand on Monday afternoon and is expected to price Tuesday.

The active forward calendar built substantially.

LogMeIn, Inc. plans to run a brief roadshow for a $750 million offering of seven-year senior secured notes (B1/B-/BB-).

Veritas started a Monday to Wednesday Zoom roadshow for a $600 million offering of five-year senior secure notes (existing ratings B2/B). Early guidance is 7½% to 7¾%.

Xenia Hotels & Resorts plans to price a $300 million offering of five-year senior secured notes on Wednesday. Initial price talk has the deal coming to yield in the high 6% area.

And Clearwater Paper plans to price a $275 million offering of eight-year senior notes (Ba3/BB-) on Wednesday. Initial talk is in the low 5% area.

Level 3 flat

Level 3’s recently priced 3 5/8% senior notes due 2029 fell flat in the aftermarket with the notes largely stuck at par.

They were seen changing hands in the par to par ¼ context in active trading on Monday, according to a market source.

The notes remained active with more than $36 million of the bonds on the tape.

Level 3 priced an $840 million issue of the 3 5/8% notes at par in a Friday drive-by.

Pricing came at the midpoint of talk for a yield talk in the 3 5/8% area.

At par

Level 3 became one of the latest deals to price with a 3-handle to get stuck at par in the aftermarket.

DaVita’s 3¾% senior notes due 2031 remained active on Monday with $35 million in reported volume.

However, they saw little movement in terms of price.

The 3¾% notes remained wrapped around par in the active trading.

DaVita priced a $1.5 billion issue of the 3¾% notes at par last Thursday.

ADT’s 3 3/8% senior notes due 2027 also remained active on Monday although the notes continued to trade around par.

The 3 3/8% notes were seen changing in the par to par 3/8 context, a source said.

There were about $15 million of the bonds on the tape by the market close.

ADT priced a $1 billion issue of the 3 3/8% notes at par last Thursday.

Standard Industries gains

While several deals that have priced with a 3-handle have been stuck at par in the aftermarket, Standard Industries’ 3 3/8% senior notes due 2031 were not one of them.

The 3 3/8% notes continued to gain in active trading on Monday.

The notes were wrapped around 101 in high-volume activity on Monday, a source said.

There was more than $77 million of the bonds on the tape.

The 3 3/8% notes saw a strong break and closed Friday at par 7/8, a source said.

The global industrial company priced a $1.1 billion issue of the 3 3/8% notes at par on Friday.

Pricing came at the tight end of talk for a yield in the 3½% area.

$343 million Friday inflows

The dedicated high-yield bond funds saw $343 million of net daily inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $238 million of inflows on the day.

Actively managed high-yield funds saw $105 million of inflows on Friday, the source said.

Indexes flat

Indexes were largely flat at the start of the week with some posting nominal gains and other nominal losses.

The KDP High Yield Daily index shaved off 1 basis point to close Monday at 67.05 with the yield now 5.54%.

The index saw a cumulative gain of 10 bps on the week last week.

The ICE BofAML US High Yield index gained 2.1 bps with the year-to-date return now 0.371%.

The index saw a cumulative gain of 55.88 bps on the week last week when it broke into positive territory for the first time since the end of February.

The CDX High Yield 30 index shaved off 17 bps to close Monday at 104.66.

The index added 177 bps on the week last week.

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