Drive-by deals dominate junk session; Ritchie trading at a premium; Charter tumbles

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 8 – The high-yield primary market was booming on Wednesday as four issuers priced one-day deals over the course of the session.

A deal that bumped up against the $1 billion mark also priced. The deal had been in the market since late last week.

Meanwhile, the rally in the secondary space waned on Wednesday with the market launching the day strong but losing steam as the session progressed.

While the market was up about ¼ point at the open, it closed the day largely unchanged with the 10-year Treasury yield again breaking 1.5%.

The trajectory of the closely-watched benchmark Treasury note dipped as low as 1.427% during Wednesday’s session but closed the day at 1.526%.

While the notes closed the day well off their highs, Ritchie Bros. Holdings Inc.’s 4¾% senior notes due 2031 (Ba3/BB) continued to trade at a large premium to their issue price.

Outside of recent issues, Weatherford International Ltd.’s 8 5/8% senior notes due 2030 (B3/B-) jumped in active trading following a ratings upgrade.

Charter Communications’ senior notes were under pressure on Wednesday with the capital structure tumbling 2 to 3 points.

One-day business

The high yield drive-through window opened wide on a busy Wednesday.

Southwestern Energy Co. priced a $1.15 billion issue of 4¾% 10-year senior notes (Ba3/BB) at par, at the tight end of talk.

The drive-by deal was four-plus times oversubscribed, according to a bond trader who added that it went very well, with the new Southwestern Energy 4¾% senior notes due 2032 heading into the close at 101 5/8 bid.

The session's other marquee deal had been in the market since late last week, clearing on Wednesday in blowout fashion, sources said.

II-VI Inc. priced a $990 million issue of eight-year senior notes (B2//BB) at par to yield 5%, 12.5 basis points through talk.

It was heard to be five-times oversubscribed as close-of-books neared, on Tuesday afternoon.

The new II-VI 5% notes due 2029 were doing well in the secondary market, wrapped around 101 late Wednesday afternoon, a bond trader said.

Four drive-by issuers appeared Wednesday morning, but only three had completed their deals by press time.

Sally Beauty Holdings, Inc. showed up with a $780 million offering of eight-year senior notes.

Talk came at 4½% to 4¾%, versus whispers in the high 4% area, and books were heard to be greater than deal-size.

However, terms were pending at press time.

Ritchie bid up

In the secondary market, auctioneer Ritchie Bros.’ 4¾% senior notes due 2031 were putting in a strong performance in the secondary space.

The notes traded as high as 102.375 during Wednesday’s session.

However, they came in alongside the overall market and were trading in the 101½ to 102 context heading into the market close.

There was more than $73 million in reported volume heading into the market close.

Ritchie Bros. priced an upsized $600 million, from, $500 million tranche of 4¾% notes at par on Tuesday. The yield printed at the tight end of the 4¾% to 5% yield talk.

The deal also included an upsized C$425 million, from C$350 million, tranche of 4.95% senior notes due 2029, which priced at par.

Weatherford jumps

Weatherford’s 8 5/8% senior notes due 2030 jumped in active trading on Wednesday following a rating upgrade.

The 8 5/8% senior notes rose 1¾ points to close the day at 103 1/8. The notes were currently yielding 7.8%.

There was more than $30 million in reported volume heading into the market close.

While less active, Weatherford’s 6½% senior notes due 2028 rose about ¾ point to close the day at 105½, a source said.

Weatherford’s capital structure was on the rise on Wednesday after S&P Global Ratings upgraded the company’s issuer rating to B- from CCC+, its secured debt to B+ from B- and its unsecured debt to B- from CCC+.

The upgrade was the result of the oil and gas company’s recent refinancing transactions, which substantially reduced the debt maturing in 2024, Prospect News reported.

In addition to reflecting a fundamental improvement, the upgrade also opened the door for new investors to take a position in the company.

“The bottom line is it’s no longer CCC,” a source said. “A lot of guys can’t buy CCC."

Charter under pressure

Charter’s capital structure was under pressure on Wednesday after the company presented at an investor conference.

Charter’s 3.9% senior notes due 2052 were the most active in the capital structure.

The notes fell 2¼ points to par ½, a source said. There was more than $18 million reported volume.

While volume in the company’s other issues was light, the notes were also down 2 to 3 points.

Charter’s 3.85% notes due 2061 fell 3 points to close the day at 95¼.

The 3.95% senior notes due 2062 fell 2¾ points to 97½.

The 4.8% senior notes due 2050 fell 2 5/8 points to close the day at 113.

The 3.7% senior notes due 2051 were down 1¾ points to 97¼.

Charter’s bonds tumbled after the company’s chief executive officer gave a presentation at the UBS Global TMT Conference.

The telecommunications sector, in general, has been under pressure over the past few sessions.

Federal Communications Commission acting chair Jessica Rosenworcel is poised for an official appointment to the position by the end of the week.

Rosenworcel has made reclassifying broadband a Title II service priority, which would give the FCC greater regulatory authority of broadband service providers such as Charter.

$1.05 billion Tuesday inflows

The high-yield ETFs had $1.05 billion of daily cash inflows on Tuesday, the second consecutive day that the ETF flows topped the $1 billion mark, a source said on Wednesday.

Monday toTuesday inflows total $2.3 billion, with the ETFs recouping about two-thirds of their recent run of outflows, the source added.

The cash flows of the actively managed high-yield funds were absolutely flat on Tuesday, the source added.

Indexes

The KDP High Yield Daily index inched up 1 basis point to close Wednesday at 67.83 with the yield now 3.94%. The index rose 51 bps on Tuesday and 3 bps on Monday.

The CDX High Yield 30 index fell 6 bps to close Wednesday at 108.63. The index gained 61 bps on Tuesday and 55 bps on Monday.

© 2015 Prospect News.
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