February junk primary kicks off with add-on; Athena breaks par; Pitney Bowes under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 1 – The high-yield primary market saw its first deal price in three days, as the month of February got underway.

Meanwhile, the secondary space continued to rally with the market bolstered by strong earnings and statements from Federal Reserve officials assuaging concern about an over-tightening of monetary policy.

The cash bond market was up another 3/8 point as it pared its losses from the previous week, a source said.

Minerva Merger Sub, Inc.’s (athenahealth) 6½% senior notes due 2030 (Caa2/CCC/CCC+) continued to dominate trading activity with the notes topping par for the first time since hitting the secondary space.

While the overall market was strong, Pitney Bowes Inc.’s senior notes were among the largest losers of the session after the company reported disappointing earnings.

February 1 primary

Full House Resorts Inc. brought a drive-by in a $100 million add-on to its 8¼% senior secured notes due Feb. 15, 2028 (expected Caa2/confirmed B-) that priced at 102, on the rich end of talk, to yield 7.662%.

Away from that trade there was a slight buildup to a big-ish active new issue calendar as Mednax, Inc. kicked off a $400 million offering of eight-year senior notes (B1/B+) with initial guidance in the mid-to-high 5% area. The roadshow ends Wednesday.

Referencing that big-ish $6.9 billion active calendar, there was some chatter in the market on Tuesday, sources said.

The Scientific Games Holdings LP $880 million offering of eight-year senior notes (Caa2/B/B) is heard to be two-times oversubscribed, with a fair amount of reverse inquiry, a trader said.

The roadshow is scheduled to wrap up Wednesday.

Meanwhile, one of the big acquisition deals on the calendar, the Prince International Corp. (PMHC II, Inc.) $1.256 billion two-part notes offer is heard to be a work in progress, the trader said.

Bond investors are looking for a bit more coupon.

The Prince deal features a $500 million tranche of seven-year senior secured notes (B3/B-) with initial talk in the mid-to-high 5% area, and a $756 million tranche of eight-year senior unsecured notes (Caa2/CCC+) with initial talk in the low-8% area.

The roadshow is scheduled to run through Wednesday.

Meantime the Prince $1.945 billion term loan is well oversubscribed, the trader said.

athenahealth tops par

athenahealth’s 6½% senior notes due 2030 topped par for the first time since hitting the secondary space.

The 6½% notes were changing hands in the par to par ½ context during Tuesday’s session.

There was $51 million in reported volume.

The notes were gaining strength alongside the broader market with a risk-on sentiment returning following volatility in January.

The notes have largely traded on a 99-handle since the $2.35 billion issue priced at par on Jan. 27.

However, they traded as low as 98 5/8 last Friday as selling pressure swept through the market.

Pitney Bowes under pressure

Pitney Bowes’ senior notes were among the largest losers of Tuesday’s session after the company reported disappointing numbers.

Pitney Bowes’ 7¼% senior notes due 2029 sank 3 points. They were changing hands in the 97½ to 98 context heading into the market close, a source said.

There was more than $12 million in reported volume.

The technology company’s 6 7/8% senior notes due 2027 fell 1¾ points to close the day at 97 3/8.

The company’s stock also cratered 15% on Tuesday.

The notes were under pressure after the company reported disappointing numbers with increased transportation and labor costs eating into its bottom line, a source said.

$748 million Monday outflows

The dedicated high-yield bond funds sustained $748 million of net daily outflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $455 million of outflows on the day.

High-yield ETFs sustained $293 million of outflows on Monday, the source said.

The combined funds are tracking $2.08 billion of net outflows in the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index rose 19 points to close the day at 63.78 with the yield now 4.75%.

The index shaved off 4 points on Monday.

The CDX High Yield 30 index rose 37 basis points to close Tuesday at 107.21.

The index was up 20 bps on Monday.

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