Morning Commentary: Tellurian launches 11¼% notes/warrants deal; junk slips ¼ point

By Paul A. Harris

Portland, Ore., Aug. 29 – After a fortnight spent languishing in the late-summer doldrums, the high-yield bond new issue market sprang to life on Monday with a $1 billion notes/warrants project financing deal from Tellurian Inc.

The public offering, via first-time sole bookrunner B. Riley Securities, Inc., will be comprised of units that include an 11¼% senior secured note due 2027 with attached warrants for the company’s common stock.

Initial price talk has the notes coming at an issue price in the 95.5 area. The strike price of the warrants will be calculated at a 20% premium to the 20-day volume-weighted average share price.

The units are set to price in the post-Labor Day week. However, timing could be accelerated, according to an informed source.

Away from the news of the reopening of the primary market, it was rugged going in the secondary market as the pre-Labor Day week got underway, sources said.

The market opened ¼ of a point lower as negative sentiment that came in the wake of Fed chairman Jerome Powell's remarks last Friday at Jackson Hole, unequivocally reasserting the Fed's “overarching” goal of fighting inflation, carried into the new week.

By mid-morning, high-yield was down ¼-point or more, according to a trader based in the New York area.

With the S&P 500 stock index off 0.75% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.28%, or 21 cents, at $75.60.

Among recent issues, the Ford Motor Co. 6.1% senior green notes due August 2032 (Ba2/BB+) were 1 point lower on the morning at 98¼ bid, the trader said.

Those bonds were 99½ bid, par offered on Friday morning, on the back of Powell's speech in Wyoming.

The new Ford green bonds came at par on Aug. 16 in a $1.75 billion high-grade-style execution.

Down along the credit spectrum, the Cornerstone Building Brands, Inc./Camelot Return Merger Sub Inc. 8¾% senior secured notes due August 2028 (B2/B) continued to hang above their new issue price at 91¾ bid, 92¾ offered, unchanged on the morning, with no notes having changed hands, the trader said.

The $710 million issue priced at 90.296 to yield 11% on July 20.

Down further still, the Carvana Co. 10¼% senior notes due May 2030 (Caa2/CCC) changed hands on Monday at 80, down about a point, the trader said.

The $3.275 billion issue priced at par on April 27.

Friday fund flows

The dedicated high-yield bond funds saw $243 million of net daily outflows on Friday, according to a market source.

High-yield ETFs saw $323 million of outflows on the day.

Actively managed high-yield funds were positive on the day, posting $80 million of inflows on Friday, the source said.

In the most recent week on record, the combined funds saw $4.57 billion of net outflows in the week to the Wednesday, Aug. 24 close, the biggest outflow since the week to June 15, and the 11th-largest outflow on record, according to the market source.

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