Secondary firms ahead of CPI, Fed; Chart gains continue; Horizon up on acquisition

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 12 – In Monday's junk primary market Belgium-based House of HR NV kicked off a €300 million offering of seven-year senior secured notes (B2/B) with initial guidance setting forth a 9% coupon to yield 10¾% to 11%.

Proceeds will be used to partially repay the bridge loan drawn in connection with the financing for Bain Capital’s acquisition of a majority stake in House of HR.

A similarly structured €425 million offer was withdrawn from the market in October because of market conditions.

Meanwhile the dollar-denominated primary market remained quiet on Monday.

It may remain quiet until after the December Fed meeting concludes on Wednesday, sources say.

The Fed's rate-setting Federal Open Market Committee is widely expected to render a decision to increase the benchmark Fed Funds rate another 0.5%.

The market will be especially tuned in to central bankers' accompanying comments for indications on the Feds anti-inflationary path in the early part of 2023, sources say.

Meanwhile, the secondary space was quiet yet firm on Monday as markets await the Tuesday release of November’s Consumer Price Index report and the Federal Open Market Committee’s Wednesday decision.

Liquidity continued to diminish as the end of the year approaches; however, recently issued paper and topical news continued to drive activity in the space.

Chart Industries, Inc.’s recently priced tranches continued to add in heavy volume.

Horizon Pharma USA, Inc.’s 5½% senior notes due 2027 (Ba2/B+) were among the top gainers on Monday after Amgen announced its $27.8 billion acquisition of the company in the year’s largest acquisition in the sector.

Tutor Perini Corp.’s 6 7/8% senior notes due 2025 (B3/B-) were the market laggard with the bonds falling more than 3 points following a hit to earnings caused by a recent court decision.

Chart adds

Chart’s recently priced tranches continued to add in heavy volume on Monday.

The 9½% senior notes due 2031 (B3/B) launched the day strong at 101¼ bid, 101¾ offered and continued to climb as the session progressed with the notes breaking out to a 102-handle.

The 9½% notes closed the day up 1¼ point in the 102 1/8 to 102 3/8 context, a source said.

There was $30 million in reported volume.

The notes, which priced at 97.949 to yield 9 7/8% on Dec. 8, saw a strong break with the notes wrapped around 101 their initial days in the market.

Chart’s 7½% senior secured notes due 2030 (Ba3/B+) also made strong gains on Monday although their higher-coupon counterpart continued to outperform them.

The 7½% notes climbed 3/8 to ½ point and were changing hands in the par 7/8 to 101 1/8 context heading into the market close.

There was $38 million in reported volume, making the tranche the most actively traded issue during Monday’s session.

The $1.46 billion issue priced at 98.661 to yield 7¾% on Dec. 8.

Horizon’s acquisition

Horizon’s 5½% senior notes due 2027 were on the rise in heavy volume after Amgen announced its $27.8 billion acquisition of the biopharmaceutical company.

The 5½% notes jumped 2½ points on the news with the notes wrapped around 102 1/8 heading into the market close, according to a market source.

There was $26 million in reported volume.

Horizon was front and center on Merger Monday as Amgen announced the largest acquisition year-to-date in the pharma sector.

Amgen will acquire Horizon for $116.50 per share in cash which values Horizon at $27.8 billion on a fully dilutive basis with the enterprise value $28.3 billion.

Amgen has secured a $28.5 billion bridge loan from Citibank and Bank of America to fund the transactions, Prospect News reported.

The deal is expected to close in the first half of 2023.

Tutor Perini under pressure

Tutor Perini’s 6 7/8% senior notes due 2025 (B3/B-) were under pressure on Monday after the company announced that earnings would take a hit as a result of a recent court decision.

The 6 7/8% notes were off more than 3 points with the notes falling to an 86-handle, a source said.

They were wrapped around 86¼ heading into the market close with a yield of 13 7/8%.

The notes were previously on an 89-handle.

The notes were under pressure after the general contractor announced it would incur a $43 million charge in the fourth quarter as a result of a court judgment related to a transportation project awarded in 2012.

Indexes

The KDP High Yield Daily index gained 6 points to close Monday at 52.6 with the yield 7.15%.

The index posted a cumulative loss of 6 points on the week last week.

The ICE BofAML US High Yield index gained 17.1 basis points with the year-to-date return now negative 9.78%.

The CDX High Yield 30 index gained 18 bps to close Monday at 100.98.

The index posted a cumulative loss of 66 bps on the week last week.

Fund flows

High-yield ETFs saw $227 million of daily cash inflows on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds were negative on the day, sustaining $230 million of outflows on Friday, the source said.

The combined funds are tracking $247 million of net outflows on the week that will conclude with Wednesday's close, according to the market source.

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