Junk: Baytex launches roadshow for Ranger buyout; Knife River adds; Cleveland-Cliffs lags

By Abigail W. Adams

Portland, Me., April 12 – The domestic high-yield bond primary market remained active on Wednesday, following the flood of issuance during Tuesday’s session, with one deal joining the forward calendar.

Baytex Energy Corp. will start a roadshow on Thursday for a $750 million offering of seven-year, no-call-three senior notes (expected B1/BB-/BB-) backing the buyout of Ranger Oil Corp, according to a market source.

The roadshow will run until Friday with pricing expected thereafter.

Meanwhile, new paper was in focus in the secondary space which was volatile following the latest slate of economic data.

The secondary space had a strong start in the morning with the market adding ¼ to ½ point after the release of the Consumer Price Index report print, a source said.

However, the market gave back much of those gains following the release of the Federal Open Market Committee’s March meeting minute notes with officials signaling a May rate increase and also reaching consensus that a recession would be likely by the end of the year.

“Everything was going up, it was hunky-dory, then some ugliness began to show up,” a source said.

The cash bond market held onto some nominal gains; however, the CDX index closed down ¼ point.

While the market leaked into the close, three out of the four deals to price during Tuesday’s session were trading at premiums to their issue prices.

Knife River Holding Co.’s 7¼% senior notes due 2031 (Ba3/BB) and Macquarie AirFinance Holdings Ltd.’s 8 3/8% senior notes due 2028 (/BB+/BB) were the outperformers of Tuesday’s deals with the notes adding more than 1 point in the aftermarket.

Churchill Downs Inc.’s 6¾% senior notes due 2031 (B1/B+) made nominal gains although the notes remained on a par handle.

However, Cleveland-Cliffs Inc.’s 6¾% senior guaranteed notes due 2030 (Ba3/BB-/BB-) were the laggards of the recent deals with the notes falling to a 99-handle in heavy volume.

Outperformers

Knife River’s 7¼% senior notes due 2031 made the largest gains of the onslaught of new paper that priced during Tuesday’s session.

The notes jumped to a 101-handle after breaking for trade and continued to add during Wednesday’s session.

The 7¼% notes were marked at 101¼ bid, 101¾ offered, a source said.

There was $24 million in reported volume.

Knife River priced an upsized $425 million, from $400 million, issue of the 7¼% notes at par on Tuesday.

Macquarie AirFinance’s 8 3/8% senior notes due 2028 (/BB+/BB) were also putting in a strong performance with the notes marked at par ¾ bid, 101¼ offered.

There was $24 million in reported volume.

In a heavily oversubscribed offering, Macquarie AirFinance priced a $500 million issue of the 8 3/8% notes at par on Tuesday.

Pricing came tighter than talk for a yield of 8½% to 8¾%.

Par handle

Churchill Downs’ 6¾% senior notes due 2031 (B1/B+) were holding onto a nominal premium in the aftermarket.

The notes traded as high as par ¾ early in the session but closed the day in the par 1/8 to par 3/8 context.

In a heavily oversubscribed offering, Churchill Downs priced the $600 million issue of 6¾% notes at par in a Tuesday drive-by.

Pricing came on top of talk. The deal was heard to have played to $1.15 billion in demand.

Cleveland-Cliffs lags

Cleveland-Cliffs’ 6¾% senior guaranteed notes due 2030 (Ba3/BB-/BB-) were the only laggards of the recent deals with the notes falling to a 99-handle.

The notes broke below par early Wednesday and continued to weaken as the session progressed.

“They traded poorly out of the gate,” a source said.

The notes closed Wednesday in the 99 to 99½ context.

The $750 million issue priced at par in a Tuesday drive-by.

The yield printed in the middle of the 6 5/8% to 6 7/8% yield talk.

The deal was heard to have played to heavy demand during bookbuilding with orders of $1.2 billion from 70 accounts.

Indexes

The KDP High Yield Daily index gained 16 points to close Wednesday at 51.91 with the yield 7.07%. The index gained 8 points on Tuesday after falling 9 points on Monday.

The ICE BofAML US High Yield index gained 25.4 basis points with the year-to-date return now 4.237%.

The index gained 26.3 bps on Tuesday and 2.8 bps on Monday.

The CDX High Yield 30 index fell 27 bps to close Wednesday at 100.82.

The index gained 32 bps on Tuesday and 33 bps on Monday.

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