Junk bond supply steady; Syneos skyrockets on takeover; Icahn falls on federal probe

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 10 – Dollar-denominated junk bond supply tallied $1.55 billion on Wednesday with a third deal coming from an American issuer, but in euros.

Meanwhile, it was a strong day in the secondary space with buyers returning to the market on the heels of a softer-than-expected Consumer Price Index print.

While there were periods of weakness during the session, the cash bond market closed the day with a ¼ to 3/8 point gain, sources said.

Real money accounts were active buyers on Wednesday with several offers-wanted-in-competition lists circulating the market.

While a strong day for the broader market, topical news was the main driver of trading activity in the space with the headlines catapulting some credits higher while others sank.

Syneos Health Inc.’s 3 5/8% senior notes due 2029 (B1/BB-) were the shining star of Wednesday’s session with the notes skyrocketing double digits following news of the company’s acquisition.

Icahn Enterprises LP’s senior notes (Ba3/BB) again took the prize of largest loser with the notes falling 1½ to 4 points after the company disclosed a federal probe sparked by short-seller Hindenburg Research’s early May report.

At Home Group, Inc.’s 7 1/8% senior notes due 2029 (Caa3/CCC-) continued their miraculous about face with the notes adding another 8 points on Wednesday after surging double digits over the past week and a half.

Active primary

New issue news volume remained steady throughout the Wednesday session.

In a drive-by Iron Mountain Inc. priced a $1 billion issue of senior notes due Feb. 15, 2029 (Ba3/BB-) at par to yield 7%, at the wide end of talk.

The deal was heard to play to $1.3 billion of orders, according to a trader who had Iron Mountain’s new notes at 99 5/8 bid, par offered late Wednesday afternoon.

Meanwhile, at the conclusion of a full roadshow Paris-based Calderys Financing, LLC priced a $550 million issue of five-year senior secured notes (B2/B) at par to yield 11¼%.

The yield printed at the tight end of yield talk in the 11 3/8% area. However, that talk came wide to early guidance in the high-10% to 11% area, according to a trader.

The deal also underwent covenant changes.

Books built to $875 million, according to the trader who had the new Calderys 11¼% notes sharply higher, at 102 bid, 103 offered, in late Wednesday trading.

Traders are coming to expect high-coupon deals such as Calderys to hit significant or better demand when they break for trading, sources say.

Also on Wednesday, Ohio-based Dana Inc. priced a €425 million issue of Dana Financing Luxembourg Sarl eight-year senior notes (B1/BB-/BB+) at par to yield 8½%, in the middle of talk.

Dana plans to use the proceeds from Wednesday’s euro deal to refinance dollar-denominated debt.

Syneos takeout

Syneos’ 3 5/8% senior notes due 2029 were in focus on Wednesday with the notes catapulting double digits on news of Syneos’ buyout by a consortium of private equity investors.

The 3 5/8% notes shot up 14 points to a 97-handle in heavy volume.

They closed the day wrapped around 97¾, a source said.

There was $87 million in reported volume.

The 3 5/8% notes had been trading in the 82 to 83 context for the past month.

The notes skyrocketed following news that Syneos would be acquired by Elliott Investment Management, Patient Square Capital and Veritas Capital in a transaction valued at $7.1 billion.

Dealers have committed $2.7 billion in credit facilities and $1.5 billion in bridge loans to help fund the leveraged buyout, Prospect News reported.

The 3 5/8% notes will be taken out in the acquisition although it is unclear whether there will be a conditional redemption, tender offer, or change-of-control put for the notes, a source said.

Icahn falls

Icahn Enterprises’ senior notes continued their downfall on Wednesday with the notes again the largest losers of the session after the company disclosed a federal probe.

Icahn’s 5¼% senior notes due 2027 sank 4 points to close the day at 84½ with the yield now 10%, according to a market source.

There was $27 million in reported volume.

The notes were trading at 94 prior to the release of Hindenburg’s report in early May.

Icahn’s 6 3/8% senior notes due 2025 also fell 4 points to close the day at 90½ with the yield 10 5/8%.

There was $27 million in reported volume.

The notes were wrapped around 99 heading into May.

Icahn’s 4 3/8% senior notes due 2029 fell 2½ points to close the day at 77½.

There was $22 million in reported volume.

The notes were on an 87-handle in early May.

Icahn’s senior notes were again for sale after the company disclosed a federal probe initiated in response to allegations made in Hindenburg Research’s report.

Hindenburg unleashed a report on May 2 accusing Icahn of running a Ponzi-esque scheme with the company marking up the value of its assets and overleveraging itself.

Icahn Enterprises disclosed that the U.S. Attorney’s office for the Southern District of New York had contacted the company and requested information following the report’s release.

At Home surges

At Home Group’s 7 1/8% senior notes due 2029 continued their remarkable about face on Wednesday with the notes adding 9 points after surging double digits over the past week and a half.

The notes continued to shoot out of the distressed debt abyss with the notes closing the day wrapped around 85, a source said.

The yield narrowed to 10½%.

There was $9 million in reported volume.

The 7 1/8% notes have jumped 25 points since May 1 when they were trading just shy of 60.

Fund flows

The dedicated high-yield bond funds sustained $600 million of net daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $538 million of outflows on the day.

Actively managed high-yield funds sustained $62 million of outflows on Tuesday, the source said.

The combined funds are tracking $926 million of net outflows on the week to Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index added 12 points to close Wednesday at 50.72 with the yield now 7.26%.

The index was down 9 points on Tuesday and 10 points on Monday.

The ICE BofAML US High Yield index gained 30.9 basis points with the year-to-date return now 4.363%.

The index was down 13.4 bps on Tuesday and 7.9 bps on Monday.

The CDX High Yield 30 index added 36 bps to close Wednesday at 100.34.

The index was off 23 bps on Tuesday and 9 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.