Valaris, Greystar, ATI price; Tenneco, Dream Finders start roadshow; Veritex, Ford weaker

By Abigail W. Adams and Paul A. Harris

Portland, Me., Aug. 7 – A late-summer pick-up in high-yield new-issue activity continued apace on Monday as three single-tranche issuers – two of them bringing drive-bys – issued $1.23 billion of notes.

All three deals printed at the tight or rich ends of talk.

Two came upsized.

In a blowout, ATI Inc. priced an upsized $425 million issue (from $400 million) of seven-year senior notes (B2/B+) at par to yield 7¼%, at the tight end of talk.

The $425 million issue was heard to have played to $1.9 billion of orders.

There was also growth in the active new-deal calendar, including Tenneco Inc., making a return attempt to take out the bridge loan backing the buyout of the company by Apollo, which got hung up on dealer balance sheets in late 2022 due to market conditions.

Tenneco started a roadshow for a $1.75 billion offering of 8% senior secured notes due November 2028, with initial price talk that has them coming deeply discounted, at 85 to 86, resulting in a 12% all-in yield.

This time around prospects for placing the Tenneco debt are much more hopeful, according to a sellside source who said that the new bond offer rode into the market on the back of $1.4 billion of reverse inquiry, and added that demand for the deal is already heard to be $2 billion.

Meanwhile, it was a quiet day in the secondary space with buyers continuing to lift the market although in light volume.

The cash bond market opened flat but notched nominal gains by the close.

ETF activity was subdued but some ETFs were circulating offers-wanted-in-competition lists, a source said.

With market players continuing to sift through earnings and awaiting the next Consumer Price Index report, set for release on Thursday, there was no clear theme to secondary trading with the market’s focus on the deals in the pipeline.

VT TopCo, Inc.’s (Veritext) recently priced 8½% senior secured notes due 2030 (B2/B/B+) remained active with the notes coming in from their heights.

Ford Motor Credit Co. LLC’s senior notes (Ba2/BB+) were also weaker in active trade.

Rite Aid Corp.’s 8% senior secured notes due 2026 (Caa3/CCC-/B) continued their strong uptrend after a heavy selling in mid-July drove them to their lowest level of the year.

Veritex comes in

Veritex’s 8½% senior secured notes due 2030 were coming down from their heights after a strong aftermarket debut.

The notes were down about ¼ point to trade in the par 7/8 to 101 1/8 context heading into the close, a source said.

There was $14 million in reported volume.

The notes saw a strong break after pricing at par on Aug. 3 and closed the previous session in the 101¼ to 101½ context.

Ford weaker

Ford’s senior notes were weaker in heavy volume on Monday as analysts warn of potential headwinds for the auto industry.

Ford’s 4.346% senior notes due 2026 were in play with the notes off about ¼ point in active trade.

The notes remained on a 97-handle and were trading in the 97 ¼ to 97½ context heading into the market close.

The yield was about 5 1/8%.

There was $12 million in reported volume.

Ford’s 7.2% senior notes due 2030 were also off about ¼ point, closing the day at 102 3/8.

The yield was 6¾%.

There was $12 million in reported volume.

Ford’s notes were weaker as analysts warn of potential headwinds for the auto industry with funding costs and decreased demand due to affordability expected to cut into profits.

Analysts are projecting a $520 million hit to Ford’s profits due to increased interest expenses in 2023/2024, a source said.

Rite Aid’s rebound

Rite Aid’s 8% senior secured notes due 2026 continued their upward momentum on Monday with the notes among the major gainers in the secondary space.

The 8% notes added 3 points in heavy volume to close the day wrapped around 58, a source said.

The yield fell to 28 5/8%.

There was $11 million in reported volume.

The notes have been on a strong uptrend since last week when they were trading on a 50-handle.

The notes have steadily climbed since a bout of heavy selling in mid-July saw them break below a 40-handle, marking their lowest level of the year.

Rite Aid’s capital structure has been on a meme-stock inspired surge over the past week with the company’s stock adding almost 70% in the past five trading sessions.

Indexes

The KDP High Yield Daily index inched up 2 basis points to close Monday at 50.41 with the yield now 7.47%.

The ICE BofAML US High Yield index added 17.2 bps with the year-to-date return now 6.434%.

The CDX High Yield 30 index added 26 bps to close Monday at 102.74.

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