Morning Commentary: Bausch + Lomb, Freedom Mortgage on deck as primary continues to rip

By Paul A. Harris

Portland, Ore., Sept. 14 – The rejuvenated mid-September high-yield primary market, now heading toward the home stretch of its biggest week since early February (third biggest of 2023, to date), is staged to crank out at least another $2 billion on Thursday, according to market sources.

On deck is Bausch + Lomb Corp. (Bausch + Lomb Escrow Corp.) with $1.4 billion of five-year secured notes talked to yield in the 8½% area.

The acquisition financing deal is heard to be playing to $3.5 billion of demand across a decent number of accounts, a bond trader said.

Also on deck for Thursday is Freedom Mortgage Corp. with a $600 million offering of five-year notes (B2/B/B+). Talk has that deal coming with a 12% to 12¼% coupon at an original issue discount of 98 to yield 12½% to 12.8%, with the market anticipating an upsize, possibly to $800 million.

Books are heard to be $1.9 billion, the trader said.

Provided both of those deals clear the market as anticipated, at their announced sizes, when the dust settles on the Thursday session the Sept. 11 week will be the biggest one of 2023 to date, edging the Feb. 6 week which saw $8.5 billion.

Of the week’s $6.8 billion of concluded business, a lot of it is trading on the screws (idiomatic for trading at or slightly above issue price, but not notably higher), the trader said.

The Sunoco LP/Sunoco Finance Corp. 7% senior notes due September 2028 (B1/BB-) were wrapped around par on Thursday morning, the source reported.

The $500 million deal priced at par, at the wide end of talk, in a Wednesday drive-by.

Diamond Offshore Drilling, Inc.’s new bonds, the Diamond Foreign Asset Co./Diamond Finance, LLC 8½% second-lien notes due October 2030 (B3/BB-), were trading above issue price on Thursday morning at par ¼ bid, par ¾ offered, the trader said.

The upsized $550 million issue (from $500 million) priced on Tuesday at par.

Better still were the Citgo Petroleum Corp. 8 3/8% secured notes due Jan. 15, 2029 (B3/B+), trading Thursday morning at par ½ bid, 101 offered, according to the trader.

The $1.1 billion issue priced at par on Wednesday in a deal heard to be two-times oversubscribed.

The new Citgos went out the door on Wednesday at par 1/8 bid, par 5/8 offered.

However, a cursory look at the week’s already concluded business prompted the trader to point to the new NFP Corp. 8½% secured notes due October 2031 (B1/B/BB-) as the week’s likely outperformer thus far, trading Thursday morning at 101 bid, 101½ offered, up a point since pricing on Monday at par in a $350 million issue.

The broad high-yield bond market opened 1/8 of a point higher on Thursday morning, according to a bond trader in New York.

With the S&P 500 stock index up 0.68% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.19%, or 14 cents, at $74.97.

Fund flows

High-yield ETFs saw decent-or-better daily cash inflows of $349 million on Wednesday, according to a market source.

Actively managed high-yield funds sustained $29 million of outflows on the day.

As the market anticipates a report on the weekly cash flows of the various asset classes, expected later Thursday from Refinitiv Lipper, the combined high-yield bond funds are tracking $5 million of net inflows for the week to Wednesday’s close, according the market source.

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