Morning Commentary: PennyMac driving-by; Alliant on tap; Credit Acceptance improves

By Abigail W. Adams

Portland, Me., Dec. 6 – The domestic high-yield bond primary market stood poised for another active session with one drive-by deal on deck and one deal set to clear the forward calendar.

PennyMac Financial Services Inc. plans to price $650 million of six-year senior notes (Ba3/B+/BB-) in a Wednesday drive-by with early guidance for a yield in the mid 8% area, according to a market source.

The notes are non-callable for three years.

The deal did not seem very attractive at that price point, a source said.

Alliant Holdings Intermediate LLC and Alliant Holdings Co-Issuer Inc. are also expected to price their $750 million offering of seven-year senior secured notes (B2/B) during Wednesday’s session.

Early guidance is for a yield in the in the low 7% area.

The books were heard to be just about deal size early Wednesday.

While the recent wave of deals has commanded tighter terms due to the dramatic repricing of the market since mid-November, new notes continued to play to strong demand and put in solid performances in the aftermarket.

The secondary space was off to a strong start early Wednesday after the latest ADP report reflected a weakening labor market.

The cash bond market added another 1/8 point after year-to-date returns broke above 10% the previous session, sources said.

Credit Acceptance Corp.’s 9¼% senior notes due 2028 (Ba3/BB) continued to shoot higher after a strong break the previous session.

Enova International Inc.’s 11¼% senior note due 2028 (B2/B-) held onto the gains made on the break with the notes continuing to trade at a premium to their discounted issue price.

Credit Acceptance gains

Credit Acceptance’s 9¼% senior notes due 2028 continued to shoot higher in active trade early Wednesday with the notes breaking above a 101-handle.

The notes added more than 1 point and were trading in the 101¾ to 102 context early in the session, according to a market source.

Credit Acceptance priced an upsized $600 million, from $550 million, offering of the 9¼% notes at par on Tuesday.

Pricing came at the tight end of talk for a yield of 9¼% to 9½%.

Timing for the deal was accelerated with pricing initially expected on Wednesday.

Enova at a premium

Enova’s 11¼% senior note due 2028 were unchanged on the day but maintained the gains made on the break in active trade early Wednesday.

The 11¼% notes were changing hands in the 99 3/8 to 99½ context early in the session, according to a market source.

Enova priced $400 million of the 11¼% notes at 99.058 to yield 11½% on Tuesday.

Pricing came in line with talk for 1 point of original issue discount with an all-in yield in the 11½% area.

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