Del Monte prices at a discount; Hanesbrands in focus; MGM slides; Hertz down again

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 1 – The domestic high-yield primary market had a quiet session on Friday after a blockbuster April that had $37.37 billion price over 57 junk-rated tranches.

Del Monte Foods Inc. launched new deal activity in May with a $500 million issue that priced with a deep discount.

Meanwhile, the secondary space rounded out an otherwise strong week on soft footing with the cash bond market down ½ to ¾ point, a source said.

However, volume remained light with trading activity continuing to focus on new issues.

Hanesbrands’ 5 3/8% senior notes due 2025 (Ba3/BB) had high-volume activity with the notes trading with a slight premium despite a down day for the market.

While the majority of recent issues improved over the past week, MGM Resorts International’s 6¾% senior notes due 2025 (Ba3/BB-) were not among them.

The notes sank further below par in active trading following earnings.

Hertz Corp.’s 6% senior notes due 2028 continued to lose ground as the grace period for the rental car company’s missed lease payment quickly comes to a close.

Del Monte at a discount

The primary market eased into May on a quiet Friday that saw just one junk deal price.

Del Monte Foods wrapped up a triple-hooks deal, pricing a $500 million issue of 11 7/8% five-year senior secured notes (Caa2/CCC+) at 97 to yield 12.704%.

Initial talk had the notes coming with a 12% coupon and with 3 points to 5 points of original issue discount.

One of a very few deals to be in the market overnight since the beginning of March, Del Monte was heard to have been playing to strong demand.

It cleared the active forward calendar heading into the weekend.

Hanesbrands at a premium

Hanesbrands’ 5 3/8% senior notes due 2025 maintained a premium in high-volume activity on Friday, despite a weak day for the secondary space.

The 5 3/8% notes were marked at par 1/8 bid, par ¼ offered early in the session with the bid/ask spread tight.

They improved as the session progressed and stood poised to close the day at par ½, sources said.

With $95 million in reported volume, the notes were among the most actively traded of Friday’s session.

The clothing company priced an upsized $700 million issue of the 5 3/8% notes at par in a Thursday drive-by.

The issue size increased from $500 million.

The yield printed at the tight end of yield talk in the 5½% area.

MGM sinks

While most of the deals from last week that fell flat in initial trading have improved, MGM Resorts’ recently priced 6¾% senior notes due 2025 were not among them.

The notes slid further below par in active trading on Friday after the lodging, entertainment and gaming company reported earnings.

The notes dropped 2 points to close the day at 95¾, according to a market source.

There was more than $22 million in reported volume heading into the market close.

MGM reported a decrease of 29% in revenue in the first quarter and a 61% decrease in adjusted EBITDAR due to the suspension of casino operations in the U.S. and Macau, according to a company news release.

MGM priced a $750 million issue of the 6¾% notes at par on April 23.

Hertz sinks further

Hertz’s 6% senior notes due 2028 continued to sink further in active trading as the grace period for a missed lease payment quickly comes to a close.

The 6% notes traded off another 3½ points to close Friday at 14½.

The notes remained active with more than $23 million in reported volume.

Hertz priced a $900 million issue of the 6% notes at par in November 2019.

While the front end of the capital structure has held up better, Hertz’s 7 5/8% senior notes due 2022 also continued to trend lower.

The notes were down about 1 point to 37.

Hertz’s capital structure has cratered over the past month as bankruptcy speculation surrounds the company.

The notes have been in focus over the past week after the car rental company announced it missed its monthly payment on its vehicle operating lease agreement and was in talks with lenders, sources said.

The grace period on the missed lease payment ends on May 4.

The company may be forced to file for bankruptcy if it does not make the payment or reach an agreement with lenders, a market source said.

$810 million Thursday inflows

The dedicated high-yield bond funds had $810 million of net daily cash inflows on Thursday, according to a market source.

High-yield ETFs had $760 million of inflows on the day.

Actively managed high-yield funds saw $50 million of inflows on Thursday, the source said.

News of Thursday's inflows trails a Thursday afternoon report that the combined funds had $743 million of net inflows in the week to the Wednesday, April 29 close, according to Lipper US Fund Flows.

Of those inflows, high-yield ETFs saw inflows of $906 million for the week, while actively managed high-yield funds were actually negative on the week, sustaining $163 million of net outflows during that period.

It was the first negative weekly flow posted by the actively managed high-yield funds since late March, the market source said.

The combined junk funds remain in the red, year to date, having sustained $1.5 billion of net outflows in 2020 to Thursday's close, the source added.

Down on day, up on week

Indexes closed Friday with losses, but all saw cumulative gains on the week.

The KDP High Yield Daily index was down 25 basis points to close Friday at 62.62 although the yield was flat at 7.45%.

The index rose 23 bps on Thursday, 18 bps on Wednesday, saw a slight decrease of 3 bps on Tuesday and was up 2 bps on Monday.

The index posted a cumulative gain of 15 bps on the week.

The ICE BofAML US High Yield index slid 25.2 bps with the year-to-date return now negative 10.073.

The index gained 29 bps on Thursday, 39.2 bps on Wednesday and 11.4 bps on Tuesday after dropping 7 bps on Monday.

The index was saw a cumulative gain of 47.4 bps on the week.

The CDX High Yield 30 index dropped 98 bps to close Friday at 93.81. The index was up 2 bps on Thursday, rose 126 bps on Wednesday, 15 bps on Tuesday and 40 bps on Monday.

The index saw a cumulative gain of 85 bps on the week.

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