Two issuers drive by junkland for $900 million; Howard Hughes softens; Icahn higher

By Paul A. Harris and Cristal Cody

Tupelo, Miss., July 17 – The domestic junk bond market had $900 million of new paper at the end of the day, Monday, with two drive-by issuers in the market.

In secondary trading, Howard Hughes Corp.’s junk paper softened after the company announced a new holding company structure, a source said.

The 4 1/8% senior notes due 2029 (Ba3/BB-) were moving Monday ½ point lower.

Icahn Enterprises LP’s senior notes (Ba3/BB) continued to reverse some of their weakness Monday after coming under pressure in May following the release of short seller Hindenburg Research’s critical report, a source said.

Icahn’s 5¼% senior notes due 2027 added ½ point.

Icahn’s 4 3/8% senior notes due 2029 went out Friday up 2.66 points on the week on $103 million of secondary action – a standout among other junk supply.

The iShares iBoxx High Yield Corporate Bond ETF improved 14 cents, or 0.19%, to $75.24.

Pair of drive-bys

A pair of drive-by issuers, Beacon Roofing Supply and Crescent Energy Co. priced a combined $900 million face amount of junk, on Monday, each driving by with a single tranche.

Both upsized. Both came tight/rich to talk. And both were oversubscribed.

They were the second and third issuers to print new high-yield bonds this month.

The new issue market generated a steady stream of news, as the week got underway, leaving in place an active forward calendar, as well as a pipeline of deals, all of which could price ahead of Friday’s close, sources said.

Howard Hughes lower

Howard Hughes’ 4 1/8% senior notes due 2029 (Ba3/BB-) declined ½ point to 83 7/8 in mostly light trading totaling $2 million, down from 84 3/8 on Friday, a source said.

The notes are callable Feb. 1, 2024.

On Saturday, S&P Global Ratings revised the company’s outlook to negative from stable and said it expects debt to remain elevated.

Howard Hughes announced Monday that its board authorized a new incorporated holding structure called Howard Hughes Holding Corp., which will become the new parent company of Howard Hughes Corp. and replace it as the company that is publicly traded on the New York Stock Exchange effective Aug. 11, or as soon thereafter.

Existing shares will be automatically converted, on a one-for-one basis, into shares of common stock of the new holding corporation, which will retain the existing ticker symbol.

The company said it believes that implementation of the reorganization will promote the growth of its businesses, including flexibility to fund future investment opportunities and to segregate assets and related liabilities in separate subsidiaries.

The company’s stock (NYSE: HHC) closed up 0.63% at $82.49.

Howard Hughes plans to release its second-quarter earnings results on Aug. 8.

The Houston-based commercial and residential real estate owner and manager’s assets include properties in New York City, Las Vegas and Honolulu.

Icahn gains

Icahn’s 5¼% senior notes due 2027 (Ba3/BB) added ½ point to bring them to 89 by the close Monday, a market source said.

In the same session a week ago, the notes were trading up 2 points in the 87 7/8 to 88 1/8 context.

Icahn’s 4 3/8% senior notes due 2029 went out Friday up 2.66 points on the week at 81.9 on $103 million of secondary action – a standout among other junk supply, according to a BofA Securities Inc. note.

Icahn’s bonds have continued to gain since June after coming under pressure in May following the release of short seller Hindenburg Research’s critical research report.

The senior notes were lifted ½ to 2 points at the start of the previous week. Carl Icahn announced a new loan agreement that consolidated his borrowings and shifted the margin call trigger for the Icahn Enterprises depositary units used as collateral.

Icahn’s loans that were secured by his IEP depositary shares were among the issues highlighted in Hindenburg Research’s May report.

Indexes

The KDP High Yield Daily index declined to 50.94 with a 7.19% yield on Monday from 51.02 with the yield 7.17% on Friday.

The index went out Friday down 16 points on the day but posted a cumulative gain of 81 points on the week.

The CDX High Yield 30 index rose to 102.95 on Monday after shedding 40 points Friday to close at 102.73.

The index posted a cumulative loss of 122 basis points for the prior week.

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