HUB prices junk megadeal; CSC, Caliber outperform; Spirit rebounds; Radiology jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 19 – HUB International Ltd. brought the curtain down on the biggest week in the junk primary market since mid-November with a megadeal.

Meanwhile, the secondary space closed the week flat with the cash bond market either side of unchanged as the selling pressure from early in the week continued to wane, a source said.

While strong retail sales figures from early in the week caused the market to dial back its rate-cut expectations, the consumer sentiment data on Friday fed into the Goldilocks scenario of rate cuts without a recession.

New paper and topical news continued to move the market with the deals to price during Thursday’s session logging strong gains in the aftermarket.

Altice USA Inc. subsidiary CSC Holdings, LLC’s 11¾% senior guaranteed notes due 2029 (B2/B) and Caliber Collision’s 7 5/8% senior secured notes due 2032 (B3/B) both broke above a 101-handle in heavy volume.

Outside of new issues, Spirit Airlines Inc.’s 8% senior secured notes due 2025 (B2) broke their death spiral on Friday with the notes climbing double digits as the airline pushes for an appeal to the antitrust verdict that blocked JetBlue’s acquisition of the company.

Radiology Partners Inc.’s senior notes also made outsized moves to the upside after the company announced a series of refinancing transactions that included an exchange offer for the notes.

Megadeal

Chicago-based insurance broker HUB International Ltd. priced $3 billion of junk in tranches of secured and unsecured notes: a $1.1 billion add-on to the HUB International 7¼% senior secured notes due June 15, 2030 (B2/B) which priced at 102, in the middle of talk, and a $1.9 billion tranche of new eight-year senior notes (Caa2/B-) that priced at par to yield 7 3/8%, at the tight end of talk.

The secured add-on was heard to be playing to $1.5 billion of demand at midmorning on Friday, at which time books for the new unsecured notes were around $3 billion, a market source said.

The add-on, which priced at 102, broke to 102.5 bid, 103 offered, while the unsecured tranche broke to par 1/8 bid, par ½ offered, after having priced at par, according to a trader.

Hub brought the issuance total for the holiday-abbreviated week of Jan. 15 to $8.6 billion, the biggest week in the new issue market since the one that began on Nov. 13, a full five-day week which counted $10.6 billion.

The most talked about deal of the week came from Wand NewCo 3 Inc. (Caliber Collision), making its first-ever trip to the junk bond yard to price $1.25 billion of 7 5/8% eight-year senior secured notes (B3/B).

It caused a pile-up as investors clamored to gain exposure to the auto collision sector which, as a sellside source pointed out, is not a cyclical sector.

There were 240 accounts in the deal, the sellsider said, of which 65 got zeroed.

As Caliber ratcheted down pricing (initial talk was in the 8% area) demand grew rather than diminished, according to sources.

When the dust settled the book size was around $8.4 billion, sources say.

Primary ahead

The week ahead promises to be an active one.

It gets underway with just one deal on the active calendar.

KeHE Distributors, LLC began a roadshow on Wednesday for a $750 million offering of senior secured notes due 2029 (B3/B), in the market with initial guidance is in the low-9% area.

However, there was an unannounced pipeline of deals that took shape as the past week wound down.

It includes England-based Merlin Entertainments plc, in the wings with a $400 million offering of seven-year senior secured notes whispered in the high-7% area. Deutsche Bank Securities Inc. is expected to lead.

Also NGL Energy Partners LP is expected to show up with a $2.5 billion offering of high-yield notes. Pro forma on the deal is in the 8½% area. BofA Securities, Inc. is expected to lead.

And Caesars Entertainment Inc. is expected to show up with a minimum of $1.5 billion of senior secured notes, likely ride into the market on a big wave of reverse inquiry – possibly a deal-size amount of reverse – and could upsize, a source said.

Outperformers

The deals to clear the primary market on Thursday were logging strong gains in the aftermarket with CSC Holdings’ 11¾% senior guaranteed notes due 2029 and Caliber Collision’s 7 5/8% senior secured notes due 2032 both breaking above a 101-handle.

CSC Holdings’ 11¾% notes due 2029 were trading in the 101 5/8 to 102 1/8 context heading into the market close.

“They just went up,” a source said.

There was $235 million in reported volume.

In a heavily oversubscribed offering, CSC Holdings priced an upsized $2.05 billion, from $1.25 billion, issue of the 11¾% notes at par in a Thursday drive-by.

The deal was heard to be three-times oversubscribed at its initial size and came into the market with a substantial amount of reverse inquiry, sources said.

The yield printed at the tight end of the 11¾% to 12% yield talk.

Caliber Collision’s 7 5/8% senior secured notes due 2032 were also strong with the notes holding the strong gains made on the break.

They were trading in the 101 5/8 to 102 1/8 context heading into the market close, a source said.

There was $122 million in reported volume.

Caliber Collision priced a $1.25 billion issue of the 7 5/8% notes at par on Thursday.

The deal played to $7.5 billion of demand at initial guidance in the 8% area with price talk tightening due to the overwhelming interest in the deal from the first-time issuer, sources said.

The yield printed at the tight end of final yield talk in the 7¾% area.

Spirit Airlines rebounds

Spirit Airlines’ 8% senior secured notes due 2025 were on the rebound on Friday with the notes reclaiming almost half of their losses over the past three sessions.

The 8% notes jumped 11 points to close the day wrapped around 69¾, a source said.

The yield narrowed to 39¾%.

There was $70 million in reported volume.

Spirit Airlines’ notes dropped about 25 points over Tuesday and Wednesday after the surprise verdict in the Department of Justice’s antitrust trial blocked JetBlue’s acquisition of the company.

However, buyers returned to lift the beleaguered airline on Friday with the company reportedly urging JetBlue to appeal the verdict.

Spirit Airlines also upped its fourth-quarter guidance and announced that it was planning to refinance its debt.

Radiology Partners rockets higher

Radiology Partners’ 5¼% senior secured notes due 2025 (Caa2/CCC+) and 9¼% senior notes due 2028 (Ca/CCC-) rocketed higher on Friday after the company announced a series of refinancing transactions that included an exchange offer for the notes.

The 5¼% senior secured notes due 2025 jumped more than 10 points.

They traded as high as 93 during the session but gave back some gains with the notes wrapped around 90½ heading into the market close, a source said.

There was $28 million in reported volume.

The 9¼% senior notes due 2028 jumped almost 16 points.

They were trading at 65¾ heading into the close with $14 million on the tape.

The illiquid issue last traded in early January on a 50-handle, a source said.

The senior notes soared on Friday after the company announced an exchange of the notes as part of a series of refinancing transactions.

The company is offering to exchange the 5¼% senior secured notes due 2025 for new first-lien notes due 2029 and to exchange the 9¼% senior notes due 2028 for new second-lien notes due 2030.

The company also announced its credit facility maturity was extended to 2028 from 2024 and its first-lien term loan maturity was extended to 2029 from 2025, according to a company news release.

Fund flows

The dedicated high-yield bond funds sustained $101 million of net daily cash outflows on Thursday, according to a market source.

High-yield ETFs had $52 million of outflows on the day.

Actively managed high-yield funds sustained $49 million of outflows on Thursday, the source said.

News of Thursday’s daily cash flows trails a Thursday report that the dedicated junk bond funds had $1 billion of net inflows in the week to the Wednesday, Jan. 17 close, the tenth inflow in the past 11 weeks, an interval during which the high-yield funds had $16.5 billion of net inflows, according to the market source.

Those inflows, understood to represent the retail portion of the high-yield investment community, indicate that there is a substantial amount of cash looking for a home in the junk bond market.

Strong demand can be inferred from the sharp executions, and swooping price talk that have been at play thus far in the 2024 new issue market.

“Witness the Caliber Collision deal,” a portfolio manager said on Friday afternoon.

Indexes

The KDP High Yield Daily index closed Friday up 5 basis points at 50.46 with the yield now 6.93%.

The index was up 5 bps on Thursday.

The CDX High Yield 30 index gained 23 bps to close Friday at 105.84.

The index gained 22 bps on Thursday after falling 22 bps on Wednesday and 32 bps on Tuesday.

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