Advisor Group, Cision, Flexential price; Sprint flat; PTC trades up; Adient, HC2 gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 31 – While the domestic high-yield primary market slowed its pace as the coronavirus rattled markets, new deal activity continued on Friday with three deals pricing.

Advisor Group Inc. priced a downsized $500 million issue of eight-year senior secured notes (B1/B/B+), Cision priced a $300 million issue of eight-year senior notes (Caa2/CCC) and Flexential Intermediate Corp. priced a $250 million issue of 11¼% senior secured notes due Aug. 1, 2024 (B2) at a discount.

The week ahead also promises to be active with offerings from Innophos Holdings Inc., Arconic Rolled Products Corp., Allen Media, LLC and Banijay expected to price.

Meanwhile, the secondary space closed out a volatile week on soft footing with the sell-off in equities and crude oil futures dragging down the junk market.

While soft, the high-yield market still held up relatively well with few names seeing a dramatic drop, a market source said.

PTC Inc.’s recently priced tranches (Ba3/BB-) were putting in a strong performance in the secondary space despite the down day for the market and the tight pricing of the bonds.

However, Sprint Corp.’s 7¼% senior notes due 2028 (B1/B+/BB) continued to trade flat in high-volume activity.

Outside of the new issues, earnings and company-specific news continued to move the secondary space.

Adient plc’s 4 7/8% senior notes due 2026 jumped following its first-quarter earnings report and news of an asset sale.

HC2 Holdings Inc.’s 11½% senior notes due 2021 topped par for the first time in recent history following news of an asset sale with proceeds to be used to redeem a portion of the outstanding amount of the notes.

Primary braves volatility

In the face of volatility that took hold of the global capital markets, volatility which sent the Dow Jones industrial average more than 2% lower on the day, the high-yield new issue market remained active on Friday.

Advisor Group priced a downsized $500 million issue of eight-year senior secured notes at par to yield 6¼%.

The issue size decreased from $575 million, with $75 million of cash moved to the term loan B.

The yield printed 25 basis points through the 6½% to 6¾% yield talk.

Demand for the bonds was heard to be $1.7 billion early Thursday afternoon, according to a trader.

With the shift of proceeds the term loan increased to $475 million, upsized because of demand, a source said.

Elsewhere Cision priced a $300 million issue of eight-year senior notes at par to yield 9½%.

Pricing moved higher during the time the deal was in the market. As recently as Wednesday discussions were taking place in the 8¾% to 9% range, up from initial talk in the low 8% area, a trader said.

Formal price talk on the deal was not widely circulated, sources said on Friday.

And Flexential Intermediate Corp. priced a $250 million issue of 11¼% senior secured notes due Aug. 1, 2024 at 97 yield 12.137%.

The week ahead

The Feb. 3 week will get underway to an active new issue calendar.

Innophos Holdings is marketing $300 million of eight-year notes (Caa1/B-). Initial guidance has the deal coming with a 9%-handle yield (9% to 9.99%). Pricing is expected on Wednesday.

Arconic Rolled Products is on the road with $400 million second-lien secured notes (Ba3/B+/BB+) expected to price Thursday, initial guidance in the low 7% area.

Allen Media plans to sell $300 million of eight-year senior notes (Caa1/B-) which come with early guidance in the low-to-mid 10% area, and are set to price in the middle part of the week ahead.

And Banijay is marketing €1.25 billion equivalent of notes in three tranches: €525 million five-year secured notes (B1/B), with initial guidance in the low 4% area, $363 million five-year secured notes (B1/B) with initial guidance in the low-to-mid 6% area, and €400 million six-year unsecured notes (Caa1/CCC+) with initial guidance 250 basis points behind the euro-denominated secured notes.

PTC trades up

PTC’s recently priced tranches were active and putting in a strong performance in the secondary space.

The Boston-based software company’s 3 5/8% senior notes due 2025 were the more active of the two tranches on Friday.

The notes were changing hands in the par 7/8 to 101 3/8 context and stood poised to close the day at 101, sources said.

The 3 5/8% notes saw more than $54 million in reported volume.

PTC’s 4% senior notes due 2028 traded as high as 101 5/8 during Friday’s session but closed the day at 101¼, sources said.

While both tranches were performing well, the 4% notes were coming in slightly from the heights reached after breaking for trade.

The 4% notes climbed as high as 101¾ in late trading Thursday evening.

PTC priced an upsized $1 billion in two tranches on Thursday.

The deal included a $500 million tranche of the 3 5/8% notes and a $500 million tranche of the 4% notes, both of which priced at par.

Pricing of the 3 5/8% notes came at the tight end of yield talk in the 3¾% area. Initial talk was in the 3 7/8% area.

The 4% notes also priced at the tight end of yield talk in the 4 1/8% area. Initial guidance was in the 4¼% area.

Sprint falls flat

Sprint’s 7¼% notes due 2028 saw high-volume activity on Friday.

However, the notes, which priced at a discount, were largely stuck at their issue price, sources said.

The 7¼% notes traded as high as par on Friday. However, the majority of prints were between 99 and 99 1/8, a source said.

The bonds saw more than $55 million in reported volume during Friday’s session. Flippers were actively trading the bond, a source said.

While the deal was heard to play to massive demand, sources questioned whether or not that was true given the pricing of the deal and their performance in the aftermarket.

Sprint priced a $1 billion issue of 7¼% notes at 99 to yield 7.418% on Thursday.

The issue price came on top of guidance. The yield came toward the wide end of yield guidance in the low 7% area.

The 7¼% notes seem to have very little upside with the bonds becoming callable if the Sprint/T-Mobile merger is approved and the bonds bound to fall if the merger is squashed, a market source said.

Adient’s earnings

Adient’s 4 7/8% senior notes due 2026 were on the rise in active trading following better-than-expected earnings and news of an asset sale, sources said.

The 4 7/8% notes rose more than 4¼ points during Friday’s session, according to a market source.

The bonds stood poised to close the day at 94¾.

More than $31 million of the bonds were on the tape by the late afternoon.

The Ireland-based automotive seating company beat expectations with a first-quarter loss of $167 million and adjusted EBITDA of $297 million.

The company raised its EBITDA guidance, which also beat analyst expectations, according to a market source.

Adient also announced that it was selling its 30% stake in Yanfeng Global Automotive to Yanfeng for $379 million in addition to certain patents for $20 million.

HC2 tops par

HC2’s 11½% senior notes due 2021 topped par on Friday for the first time since pricing.

The notes rose over 4½ points to par ½ in active trading following news of an asset sale, according to a market source.

The 11½% notes have largely lagged their issue price since pricing at 98¾ in November 2018.

The notes spent most of 2019 in the mid-80s but steadily gained strength throughout December and January.

The 11½% notes closed Thursday at 96, a source said.

The New York-based holding company’s bonds were on the rise following news a subsidiary of Global Marine Holdings, which HC2 had a 73% stake in, was selling the Global Marine Group for $250 million in cash, according to a company news release.

Proceeds from the sale will be used to redeem a portion of the 11½% notes with the redemptions expected in the second quarter.

$216 million Thursday outflows

The dedicated high-yield bond funds sustained $216 million of net daily outflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $286 million of outflows on the day.

Actively managed high-yield funds were positive on Thursday, posting $70 million of inflows, the source said.

News of Thursday's daily flows trails a Thursday afternoon report that the combined funds sustained $2.87 billion of outflows for the week ending Jan. 29, the largest outflow since last August.

That weekly outflow encompassed the $1.73 billion daily outflow reported for Friday, Jan. 24, the biggest daily outflow ever recorded.

Those cash hemorrhages notwithstanding, the combined junk funds were closing the month of January with both feet in positive territory: $700 million net inflows for the year 2020 to the Jan. 30 close.

Indexes down

Indexes were down on Friday with all closing out a volatile week with losses.

The KDP High Yield Daily index shaved off 3 points to close Friday at 71.35 with the yield now 5.08%.

The index was down 1 bp on Thursday, gained 7 bps on Wednesday and 3 bps on Tuesday, and dropped 34 bps drop Monday.

The index was down 28 bps on the week.

The CDX High Yield 30 index dropped 34 bps to close Friday at 108.39. The index was up 14 bps on Thursday, took off 18 bps on Wednesday, gained 63 bps on Tuesday and tumbled 70 bps on Monday.

The index saw a cumulative loss of 45 bps on the week.

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