Hot junk market brings three Wednesday issuers; KeHE adds after strong break; DISH rallies

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 24 – Three junk bond issuers used robust market conditions on Wednesday to price new deals.

Meanwhile, the secondary space was either side of unchanged with Treasury yields edging higher on the eve of the latest GDP print.

While the market was firm early in the session with expectations for a strong GDP print high, it leaked into the close, a source said.

However, it was a new issue-centric day in the secondary space with recently priced paper continuing to put in strong aftermarket performances.

KeHE Distributors, LLC’s new 9% senior secured notes due 2029 (B3/B) continued to add after a strong break with the notes jumping to a 101-handle.

Caesars’ new offering sparked activity in the company’s 7% senior secured notes due 2030 (Ba3/B) with the refinancing deal boosting its outstanding notes.

Outside of new paper, DISH Network Corp.’s senior notes (Caa2/CCC+) returned to focus with the notes rallying as the battle with creditors over a highly controversial asset transfer continues.

Wednesday

Huge demand on the part of high-yield bond investors is spurring vigorous activity in the new issue market, sources said on Wednesday.

In drive-by action Freedom Mortgage Holdings LLC priced an upsized $500 million issue (from $450 million) of five-year senior notes (B2/B) at par to yield 9¼%, at the tight end of talk. Prior to the release of the 9¼% to 9½% price talk the deal was heard to be three-times oversubscribed, a trader said.

England-based Merlin Entertainments plc priced an upsized $500 million issue (from $400 million) of seven-year senior secured notes at par to yield 7 3/8%, at the tight end of talk.

The deal was heard to be four-times oversubscribed, a trader said.

Meanwhile Caesars Entertainment, Inc. drove through with the session’s biggest deal, a $1.5 billion offering of 6½% eight-year senior secured notes (Ba3/B+) talked in the 6 5/8% area.

That deal was heard to have been met by a whopping $7 billion of demand, according to a sellside source.

Thursday

Looking to Thursday’s session, NGL Energy Partners LP is on deck with a $2.1 billion two-part offering of senior secured notes (B2/B+/BB-).

Price talk surfaced Wednesday.

The deal includes five-year notes talked to yield in the 8¼% area, inside of initial guidance in the 8½% area, and seven-year notes talked to yield in the 8½% area, inside of yield talk in the 8¾% area.

Elsewhere Artera Services, LLC joined a growing calendar of deals slated to price during the week ahead.

The company plans to market a $740 million offering of seven-year senior secured first priority notes through the week of Jan. 29.

An investor call is scheduled to get underway at 1 p.m. ET on Thursday.

Initial guidance is in the 9% area.

Away from the offerings already announced to the market is a substantial shadow calendar of offerings expected to be near at hand (see related stories in this issue).

KeHE adds

KeHE’s new 9% senior secured notes due 2029 continued to add after a strong break with the notes shooting up to a 101-handle.

The 9% notes traded up ¼ to 3/8 points.

They were changing hands in the 101 1/8 to 101 3/8 context heading into the market close, according to a market source.

There was $38 million in reported volume.

KeHE Distributors priced a $750 million issue of the 9% notes at par on Tuesday.

The yield printed in the middle of yield talk in the 9% area.

Caesars gains

Caesars’ new offering sparked activity in the company’s outstanding notes with the refinancing deal a boon to the capital structure, sources said.

The 7% senior secured notes due 2030 (Ba3/B+) added about ½ point with the notes returning to a 102-handle.

The notes were trading in the 102¼ to 102½ context heading into the market close, a source said.

The yield was about 6 3/8%.

There was $22 million in reported volume.

The shorter duration and comparable yield to the new offering boosted the attractiveness of the 2030 notes, a source said.

The 8 1/8% senior notes due 2027 (B3/B) gained ¼ to 3/8 point to close the day at 102½ with a yield of 6¼%.

There was $13 million in reported volume.

The 4 5/8% senior notes due 2029 added 3/8 point to close the day wrapped around 91¼ with the yield 6½%.

DISH rallies

DISH’s senior notes returned to the spotlight on Wednesday with the notes stronger as creditors band together to challenge the controversial asset transfer that moved wireless spectrum outside of their reach.

DISH’s soon-to-mature 5 7/8% senior notes due Nov. 15, 2024 rose 1 point in heavy volume.

They were trading at 93¾ with a yield of 14 3/8% heading into the market close, according to a market source.

There was $42 million in reported volume.

The 5 7/8% notes were included in the recently launched exchange offer for four series of DISH DBS Corp. notes.

EchoStar is offering to exchange $1,000 in principal of the 5 7/8% notes for $1,000 in principal of new 10% senior secured notes due 2030.

The notes will be secured by subsidiary DISH DBS Issuer LLC interests but will have no recourse to any of EchoStar’s assets.

DISH DBS creditors have banded together to cry foul on EchoStar’s transfer of wireless spectrum to a new subsidiary outside of their reach about two weeks ago.

Fund flows

High-yield ETFs sustained $549 million of daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds, meanwhile, had $228 million of inflows on Tuesday, the source said.

Indexes

The KDP High Yield Daily index climbed 5 basis points to close Wednesday at 50.54 with the yield now 6.89%.

The index dipped 4 bps on Tuesday and gained 6 bps on Monday.

The ICE BofAML US High Yield index gained 11.1 bps with the year-to-date return now negative 0.35%.

The index was off 8.5 bps on Tuesday and added 29.3 bps on Monday.

The CDX High Yield 30 index slid 5 bps to close Wednesday at 105.68.

The index was down 5 bps on Tuesday and 6 bps on Monday.

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