Primary prices over $6 billion; Bausch in focus; Diamond Sports gains; funds up $490 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 19 – News flow for the high-yield bond market remained heavy on Thursday with more than $6 billion of new deals pricing over the day.

Meanwhile, the secondary space logged minor gains on Thursday with the market opening the day unchanged but gaining some momentum as the session progressed.

New paper continued to dominate the tape with recent deals continuing to perform well.

Bausch Health Cos. Inc.’s recently priced tranches (B3/B/B) were in focus with the notes trading with a healthy premium.

While coming in from their highs after breaking for trade, Syneos Health, Inc.’s newly priced 3 5/8% senior notes due 2029 (B2/BB-) remained on a 101-handle in active trading.

Outside of recent issues, Diamond Sports Group LLC and Diamond Sports Finance Co.’s senior notes continued to improve in active trading on Thursday following parent company Sinclair Broadcasting’s strategic partnership with Bally’s Corp.

While inflows tempered compared to the massive $4.57 billion inflow the previous week, cash continued to enter the space.

High-yield mutual and exchange-traded funds had inflows of $490 million in the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flows Newsline.

$6 billion day

Frontier Communications Corp., working to extract itself from bankruptcy, priced a downsized $2.55 billion amount of secured notes in a two-part drive-by.

The deal included a downsized $1.55 billion tranche (from $1.8 billion) of 5% 7.5-year DIP-to-exit first lien notes (B3/B+/BB+) and a $1 billion tranche of 6¾% 8.5-year DIP-to-exit second-lien notes (Caa2/CCC+/BB+), both coming at the tight ends of talk.

Medical Properties Trust, Inc. priced an upsized, split-rated $1.3 billion issue (from $1 billion) of 3½% 10.25-year senior notes (Ba1/BBB-) at the tight end of talk.

Sinclair Broadcast Group, Inc. priced an upsized $750 million issue (from $550 million) of 4 1/8% 10-year senior secured notes (Ba2/BB) at the tight end of talk.

And Presidio Holdings Inc. priced a $125 million add-on to its 4 7/8% senior secured notes due Feb. 1, 2027 (B1/B) at 104, the rich end of talk (see related stories in this issue).

Big deals on the horizon

In the wake of Thursday's business there is a decent or better active new issue calendar that includes a couple of megadeals.

Carnival Corp. is in the market with its first offering of unsecured notes since the onset of the coronavirus pandemic, which it expects to price on Friday.

Tranches of the 5.25-year senior notes (B2/B-) were initially sized at $1 billion and €350 million, and initially talked in the mid-to-high 8% area.

However late Thursday both tranches were heard to upsize, with talk ratcheting down to 8%.

Investors are in a big hurry to own the cruise line's debt, according to a trader who added that the market is now betting that a coronavirus vaccine will surface sooner than later, and the cruise business will pick up where it left off before the pandemic.

Recall that Carnival was one of the first issuers out of the gate last spring, when the chill of the pandemic took hold in the global capital markets.

In early April the cruise line priced $4 billion of 11½% senior secured first-priority notes due April 2023 – one of four tranches of secured notes it has priced since the onset of the pandemic.

As a measure of the market's confidence that Carnival will cruise again, and sooner than later, those 11½% notes due 2023 are now trading at 112½ bid, implying a yield of 5%, the trader said.

Another megadeal on the calendar is the Ancestry $1 billion two-part offer: $450 million of 7.5-year senior first-lien notes (B1/B) initial talk low-to-mid 5% area, and $550 million eight-year senior unsecured notes (Caa1/CCC+) initial talk mid-to-high 7% area.

It is shaping up to be a big blowout, according to a trader who said books for both tranches were three-times oversubscribed early Thursday, and are expected to grow significantly before the deal prices. That is expected to take place on Monday.

Bausch Health above par

Bausch Health’s two tranches of senior notes were in focus in the secondary space with both tranches trading with a healthy premium.

Bausch’s 5¼% senior notes due 2031 traded in a range of par 3/8 to 101 1/8 during Thursday’s session.

They were marked at par ¾ bid, 101 1/8 offered heading into the market close, a source said.

There was more than $155 million in reported volume during the session.

The other tranche, Bausch’s 5% senior notes due 2029 traded in a range of par to par 7/8 and were marked at par 5/8 bid, 101 offered heading into the market close.

There were more than $120 million of the bonds on the tape during the session.

The serial issuer of junk bonds priced an upsized $2 billion, from $1.75 billion, two-tranche offering in a Wednesday drive-by.

The deal included a $1 billion tranche of the 5¼% notes and a $1 billion tranche of the 5% notes, both of which priced at par.

The 5¼% notes priced at the tight end of the 5¼% to 5½% yield talk.

The 5% notes priced at the tight end of the 5% to 5¼% yield talk.

Syneos on a 101-handle

While Syneos Health’s 3 5/8% senior notes due 2029 were coming in from their highs after breaking for trade, the notes remained on a 101-handle in active trading on Thursday.

The 3 5/8% notes traded in a range of 101 to 101 5/8 throughout the session and were marked at 101 bid, 101¼ offered heading into the close, sources said.

The notes were coming in slightly after closing out the previous session at 101½ bid.

Syneos priced an upsized $600 million, from $500 million, issue of the 3 5/8% notes at par on Wednesday.

The yield printed inside of yield talk in the 3 7/8% area. Initial guidance was in the low 4% area.

Diamond Sports

Diamond Sports’ secured and unsecured notes continued to improve on Thursday with the notes’ rebound further fueled by news of parent company Sinclair Broadcasting’s partnership with casino operator Bally’s Corp.

Diamond Sports’ 5 3/8% senior secured notes due 2026 gained 2 points to close Thursday at 74 7/8, a source said.

Diamond Sports’ 6 5/8% senior notes due 2027 rose 3 points to close Thursday at 57.

Both tranches were active with more than $20 million in reported volume during the session.

Sinclair recently announced that it had entered into a strategic, long-term sports betting and iGaming partnership with Bally’s.

Through the partnership, Bally’s will integrate content with Sinclair’s television stations and sports networks.

Diamond Sports will be rebranded with Bally’s name and will receive naming rights fees and a percentage of Bally’s Interactive’s marketing spend, the company said in a press release.

The news helped further a rebound in Diamond Sports’ notes.

The 5 3/8% notes were trading in the low 50s and the 6 5/8% notes in the low 40s in late October as rumors circulated about a possible restructuring of Sinclair’s debt-ridden regional sports network, which it acquired from Disney in 2019.

Indexes mixed

Indexes were again mixed on Thursday as they have been for much of the week.

The KDP High Yield Daily index rose 3 points to close Thursday at 67.65 with the yield now 4.95%.

The index gained 9 points on Wednesday, 2 points on Tuesday and 14 points on Monday.

The ICE BofAML US High Yield index gave back some of its gains on Thursday.

The index shaved off 6.1 bps with the year-to-date return now 3.377%.

The index was up 19.3 bps on Wednesday, 11.5 bps on Tuesday and 36.6 bps on Monday.

The CDX High Yield 30 index gained 27 bps to close Thursday at 107.79.

The index dropped 26 bps on Wednesday and 9 bps on Tuesday after rising 75 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.