Primary wraps roadshows, plus two drive-bys; Townsquare outperforms; PBF at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Dec. 17 – With an eye on the looming end of 2020, the junk bond primary cleared out its active calendar on Thursday and two issuers appeared with drive-by deals, marking an active Thursday in a market that is seemingly not quite ready to go dormant.

Meanwhile, the secondary space remained firm on Thursday with optimism surrounding a stimulus package pushing an already tight market tighter.

While trading activity remained focused on the new paper in the market, other secondary activity was picking up as accounts raised cash in preparation for 2021, which is also expected to be an active year, a source said.

The majority of new paper continued to perform well.

Townsquare Media, Inc.’s 6 7/8% senior secured notes due 2026 (B2/B) outperformed with the notes jumping to a 103-handle.

PBF Holding Co. LLC and PBF Finance Corp.’s 9¼% senior secured notes due May 15, 2025 (Ba3/BB/BB) were active following an add-on and trading at a premium to their reoffer price.

While the majority of deals to hit the aftermarket continued to trade up, 99 Cents Only Stores LLC’s 7½% senior secured notes due 2026 (Caa1/B-) fell flat, although volume in the name was light.

Expected and unexpected

The new issue market remained busy on Thursday as dealers cleared out an active calendar, while a pair of issuers – each with a single $500 million tranche in tow – appeared at the drive-through window.

At the conclusion of a roadshow KIK Consumer Products priced a downsized $1 billion amount of notes in two tranches, both of which came deep inside of early whispers.

The deal, which was downsized from $1.125 billion, featured a downsized $475 million tranche (from $600 million) of 5% six-year senior secured notes (B2/B-) that priced at par, at the tight end of the 5% to 5¼% yield talk. Initial guidance was in the 6% area.

The deal also included a $525 million tranche of 7% seven-year senior unsecured notes (Caa2/CCC) that priced at par, also at the tight end of the 7% to 7¼% talk. Initial guidance was in the 8% area.

Live Nation Entertainment, Inc. priced a $500 million issue of 3¾% seven-year senior secured notes (B1/B+) at the tight end talk, in a drive-by.

In a deal that ran a full roadshow Talos Energy Inc. priced an upsized $500 million issue (from $400 million) of 12% five-year second-priority senior secured notes (B3/B+/B) at 91 to yield 14.583%.

The coupon came on top of coupon talk. The issue price came in the middle of the 90 to 92 price talk. Coupon talk and price talk both had come on top of early guidance.

The deal, which was heard to have been two-thirds done by reverse inquiry, traded to 91 7/8 bid in the secondary market on Thursday afternoon, a trader said.

And Antero Resources Corp. priced a $500 million issue of 8 3/8% 5.5-year senior notes (expected B3/confirmed B) at the tight end of talk, in a Thursday drive-by.

The deal was heard to be playing to $715 of demand across 27 accounts on Thursday morning, a trader said (see related stories in this issue).

The new Antero 8 3/8% notes, which priced at par, were going out at 101 bid, 101¼ offered, the trader said, adding that, in general, bonds sold by energy-related issuers in a late-2020 rush, attempting to take advantage of the excellent technical condition of the junk bond market, have traded well.

Energy doing well

The Blue Racer Midstream, LLC 7 5/8% senior notes due December 2025 (B2/B/B+) were 104¾ bid, 105½ offered on Thursday afternoon, according to the source. The $600 million deal price at par on Dec. 9.

Elsewhere, senior bullet notes sold earlier in the month by Occidental Petroleum Corp., a fallen angel story, were also trading at handsome premiums to new issue prices at Thursday's close.

The Occidental Petroleum 5½% notes December 2025 were 104 bid, 105 offered, the trader said.

The 6 1/8% notes due January 2031 were 105¼ bid, 106¼ offered.

Both priced at par on Dec. 8.

While some market watchers expressed the belief that Thursday's action would wrap things up for the year 2020, in the new issue market, others remained skeptical.

With the market remaining in solid technical condition, the new issue machine could well continue to run in the early part of the Dec. 21 week, a syndicate banker said.

Townsquare outperforms

Townsquare Media’s 6 7/8% senior secured notes due 2026 outperformed in the secondary space with the notes rising to a 103-handle.

The notes were changing hands in the 103¼ to 103½ context heading into the market close.

There was more than $65 million in reported volume.

Townsquare priced a $550 million issue of the 6 7/8% notes at par on Wednesday.

Pricing came at the tight end of yield talk in the 7% area. Initial guidance was in the low 7% area.

The deal was heavily oversubscribed and played to $2.5 billion in orders early Wednesday.

PBF’s rebound

PBF Holding’s 9¼% senior secured notes due 2025 were active following an add-on and trading at a premium to their reoffer price.

The notes were changing hands in the par 7/8 to 101 3/8 context heading into Thursday’s close.

The 9¼% notes staged a significant rebound since November when the notes traded as low as 87½ in the run-up to the company’s earnings report.

“That’s pretty remarkable,” a source said.

PBF priced a $250 million add-on to the 9¼% notes at 100.25 to yield 9.175% on Wednesday.

The issue price came in the middle of price talk in the 100.25 area.

Initial guidance was in the 100 area.

99 Cents – 99 context

While the majority of new deals to price were trading up in the secondary space, 99 Cents’ 7½% senior secured notes due 2026 fell largely flat.

The notes were changing hands in the 99½ to par ½ context on Thursday, although volume was light, a source said.

There were $18 million of the bonds on the tape during Thursday’s session.

99 Cents is a dollar store and a weak credit, a source said. The issue size was also small, which contributed to their lackluster performance.

“$350 million is right on the cusp of where people care,” a source said.

99 Cents priced an upsized $350 million, from $325 million, issue of the 7½% notes at par on Wednesday.

Pricing came tighter than talk for a yield in the 7¾% area. Initial guidance was 7¾% to 8%.

The deal was done by reverse inquiry and was playing to over $800 million of orders early Wednesday, a source said.

Indexes mixed

Indexes were on the rise on Thursday.

The KDP High Yield Daily index was up 8 points to close Thursday at 68.7 with the yield now 4.47%.

The index gained 3 points on Wednesday, 5 points on Tuesday and 7 points on Monday.

The ICE BofAML US High Yield index gained 8.3 bps with the year-to-date return 5.475%.

The index was up 4.7 bps on Wednesday, 4.5 bps on Tuesday and 13.4 bps on Monday.

The CDX High Yield 30 index gained 21 bps to close Thursday at 109.18.

The index dropped 19 bps on Wednesday after gaining 31 bps on Tuesday and 1 bp on Monday.

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