DISH megadeal prices; junk trading holds amid sell-off in Treasuries; Graphic Packaging still up

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 10 – Plenty of paper, $6.75 billion in new notes, cleared the high-yield primary market just in time for a one-day Thursday respite when the bond market closes for a holiday.

Meanwhile, the secondary space was soft on Wednesday as the latest Consumer Price Index report, which reflected the fastest growth of consumer prices in decades, sent the Treasury market into a tailspin.

While the market was off about ¼ to ½ point, it held up relatively well given the CPI data and the ensuing sell-off in Treasuries.

However, trading activity was muted on Wednesday raising the possibility that future weakness is in store.

New and recent deals continued to dominate the tape albeit with mixed performances.

Open Text Corp. and Open Text Holdings, Inc.’s two tranches of senior notes (Ba2/BB) were wrapped around par in active trading.

Graphic Packaging Holding Co.’s 3¾% senior notes due 2030 (Ba2/BB) were trading at a premium in the aftermarket although the notes closed the day well off their highs.

$6.75 billion Wednesday

Four issuers priced five tranches of dollar-denominated junk bonds during the Wednesday session, raising a hefty total of $6.75 billion.

Well over three-fourths of that total came in a megadeal from DISH Network Corp. and DISH DBS Corp.

One of the most familiar names on the high-yield bondscape, DISH priced an upsized $5.25 billion amount of senior secured bullet notes (Ba3/B+) in two tranches on Wednesday.

The deal included an upsized $2.75 billion tranche (from $2.5 billion) of 5¼% notes due December 2026 and $2.5 billion of 5¾% notes due December 2028.

The notes in both tranches priced at par, in the middle of talk.

The deal size grew two times, to $5.25 billion from $5 billion, after having increased earlier Wednesday to $5 billion from $4 billion.

Books were heard to contain $9.3 billion of orders across both tranches, an investor said.

Lousy day in fixed income

Both new DISH bonds were lower in late Wednesday trading, the investor said.

The 5¼% notes due 2026 were 99 5/8 bid, 99 7/8 offered, at the market close, the source said.

The 5¾% notes due 2028 were 99 3/8 bid, 99 5/8 offered.

However those levels did not necessarily indicate poor execution, the investor specified, adding that Wednesday was a lousy day in the fixed-income markets.

Fixed income, and indeed a big cross section of the U.S. capital markets succumbed to inflation jitters on Wednesday as the Consumer Price Index inflation rate surged to its highest level since 1991.

Also, a $25 billion auction of 30-year Treasuries went poorly, sources said.

Market heaviness also appeared to weigh on one other Wednesday junk deal.

PROG Holdings, Inc. priced a $600 million issue of 6% senior notes due 2029 (B1/BB-) at par.

Pricing on the deal backed up while it was in the market.

The yield printed at the wide end of the 5¾% to 6% yield talk. Initial guidance, meanwhile, was in the mid-5% area.

Investors were heard to receive full allocations of the notes, a trader said.

The new PROG Holdings 6% notes due 2029 were in the secondary market in a context of 99½ bid, par ½ offered, at Wednesday's close, the trader added, noting that the deal actually broke too late in the day for it to actually trade.

Wednesday’s high-yield new issue action cleared the active forward calendar ahead of the Thursday Veterans Day holiday.

Holding up

In the backdrop of bond market trading, there was no bid for the 30-year bond at the auction held on Wednesday, which sparked a sell-off in 10-year Treasuries with the yield rising about 10% to close the day at 1.554%.

While the rising Treasury yield sparked a sell-off in equities, with high-flying growth stocks particularly hard hit, the high-yield market held up relatively well.

The secondary market opened unchanged but grew weaker as the session progressed and was down about ¼ to ½ point heading into the close, sources said.

“It’s lower but not what you would think given the CPI number,” a source said.

While down on Wednesday, the market held on to the gains made since it started to rally last week.

However, volume in the space remained muted raising the possibility that future weakness is in store when trading volume increases.

While there was little follow-through, Bids-Wanted-In-Competition lists exceeded $4 billion on Wednesday, a source said.

Open Text flat

In terms of specific issues, Open Text’s two tranches of recently priced senior notes fell flat in the aftermarket.

The management software developer’s 3 7/8% senior notes due 2029 and 4 1/8% senior notes due 2031 were both wrapped around par in active trading.

They were marked at 99¾ bid, par ¼ offered heading into the close.

Open Text priced an upsized $850 million tranche of the 3 7/8% notes and an upsized $650 million tranche of the 4 1/8% notes at par on Tuesday.

The 3 7/8% notes priced at the tight end of the 3 7/8% to 4 1/8% yield talk.

The 4 1/8% senior notes priced at the tight end of the 4 1/8% to 4¼% yield talk.

Both tranches were originally sized at $500 million.

Graphic Packaging at a premium

Graphic Packaging’s 3¾% senior notes due 2030 were trading at a premium in the secondary space.

However, the notes stood poised to close the day well off their highs.

The notes were marked at par ½ bid, 101 offered heading into the market close, a source said.

They were 101 bid earlier in the session.

Graphic Packaging priced a $400 million tranche of the 3¾% notes at par on Tuesday. Pricing came in the middle of yield talk in the 3¾% area.

The deal also included a €290 million tranche of 2 5/8% notes due 2029, which also priced at par.

$518 million Tuesday inflows

The dedicated high-yield bond funds saw $518 million of net daily inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $408 million of inflows on the day.

Actively managed high-yield funds saw $110 million of inflows on Tuesday, the source said.

With only Wednesday's daily total remaining to go into the tally the combined funds are tracking around $2.7 billion of inflows for the week to Wednesday's close, which would be the largest weekly inflow since the first week of April, according to the market source.

Indexes

The KDP High Yield Daily index fell 9 points to close Wednesday at 69.96 with the yield now 3.75%. The index gained 6 points on Tuesday and 13 points on Monday.

The CDX High Yield 30 index fell 31 points to close Wednesday at 109.21. The index was down 13 bps on Tuesday and 7 bps on Monday.

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