Primary prices $3.4 billion in seven tranches; forward calendar balloons to $9 billion; new deals trade up

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 14 – The domestic high-yield primary market launched the Sept. 14 week with a bang with six issuers pricing a cumulative $3.4 billion in seven tranches.

The active pace is expected to continue with $9 billion in junk-rated deals joining the forward calendar.

Meanwhile, the secondary space was firm on Monday although volume was light amid the massive buildup in the forward calendar.

New paper continued to dominate trading activity with several recent deals performing well.

Radiate Holdco LLC and Radiate Finance Inc.’s (Astound Broadband) two tranches of senior notes continued to gain in active trading on Monday with the unsecured tranche outperforming.

Tallgrass Energy Partners, LP and Tallgrass Energy Finance Corp.’s 7½% senior notes due 2025 (B1/BB-/BB-) and Avaya Holdings Corp.’s 6 1/8% senior secured notes (B2/B/BB-) were also on the rise with both issues trading up to a 102-handle.

Some of the recent deals from the lower side of the credit spectrum continued to perform well with Big River Steel LLC’s 6 5/8% senior notes due 2029 (Caa1/B) also hitting a 102-handle on Monday.

Mega-Monday

It was mega-Monday in the high yield primary, as six issuers brought a combined seven tranches, pricing a face amount of $3.4 billion.

Five of Monday's six issuers came with drive-by deals.

The executions tended to be tight. Four of the seven tranches priced tight- or rich to talk. One came in the middle of talk. One came inside of talk. However, another priced on the wide end.

And interestingly, none of Monday's transactions was upsized.

Meantime the active forward calendar ballooned to over $9 billion.

However, junk purists (at least those who can recover from that contradiction in terms) might insist on marking that figure down by $4 billion.

That's the size of the long-anticipated Delta Air Lines deal backed by its customer loyalty program, which comes with solid investment grade ratings, but is being guided with junk-like yields, and is being transacted on both the high yield and investment grade syndicate desks.

Delta SkyMiles began a telephone roadshow on Monday for a $4 billion two-part offering of senior secured bullet notes (Baa1//BBB).

The offering features $2 billion of five-year notes with initial talk in the 5% area, and $2 billion of eight-year notes talked with initial talk in the 5 3/8% area.

The offering also has an asset-backed aspect in that both tranches come with amortization features.

Indeed, asset-backed accounts have taken interest in the recent airline deals which have been secured by assets related to customer loyalty programs, partly because those asset-backed investors are heard to have an appreciation for the collateral, sources say.

The roadshow for Delta SkyMiles runs through Thursday (see related stories in this issue).

Astound Broadband at a premium

Astound Broadband’s two tranches of senior notes were putting in a strong performance in the secondary space with both tranches trading at a premium.

However, the unsecured tranche outperformed.

Astound’s 4½% senior secured notes due 2026 (B1/B) traded in a range of par 3/8 to 101 on Monday, a source said.

The notes were changing hands in the par ¾ to 101 context heading into the market close.

The 6½% senior notes 2028 (Caa1/CCC+) traded up to a 101-handle on Monday and stood poised to close the day at 101 bid, 101 3/8 offered, a source said.

Each tranche saw about $30 million in reported volume.

The cable and internet broadband provider priced a downsized $900 million tranche of the 4½% notes and a $1 billion tranche of the 6½% notes at par last Friday.

The secured tranche was downsized from $2.25 billion and priced at the tight end of the 4½% to 4¾% yield talk.

The unsecured tranche priced at the tight end of the 6½% to 6¾% yield talk.

In addition to refinancing debt, proceeds from the offering were to be used to sponsor a dividend payment to shareholders.

Tallgrass trades up

While volume was light, Tallgrass Energy’s 7½% senior notes due 2025 were trading with a large premium in the secondary space.

The 7½% notes traded as high as 103 on Monday. However, the majority of prints were in the 102½ to 102 7/8 context, a source said.

While Tallgrass is from the embattled energy sector, the company is one of the stronger credits and the notes offered a nice yield, a source said.

“There’s no yield anywhere,” the source said.

Tallgrass priced an upsized $600 million issue of the 7½% notes at par last Friday.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

The issue size increased from $500 million.

Avaya in focus

Avaya’s 6 1/8% senior notes due 2028 were among the most actively traded issues of Monday’s session with the notes making large gains.

The 6 1/8% notes traded up to a 102-handle in the high-volume activity.

They were changing hands in the 102¼ to 102 3/8 context heading into the market close, a source said.

There was more than $55 million on the tape during Monday’s session.

The business communications services provider priced an upsized $1 billion issue of the 6 1/8% notes at par last Friday.

Pricing came at the tight end of yield talk in the 6¼% area. The issue size increased from $750 million.

Big River Steel gains

Big River Steel’s recently priced 6 5/8% senior notes due 2029 continued to rise in active trading on Monday.

The notes also jumped to a 102-handle and closed the day at 102¼, a source said.

The 6 5/8% notes remained active with more than $21 million in reported volume heading into the close.

The notes from the CCC-tier credit have traded with a large premium since they priced at par on Sept. 9.

The issue from the steel producer is one of several recent deals with a CCC-credit ranking to clear the primary market after a long hiatus.

While Big River Steel’s notes were performing well, Tenet Healthcare Corp.’s 6 1/8% senior notes due 2028 (Caa1/CCC+/B) continued to languish below par.

The 6 1/8% notes continued to trade around 99½ on Monday although volume was light, a source said.

Tenet’s 6 1/8% notes were the largest CCC-rated issue year-to-date.

Tenet priced a $2.5 billion issue of the 6 1/8% notes at par on Sept. 1.

$264 million Friday inflows

The dedicated high-yield bond funds saw $264 million of net inflows on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high yield funds saw $405 million of inflows on the day.

Indexes gain

Indexes were on the rise on Monday.

The KDP High Yield Daily index rose 2 basis points to close Monday at 66.95 with the yield now 5.4%.

The index posted a cumulative loss of 36 bps on the week last week.

The ICE BofAML US High Yield index gained 4.7 bps with the year-to-date return now 0.398%.

The index was down 22.6 bps on the week.

The CDX High Yield 30 index gained 25 bps to close Monday at 106.31.

The index was up 37 bps on the week last week.

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