Primary prices $1.15 billion in reprieve; lower-rated NCL, Affinity Gaming outperform

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Dec. 16 – Halfway through the week, the high-yield market has already logged over $8.5 billion of new paper, most of that pricing on Monday and Tuesday.

Relaxing from the torrid pace, Wednesday tallied a fresh $1.15 billion of that weekly total from three tranches.

Meanwhile, the secondary space was largely unchanged on Wednesday with new paper dominating the tape.

While new issues continued to trade at a premium to their issue price, lower-rated paper outperformed.

NCL Corp. Ltd.’s 5 7/8% senior notes due 2026 (B), AdaptHealth LLC’s 4 5/8% senior notes due 2029 (B1/B-) and E.W. Scripps Co.’s 5 3/8% senior notes due 2031 (Caa1/CCC+/B-) and Affinity Gaming’s 6 7/8% senior secured notes due 2027 (B3/B-) were all trading about 2 points above their issue prices.

While E.W. Scripps’ 3 7/8% senior secured notes due 2029 (Ba3/BB-/BB) were also trading with a large premium, the notes did not reach the same heights as the unsecured tranche.

Meanwhile, Tallgrass Energy Partners, LP/Tallgrass Energy Finance Corp.’s 6% senior notes due 2030 (B1/BB-/BB-) and Valvoline Inc.’s 3 5/8% senior notes due 2031 (Ba3/BB-) closed Wednesday on a par-handle.

Wednesday logs $1.15 billion

With more than $7.42 billion of issuance pricing Monday and Tuesday the new issue market took a breather on Wednesday, as market observers began listening for the final fanfares of the 2020 primary market to sound.

Three issuers priced a combined face amount of $1.15 billion in three dollar-denominated tranches on Wednesday.

Executions were solid, with one deal pricing inside of talk, one at the tight end and one in the middle of talk.

Townsquare Media, Inc. priced a $550 million issue of 6 7/8% five-year senior secured notes (B2/B) at par, at the tight end of talk.

The deal was playing to a $2.5 billion order book at 9 a.m. ET on Wednesday, a trader said.

99 Cents Only Stores LLC priced an upsized $350 million issue (from $325 million) of 7½% five-year senior secured notes (Caa1/B-) at par, 12.5 basis points through talk.

The offer was completely circled up by reverse inquiry, and was playing to over $800 million of orders early Wednesday, a trader said.

The only new name to burst on the scene during the Wednesday session was PBF Energy which priced a $250 million add-on to its 9¼% senior secured notes due May 15, 2025 (Ba3/BB/BB) at 100.25, in the middle of talk.

Apart from PBF, all of Wednesday's newsmakers had been in the market since the early part of the week.

Upcoming

The new issue market figures to remain active on Thursday, with two announced deals expected to price during that session.

KIK Consumer Products set price talk for its $1.125 billion two-part offering.

The deal features a $600 million tranche of six-year senior secured notes talked to yield 5% to 5¼%, deep inside of initial guidance in the 6% area, and a $525 million tranche of seven-year senior unsecured notes talked to yield 7% to 7¼%, also deep inside of initial guidance which was in the 8% area.

The consumer products company, which is seeking to term out bank debt and fund a distribution to shareholders, is also in the bank loan market with a $775 million term loan.

There is heard to be $5 billion of demand across the three tranches – secured and unsecured bonds, and the loan – a trader said, adding that there is a decent amount of reverse inquiry in the bond portion.

Also expected to price Thursday is the Talos Energy Inc. $400 million second-priority senior secured notes due 2026.

Early talk has the deal coming with a 12% coupon with eight- to 10 points of original issue discount which, if realized, could have the Houston-based oil and gas company's deal yielding 14%-plus, a trader observed.

However, the deal was heard to be two-thirds done in reverse inquiry, the trader said, adding that when official price talk surfaces (it's expected Thursday) there will likely be a sizable reduction in the amount of original issue discount being offered to investors (see related stories in this issue).

Outperformers

While new paper continued to trade well across the board, it was the lower-rated paper that was outperforming as market players hunt for yield.

Norwegian Cruise Line’s 5 7/8% senior notes due 2026 traded up to a 102-handle on Wednesday.

The notes started the day around 101½ and were changing hands in the 102 to 102½ context by the market close, a source said.

There was more than $60 million in reported volume during Wednesday’s session.

NCL priced an upsized $850 million, from $500 million, issue of the 5 7/8% notes at par on Tuesday.

Pricing was tighter than the 6% to 6¼% price talk.

The deal was heard to be at least 4x oversubscribed.

AdaptHealth’s 4 5/8% senior notes due 2029 were changing hands in the 101 7/8 to 102 context heading into the market close.

There was $46 million on the tap heading into the market close.

AdaptHealth priced a $500 million issue of the 4 5/8% notes at par on Tuesday.

Pricing came at the tight end of yield talk in the 4¾% area. Initial guidance was in the low 5% area.

Affinity Gaming’s 6 7/8% senior secured first-lien notes due 2027 closed Wednesday at 102¾, according to a market source.

The casino operator priced a $475 million issue of the 6 7/8% notes at par on Tuesday.

Tale of two tranches

E.W. Scripps’ two tranches of senior notes were putting in a strong performance in the secondary space although the unsecured tranche outperformed.

The 3 7/8% senior secured notes due 2029 traded up to a 101-handle with the notes changing hands in the 101¼ to 101¾ context heading into the market close.

There was $36.5 million on the tape late in the day.

While the notes were trading well, the 5 3/8% senior notes due 2031 traded to a high of 103 on Wednesday and were changing hands in the 102½ to 102 7/8 context heading into the market close.

There was $60 million on the tape heading into the market close.

Scripps priced a downsized $1.05 billion, from $1.2 billion, amount of senior notes in two tranches on Tuesday.

The deal included a downsized $550 million, from $700 million, tranche of the 3 7/8% notes, which priced at par.

Pricing came at the tight end of yield talk in the 4% area. Initial talk was in the low 4% area.

The deal also included a $500 million tranche of the 5 3/8% notes, which priced at par.

Pricing came at the tight end of talk for a yield 5 3/8%.

Par handle

While lower-rated paper outperformed on Wednesday, new paper on the higher end of the credit spectrum was trading with a par-handle.

Tallgrass Energy’s 6% senior notes due 2030 were changing hands in the par 3/8 to par ¾ context heading into the market close, a source said.

There was more than $102 million on the tape.

Tallgrass priced an upsized $750 million, from $500 million, issue of the 6% notes at par on Tuesday.

Pricing came at the tight end of the 6% to 6¼% yield talk.

Valvoline’s 3 5/8% senior notes due 2031 traded in a range of par 1/8 to 101 on Wednesday with the notes changing hands in the par 5/8 to par 7/8 context heading into the market close.

Valvoline priced a $535 million issue of the 3 5/8% notes at par on Tuesday.

Pricing came at the tight end of yield talk in the 3¾% area and tighter than initial guidance in the 4% area.

$279 million Tuesday inflows

The dedicated high-yield bond funds saw $279 million of net inflows on Tuesday, the most recent session for which data was available at press time, according to a Prospect News analysis of that data.

High-yield ETFS had $259 million of inflows on the day, according to a market source.

Actively managed high-yield funds saw $20 million of inflows on Tuesday, the source added.

The high-yield ETFs currently have $77.3 billion of assets under management, surpassing the previous historical peak of $57.9 billion in December 2019, according to the market source.

At the end of 2018 the ETFs had $37 billion of assets under management, the source noted, adding that for historical perspective, at the end of 2008 they had $2.4 billion.

Indexes mixed

Indexes were mixed on Wednesday with some posting nominal gains and others nominal losses.

The KDP High Yield Daily index gained 3 points to close Wednesday at 68.62 with the yield now 4.51%.

The index was up 5 points on Tuesday and was up 7 points to close Monday.

The ICE BofAML US High Yield index was up 4.7 bps with the year-to-date return now 5.392%.

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

The CDX High Yield 30 index dropped 19 bps to close Wednesday at 108.97.

The index rose 31 bps on Tuesday and 1 bp on Monday.

© 2015 Prospect News.
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