Morning Commentary: New junk deals steady or better in secondary; Advanced Drainage eyed

By Paul A. Harris

Portland, Ore., June 2 – The high-yield bond market opened unchanged on Thursday, sources said.

With the Dow Jones industrial average down 0.45% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was essentially flat, off 4 cents, or 0.06%, at $78.86.

Deals priced during Wednesday’s burst of issuance activity – the biggest session in the primary market in over a month – tended to be trading at premiums to their issue prices on Thursday morning, sources said.

Among them, the Builders FirstSource, Inc. 6 3/8% senior notes due June 2032 (Ba2/BB-) – with the longest duration of any of Wednesday's trades – were par ¼ bid, par ½ offered on Thursday morning.

The upsized $700 million issue (from $600 million) priced at par.

The Tenet Healthcare Corp. 6 1/8% senior secured notes due June 2030 (B1/BB-/BB-) were par 1/8 bid, par ½ offered on Thursday.

The upsized $2 billion issue (from $1.8 billion) priced at par. The issue was heard to have been driven into the market on $500 million of reverse inquiry and played to $5 billion of demand early Wednesday afternoon.

The new Kinetik Holdings LP 5 7/8% senior sustainability-linked notes due June 2030 (Ba1/BB+/BB+) were trading at a slight premium on Thursday morning at 99¾ bid, par 1/8 offered.

The $1 billion issue priced at 99.588 to yield 5.94%, coming inside of talk and far lower than initial guidance, which had the deal coming in the low-to-mid 6% area.

The sentiment in the market is that the Kinetik deal priced on the screws, the sellsider remarked.

The burst of activity in the post-Memorial Day new issue market – $6.1 billion in two sessions – lends credence to an assertion that continued to circulate the market throughout the mid-to-late May issuance drought, that investors have built-up cash balance looking for a home on the new issue calendar, the sellisider asserted.

Following Wednesday's $4.3 billion burst, the Thursday primary market is playing host to a single prospective deal.

Advanced Drainage Systems Inc. plans to price a $500 million issue of eight-year senior notes (expected Ba2/confirmed B+) in a drive-by.

The deal is talked to yield in the 6½% area, inside of initial guidance in the high 6% area.

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