Junk primary brings $2.35 billion; PBF Energy up on redemption; Tenet, Kinetik under water

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 9 – The high-yield new issue market generated a healthy news volume on Thursday as four issuers, each bringing a single tranche of junk, priced $2.35 billion face amount of new notes.

The flurry of primary market activity came on another heavy day for risk assets with selling in the secondary space accelerating as the 10-year Treasury yield marched higher.

Inflation and recession were once again rattling the market following the European Central Bank’s rate hike announcement and May’s consumer price index report set for release on Friday.

The cash bond market was off ¾ point on Thursday with the ICE BofAML US High Yield index’s year-to-date returns again plummeting past negative 9%.

While the overall market was heavy on Thursday, PBF Energy Inc.’s senior notes were a bright spot in the space with the petroleum refiner’s capital structure gaining after the company called its 9¼% senior secured notes due 2025 (B2/BB).

New and recent issues succumbed to the selling pressure, though, with Tenet Healthcare Corp.’s 6 1/8% senior secured notes due 2030 (B1/BB-/BB-) and Kinetik Holdings LP’s 5 7/8% sustainability-linked senior notes due 2030 (Ba1/BB+/BB+) falling below their issue prices in active trading.

$2.35 billion

Of the four issuers in the Thursday market, only one deal came as a drive-by. Of the remaining three, all of which came on the heels of investor roadshows, one came on an accelerated timeline.

None of Thursday's issues upsized or downsized.

One came tight to talk while the other three came in the middle of talk.

With equities going into a steep dive late in the Thursday session a disinclination to push pricing seemed to surface, on the part of dealers and issuers, a sellside source remarked at the close.

Thursday's sole drive-by came from Houston-based independent oil and gas company Callon Petroleum Co. which priced a $600 million issue of eight-year senior notes (B3/B/B+) at par to yield 7½%, in the middle of yield talk, and tight to initial guidance in the high 7% area.

It was heard to be playing to at least $1.5 billion of demand at midday, and the bonds were going out at par bid, par ½ offered.

On Thursday morning Callon's new deal was perceived to be coming pretty cheap to the company's existing 8% senior notes due August 2028 which were trading at around 104 at the time, representing a yield to worst of approximately 7.07%, the sellsider remarked.

Among the roadshow deals Univision Communications Inc. priced a $500 million issue of 7 3/8% eight-year senior notes (B1/B+) at 99.255 to yield 7½%.

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

Timing was accelerated. The roadshow had previously been expected to run through Friday, and the original timeline had the deal pricing early in the week ahead.

Univision's deal was heard to be playing to $2.2 billion of investor demand, and the bonds were trading above the new issue price at the close, 99 3/8 bid, 99 5/8 offered.

Central Parent Inc. and Central Parent Merger Sub Inc. priced $750 million of 7¼% seven-year senior secured first-lien notes (B1/B+) supporting the buyout of CDK Global Inc. by Brookfield Business Partners.

The deal priced at par to yield 7¼%, in the middle of talk, having undergone covenant changes.

It was trading slightly below the new issue price at the Thursday close, 99¼ bid, 99¾ offered, a sellside source said.

Meanwhile Maxar Technologies Inc. priced a $500 million issue of five-year senior secured notes (B2/B) at par to yield 7¾%, in the middle of talk, heard to have been playing to $840 million of demand.

As the dust settled on Thursday's flurry of new issue activity one deal remained on the active forward calendar.

Iris Holdings Inc. is on the road with a $400 million offering of 6.5-year senior notes (Caa2/CCC+) backing the buyout of Intertape Polymer Group Inc. by Clearlake Capital Group LP.

Initial guidance has the notes coming with a 10% coupon at an issue price in the low 90s with an all-in yield in the high 11% area to the low 12% area. Pricing is expected on Tuesday.

PBF’s call

While the overall market was heavy on Thursday, PBF Energy bucked the trend with the company’s capital structure on the rise after calling its 9¼% senior secured notes due 2025.

The 9¼% notes were in focus following the call news and gained 7/8 point to end the day at 105 1/8.

The notes were trading up to their redemption value, a source said.

There was $28 million in reported volume.

The news lifted the petroleum refiner’s unsecured notes with the redemption of its secured notes a credit positive for the company, a source said.

The 6% senior notes due 2028 (Caa1/B/B-) rose 1 point to close the day at 93 with the yield now 7½%.

There was $17 million in reported volume.

The 7¼% senior notes due 2025 (Caa1/B/B-) rose 7/8 point to 99¼ with the yield also 7½%.

There was $10 million in reported volume.

PBF Energy announced on Thursday that it planned to redeem the $1.25 billion outstanding of its 9¼% notes at a redemption price of 104.625 plus accrued interest on July 11. (See related article in this issue)

Below issue

Tenet’s 6 1/8% senior secured notes due 2030 and Kinetik’s 5 7/8% senior notes due 2030 succumbed to the selling pressure on Thursday with both recent issues sinking below their issue prices.

Tenet’s 6 1/8% notes were down ½ point in intraday activity with the majority of prints in the 99 to 99¼ context, a source said.

However, a round lot trade heading into the market close pushed the notes down 1 point with the notes closing the day at 98½.

There was $14 million in reported volume.

Tenet’s 6 1/8% notes were trading with a slight premium after the $2 billion issue, which priced at par, broke for trade on June 1.

While the notes traded as high as par 5/8, they have been on a downtrend throughout the week alongside the broader market.

The notes closed Wednesday’s session at 99½.

Kinetik’s 5 7/8% senior notes due 2030 sank further below their discounted issue price on Thursday.

The notes were changing hands in the 98 7/8 to 99 1/8 context for the majority of the session.

However, the notes were pushed down to 98 5/8 as selling pressure intensified into the close, a source said.

The $1 billion issue priced at 99.588 to yield 5.94% on June 1.

The deal traded at a premium to its discounted issue price on the break hitting as high as par 1/8.

However, the notes have been working their way lower alongside the broader market over the past few sessions.

Indexes

The KDP High Yield Daily index fell 25 points to close Thursday at 57.01 with the yield now 6.66%.

The index was down 22 points on Wednesday, 18 points on Tuesday and 18 points on Monday.

The ICE BofAML US High Yield index fell 43 basis points with the year-to-date return now negative 9.272%.

The index was down 19.4 bps on Wednesday, 32.7 bps on Tuesday and 19.6 bps on Monday.

The CDX High Yield 30 index fell 76 bps to close the day at 99.98.

The index was down 26 bps on Wednesday, gained 5 bps on Tuesday and fell 16 bps on Monday.

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