Transocean, Lamar price; Tenet lags issue price; Vistra, MGM, Albertsons wrap around par

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 23 – The high-yield primary market continued to churn out new deals on Wednesday with two drive-by deals pricing one day after the primary market’s busiest day in nearly four months on Tuesday.

Transocean Poseidon Ltd. priced a $550 million issue of 6 7/8% eight-year senior secured notes (B1/B+) at 99.25 to yield 7.026%.

Lamar Advertising Co. priced a $250 million add-on to its 5 ¾% senior notes due Feb. 1, 2026 (Ba2/BB) at 102 to yield 5.289%.

Meanwhile, the new paper that priced during Tuesday’s session was in focus in the secondary space.

However, in stark contrast to the deals that priced earlier in January, which all traded well above their issue price, the paper to price during Tuesday’s session had a lackluster reception in the secondary space.

Each issue was either at or below their issue price in secondary trading, which sources attributed to the tight pricing of the upsized deals.

Tenet Healthcare Corp.’s 6¼% senior notes due 2027 dominated activity with the notes lagging their issue price.

The health care services providers 6¾% senior notes due 2023 also continued their downward momentum on Wednesday.

Albertsons Cos., Inc.’s 7½% senior notes due 2026 (B3/B+), Vistra Energy Corp.’s 5 5/8% senior notes due 2027 (Ba3/BB) and MGM Growth Properties LLC’s 5¾% senior notes due 2027 wrapped around par in high-volume activity.

RIG secured deal

For the second consecutive session the high-yield drive-through window serviced multiple issuers on Wednesday, as the new year finally appears to be generating a more or less steady stream of news in the new issue market.

Transocean Poseidon priced a $550 million issue of 6 7/8% eight-year senior secured notes (B1/B+) at 99.25 to yield 7.026%.

The coupon, price and yield came on top of final talk which had been revised richer and tighter from earlier talk specifying a coupon in the 7% area at 99. Initial talk had the deal coming in the 99 area to yield 7% to 7¼%.

Morgan Stanley & Co., Wells Fargo Securities LLC, Citigroup Global Markets Inc., Goldman Sachs & Co., DNB Markets and Credit Agricole CIB were the joint bookrunners for the project-funding deal.

Lamar taps 5¾% notes

Lamar Advertising priced a $250 million add-on to its 5¾% senior notes due Feb. 1, 2026 (Ba2/BB) at 102 to yield 5.289%.

JP Morgan Securities LLC managed the placement.

The Baton Rouge, La.-based outdoor advertising company plans to use the proceeds to repay a portion of the borrowings outstanding under its revolving credit facility.

Tenet lags

Tenet Healthcare’s 6¼% senior notes due 2027 dominated activity in the secondary space with the notes dipping below their issue price in high-volume trading.

They were seen trading down to 99 7/8, about ½ point drop from their closing price after breaking for trade on Tuesday, a market source said.

More than $193 million of the bonds were on the tape by the late afternoon on Wednesday.

Tenet Healthcare priced an upsized $1.5 billion issue of the 6¼% notes at par in a Tuesday drive-by. The deal doubled from its initial $750 million size.

The yield printed at the tight end of yield talk in the 6 3/8% area and inside of initial guidance in the 6¾% area.

The lackluster performance of the notes was attributed to their tight pricing and the abundance of supply, according to a market source.

While Tenet’s 6¼% notes struggled to stay above water, the company’s 6¾% notes due 2023 continued to trade down.

The 6¾% notes shaved off another 7/8 point to trade down to 97 during Wednesday’s session, according to a market source.

More than $30 million of the bonds were on the tape by the late afternoon. The notes dropped 1 1/8 points on Tuesday after Tenet announced its new deal.

The 6¾% notes are unsecured versus the new offering which is secured second-lien paper, a market source said.

Albertsons active

Albertsons’ new 7½% senior notes due 2026 were the most actively traded issue in the secondary space after Tenet Healthcare with more than $100 million of the bonds changing hands.

The 7½% notes also dipped below par in high-volume activity but stood poised to close the day above water.

The notes traded in a range of 99 7/8 to par ½ during Wednesday’s session, a market source said.

However, the notes were trading between par 1/8 and par ¼ in the late afternoon.

Albertsons priced an upsized $600 million issue of the 7½% notes at par in a Tuesday drive-by. The issue size was increased from $500 million.

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

MGM at par

MGM Growth Properties’ 5¾% notes due 2027 were also largely wrapped around par in active trading.

The notes were trading in a range of par to par ½ throughout Wednesday’s session with the notes tightening to a range of par 1/8 to par ¼ in the late afternoon, according to a market source.

More than $82 million of the bonds changed hands during Wednesday’s session.

MGM Growth priced an upsized $750 million of the 5¾% notes at par in a Tuesday drive-by.

The issue size was increased from $500 million.

The yield came at the tight end of the 5¾% to 5 7/8% yield talk.

Vistra at par

Vistra’s new 5 5/8% senior notes due 2027 were trading at par on Wednesday after dipping below par on Tuesday, according to a market source.

The notes were changing hands in a tight range of par to par 1/16, a market source said.

More than $50 million of the bonds had changed hands during Wednesday’s session.

The notes traded down out of the gate on Tuesday and were seen at 99 7/8 shortly after breaking for trade.

Vistra priced an upsized $1.3 billion issue of the 5 5/8% notes at par in a Tuesday drive-by.

The issue size was increased from $700 million.

The yield printed in the middle of the 5½% to 5¾% yield talk and tight to initial guidance in the 5¾% area.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, the most recent session for which data was available at press time, a trader said.

High yield ETFs sustained $394 million of outflows on the day.

However, actively managed high-yield funds saw $255 million of inflows on Tuesday, the source said.

Combined, the dedicated junk funds have seen $4.2 billion of net inflows in the year 2019 to Tuesday's close, which is an impressive amount, given that the new year is just three weeks old, a market source said.

However, the number is dwarfed by the $46.7 billion of outflows that those funds sustained in the full year of 2018, the source said.

Indexes mixed

Indexes were mixed on Wednesday after all posted strong gains on the week last week.

The KDP High Yield Daily index was down 6 basis points on Wednesday to close the day at 68.76 with the yield now 6.54%.

The index was down 10 bps on Tuesday after a cumulative gain of 32 bps on the week last week.

The ICE BofAML US High Yield index was down 2.6 bps with the year-to-date return now 3.701%.

The index dropped 19.3 bps on Tuesday after a 71.8 bps gain on the week last week.

After closing 2018 with a year-to-date return of negative 2.265%, the index catapulted past 3% returns in the first two weeks of 2019.

The CDX High Yield 30 index rose 12 bps to close Wednesday at 104.31.

The index was down 59 bps on Tuesday after a cumulative gain of 88 bps on the week last week.

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