CA Magnum/Hexaware prices; Roblox struggles in junkland; Gray Television on a 101-handle

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 27 – New junk paper in the primary market totaled $1.51 billion on Wednesday, with two-thirds of it coming from a $1.01 billion issue from CA Magnum Holdings.

Meanwhile, it was a lackluster day in the secondary space on Wednesday with earnings reports coming in largely as expected and the Treasury curve flattening with the 10-year Treasury yield continuing to decline.

“Every time it seems like it’s selling off it rallies,” a source said.

While there have been some large inflows into the space and the calendar has been light the past few sessions, the high-yield market has been trending lower with rate-sensitive names continuing to underperform.

In recent deals, Roblox Corp.’s 3 7/8% senior notes due 2030 (Ba2/BB) were struggling in the secondary space with the notes trading below par.

However, Gray Television, Inc.’s 5 3/8% senior notes due 2031 (B3/B/BB-) were putting in a strong performance with the attractively priced notes rising to a 101-handle.

CA Magnum

Two issuers priced a $1.51 billion face amount of dollar-denominated junk on Wednesday.

The bigger portion of it came from CA Magnum Holdings which sold $1.01 billion of five-year senior secured notes (B1//BB-) at par to yield 5 3/8%, 12.5 basis points through talk.

The deal, backing the buyout of India-based Hexaware Technologies by Carlyle Group, was heard to be well-oversubscribed.

Teva megadeal

Elsewhere Israel-based Teva Pharmaceutical Industries Ltd. unveiled a debt refinancing megadeal, $4 billion equivalent of sustainability-linked senior notes (Ba2/BB-/BB-) that are coming in four bullet tranches.

The deal is expected to generate plentiful interest among high-yield investors, a portfolio manager said.

It comes in two dollar-denominated tranches and two euro-denominated tranches, with the overall amounts of issuance in each currency expected to be approximately even (i.e., approximately $2 billion and €2 billion).

The dollar-denominated portion includes 5.5-year notes with initial guidance in the 4¾% area, and 7.5-year notes with initial guidance in the 5% area.

The euro-denominated portion includes 5.5-year notes and 8.5-year notes.

A global roadshow is underway. Pricing is set for early next week.

The primary market set a pace in late September and early October that has dwindled, somewhat, on the threshold of November, the portfolio manager remarked, on Wednesday.

That's partly because a lot of prospective late 2021 issuers crammed their deals into the early post-Labor Day weeks, the investor said.

It's also because a lot of financing that might ordinarily be transacted in the junk bond market is lately showing up in the leveraged loan market, instead, the source added.

Roblox struggles

Roblox’s 3 7/8% senior notes due 2030 were struggling in the aftermarket with the tight pricing of the notes leaving them nowhere to go.

The 3 7/8% notes were marked at 99¾ bid, par offered heading into Wednesday’s close.

While the gaming platform had a massive market cap underlying the notes, the pricing “didn’t leave anything on there for flippers so it didn’t trade well,” a source said.

Roblox priced a $1 billion issue of the 3 7/8% notes at par on Tuesday.

The yield printed in the middle of yield talk in the 3 7/8% area.

While some buyers balked at pricing below 4%, the deal was ultimately heard to have played to $1.8 billion in demand.

Gray on a 101-handle

Gray Television’s 5 3/8% senior notes due 2031 were putting in a strong performance in the secondary space with the notes rising to a 101-handle.

The 5 3/8% notes were changing hands in the 101 to 101½ context during Tuesday’s session.

The deal was attractively priced and the name is a familiar one to high-yield investors, a source said.

In a heavily oversubscribed offering, Gray Television priced an upsized $1.3 billion, from $1.125 billion, issue of the 5 3/8% notes at par on Tuesday.

The yield printed at the tight end of the 5 3/8% to 5½% yield talk.

$284 million Tuesday inflows

The dedicated high-yield bond funds saw $284 million of net inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $212 million of inflows on the day.

Actively managed high-yield funds saw $72 million of inflows on Tuesday, the source said.

Indexes

The KDP High Yield Daily index rose 2 points to close Wednesday at 69.63 with the yield now 3.87%. The index shaved off 1 point on Tuesday and 5 points on Monday.

The CDX High Yield 30 index dropped 17 bps to close Wednesday at 109.04.

The index rose 14 bps on Tuesday and 2 bps on Monday.

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