Mr. Cooper, Navient price; loanDepot gains on earnings beat; PG&E active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 1 – Three drive-by issuers priced $2.05 billion of dollar-denominated junk during a news heavy Monday session in the primary market.

All three issues brought single tranches.

Two upsized their deals.

All came within talk, with one pricing at the tight end, one in the middle and one at the wide end of talk.

Investors faced down interest rate apprehensions to the extent that one of Monday's issuers walked away with a three-handle yield.

Molina Healthcare, Inc. priced a $750 million issue of 10.5-year senior bullet notes (Ba3/BB-) at par to yield 3 7/8%, at the tight end of talk.

The deal was three-times oversubscribed at talk, according to a bond trader who added that there had been some reticence among investors at taking down a 10-year bullet priced below 4%, with some placing orders with limits at 4%.

Late Monday the new Molina Healthcare 3 7/8% senior notes due May 2032 were seen at 99¾ bid, the trader said.

Navient Corp. priced an upsized $750 million issue of 7.25-year senior bullet notes (Ba3/B+/BB-) at par to yield 5½%.

Mr. Cooper priced an upsized $600 million issue of 10-year senior notes (B2/B+) at par to yield 5¾%.

Meanwhile the new issue calendar underwent a buildup, and was pushing $10 billion at Monday's close.

A chunk of that is slated to come from a single issuer on Tuesday.

Teva Pharmaceutical Industries Ltd.’s set price talk on its $4 billion equivalent offering of sustainability-linked senior notes (Ba2/BB-/BB-) on Monday.

Issuance in each currency had been expected to be approximately even, for example, approximately $2 billion and €2 billion.

However demand, which was heard to be around $4 billion equivalent across all four tranches, early Monday, appears skewed to the euro-denominated notes, with demand for the dollar-denominated paper heard to be around $1.5 billion across both tranches.

This was reflected in official talk, which had the euro-denominated notes talked tight to initial guidance, while the dollar-denominated notes were talked wide to initial guidance.

Part of the reason the dollar-denominated tranches might be lagging is that they will not become part of the high-yield index, the trader said.

Deeper into record territory

Dollar-denominated issuance for 2021 – already the biggest year in the history of the market – crossed the $450 billion mark, with Monday's deals in the tally, according to Prospect News data.

Year-to-date the dollar junk new issue market has seen $450.9 billion clear the market in 695 tranches, leaving the previous record, 2020's $435.1 billion a diminishing speck in the rearview mirror.

For those who weren't watching closely enough – including this writer – the old record fell nearly two weeks ago, on Oct. 19, in a $6.5 billion session that included $2 billion from one of the pandemic era's most prodigious issuers, Carnival Corp.

Will the market possibly reach $500 billion — or $0.5 trillion — before the curtain comes down on 2021?

That's not out of the question, sources said on Monday.

In the run-up to Christmas the market is anticipating $25 billion to $50 billion, one source said.

Issuance on the high end of that wide spread would make the six full weeks of the year remaining (excluding the pre-Thanksgiving week and the pre-Christmas week) busy weeks indeed.

$255 million Friday inflows

The dedicated high-yield bond funds saw $255 million of net inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High yield ETFs saw $135 million of inflows on the day.

Actively managed high-yield funds saw $120 million of inflows on Friday, the source said.

Secondary sideways

Meanwhile, the secondary space saw another sideways day on Monday with the cash bond market opening with gains but losing strength as the session progressed to close the day largely unchanged, sources said.

However, trading activity remained light with many on the sidelines in the run up to the Federal Reserve Open Market Committee Meeting.

The Federal Reserve is expected to formally announce bond tapering at the meeting’s conclusion on Wednesday.

Sources anticipate some market volatility surrounding the announcement.

With activity around recent deals muted on Monday, earnings-related news was the main driver of trading activity in the secondary space.

LD Holdings Group LLC’s junk bonds were making gains in active trading following better-than-expected earnings.

PG&E Corp.’s 5¼% senior notes due 2030 were active although little changed following the utility company’s earnings and disclosure that its role in the Dixie Fire is under investigation.

loanDepot’s earnings

LD Holdings, the parent company of loanDepot, saw its senior notes jump after the mortgage lender’s earnings report.

LD Holding’s 6 1/8% senior notes due 2028 were up more than 2½ points.

The notes were changing hands in the 93¾ to 94¼ context heading into Monday’s close, according to a market source.

There was more than $12 million in reported volume.

The notes closed out last week on a 91-handle.

While less active, LD Holding’s 6½% senior notes due 2025 were up more than 1 point to close the day at 99¼.

The notes were on the rise after the company reported strong numbers, a source said.

loanDepot reported revenue of $923.8 million versus analyst expectations for earnings of $870.3 million.

PG&E active

PG&E’s 5¼% senior notes due 2030 were active although little changed following the utility company’s earnings report.

The 5¼% notes continued to trade on a 104-handle.

They were changing hands in the 104 ½ to 104 7/8 context throughout Monday’s session.

There was more than $15 million in reported volume.

Earnings were largely inline with expectations. However, the company also announced that its role in the Dixie Fire, the second-largest forest fire in California’s history, was under investigation.

Indexes

The KDP High Yield Daily index fell 6 points to close Monday at 69.58 with the yield now 3.92%.

The index shaved off 2 points on the week last week.

The CDX High Yield 30 index fell 6 bps to close Monday at 108.81.

The index posted a cumulative loss of 18 bps on the week last week.

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