Primary sells $3.1 billion; Michaels in focus; EnVen, WASH, Organon, News Corp. at premiums

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 9 – The Friday session had another $3.1 billion face amount of issuance come in four dollar-denominated tranches of junk from three issuers, capping off a $14.8 billion/20 tranche week.

Michaels Cos., Inc.’s downsized $2.15 billion two-tranche offering and CEC Entertainment LLC’s upsized $650 million issue of five-year senior secured notes (Caa1/CCC) were among the issues to clear the market.

Michaels’ new notes were in focus with the notes ripping on the break, a theme of several recent issues with high yields.

Meanwhile, the secondary space was relatively unchanged on Friday after a strong week that saw credit spreads at their tightest levels since October 2018.

Spreads tightened to 322 bps with BB credits outperforming, according to a BofA Global Research report.

New paper continued to dominate the tape after the deluge of deals priced over the past two sessions.

The majority of deals were putting in strong performances in the secondary space.

EnVen Energy Corp.’s 11¾% senior secured second-lien notes due 2026 (Caa1/B-) outperformed in the aftermarket with the notes trading more than 4 points above their discounted issue price.

Organon & Co.’s dollar-denominated tranches maintained their large premiums in active trading on Friday after ripping on the break.

WASH Multifamily Laundry Systems’ 5¾% senior secured first-lien notes due 2026 (B3/B-) and News Corp.’s 3 7/8% senior notes due 2029 (Ba2/BB+) were also trading with healthy premiums in the aftermarket.

However, Titan International, Inc.’s 7% senior secured notes due 2028 (Caa1/B-) fell flat.

Friday’s primary

The Friday session saw another $3.1 billion face amount of issuance come in four dollar-denominated tranches of junk from three issuers, capping off a $14.8 billion/20-tranche week.

The session saw Michaels Cos. price $2.15 billion of notes backing the buyout of the company by Apollo.

The deal, downsized from $2.3 billion, included a downsized $850 million tranche (from $1 billion) of 5¼% seven-year senior secured notes (Ba3/B) and a $1.3 billion tranche of 7 7/8% eight-year senior unsecured notes (B3/CCC+).

Both came at par, at the tight ends of talk.

Following a raft of concessions from the issuer on the covenant package the deal was a blowout, sources said.

The new Michaels 7 7/8% unsecured notes were 103¾ bid, 104¼ offered, or maybe better, a trader said late Friday.

The 5¼% secured notes were 102 bid.

Investors are focused on yield right now, a trader said, pointing to the difference in trading levels of the Michaels unsecured notes versus the secureds.

If it’s yielding in the sevens or eights it is getting a disproportionate amount of attention, the source added.

Also on Friday, three months after emerging from bankruptcy CEC Entertainment priced an upsized $650 million issue (from $600 million) of 6¾% five-year senior secured notes (Caa1/CCC) at par, at the tight end talk.

The deal was heard to be two-times to three-times oversubscribed, a trader said, adding that it traded to a modest premium: par ¼ bid, par ½ offered.

A trader drew a comparison to the Dave & Buster's Entertainment, Inc. 7 5/8% secured notes due 2025, now 108 bid where it yields around 4½%, and said in that context investors were finding the new Chuck E. Cheese bonds easy to like.

Friday's action cleared the active deal calendar (see related stories in this issue).

It won't stay that way long, sources say.

Already there is visibility on 10 to 12 deals in the week ahead, a trader said.

EnVen outperforms

EnVen Energy’s 11¾% senior secured second-lien notes continued to gain momentum on Friday after a strong break with the notes now more than 4 points above their discounted issue price.

The notes traded up to 102 bid, 102¼ offered Friday afternoon, a source said.

They were continuing to gain after rocketing up to 101½ bid after breaking for trade on Thursday.

EnVen Energy priced a $300 million issue of the 11¾% notes at 98 to yield 12.97% on Thursday.

Organon active

Organon’s dollar-denominated tranches remained active on Friday with the notes holding on to their large premiums.

Organon’s 5 1/8% senior notes due 2031 continued to trade in the 102½ to 103¼ range on Friday.

However, most prints were on a 102-handle, a source said.

There was more than $80 million in reported volume.

Organon’s 4 1/8% senior notes due 2028 traded as high as 102¼ on Friday. However, they were changing hands in the 101 5/8 to 102 context heading into the close.

There was more than $75 million in reported volume.

The notes were largely unchanged after a strong break on Thursday.

The notes were performing better than expected, a source said.

Organon priced a $2.1 billion tranche of the 4 1/8% notes and a $2 billion tranche of the 5 1/8% notes at par on Thursday as part of a three-tranche dual-currency megadeal.

The 4 1/8% notes priced at the tight end of the 4 1/8% to 4¼% talk; the 5 1/8% notes priced at the tight end of the 5 1/8% to 5¼% talk.

The deal played to heavy demand during bookbuilding with both tranches heavily oversubscribed.

At a premium

WASH Multifamily Laundry’s 5¾% senior secured first-lien notes due 2026 and News Corp.’s 3 7/8% senior notes due 2029 (Ba2/BB+) were also putting in strong performances in the aftermarket.

WASH’s 5¾% notes were changing hands in the 102½ to 102¾ context heading into Friday’s close.

There was more than $144 million in reported volume.

WASH priced an $850 million issue of the 5¾% notes at par on Thursday. Pricing came tighter than yield talk in the 6% area.

While the notes were coming in from the heights reached after breaking for trade, News Corp.’s 3 7/8% senior notes due 2029 maintained a healthy premium in active trading.

The 3 7/8% notes traded as high as 101 7/8 during Friday’s session.

However, they came in as the session progressed and were marked at par 7/8 bid, 101 1/8 offered heading into the close.

There was more than $55 million in reported volume.

The heavily oversubscribed offering was marked at 101¼ bid, 102 offered after breaking for trade on Thursday.

News Corp. priced an upsized $1 billion, from $750 million, issue of the 3 7/8% notes at par on Thursday.

Pricing came tighter than the 4% to 4¼% yield talk.

The deal was heard to have played to $5 billion in demand.

Titan flat

While the majority of high-yielding paper have put in strong performances in the aftermarket, Titan International’s 7% senior secured notes due 2028 fell flat.

The 7% notes were marked at par bid, par ¼ offered.

There was more than $76 million in reported volume.

While the deal was heard to have played to massive demand, which included a significant amount of reverse inquiry, the company was heavily leveraged and the offering was not as well-liked as previously believed.

Titan priced a $400 million issue of the 7% notes at par on Thursday.

The yield printed tighter than talk in the 7¼% area.

Indexes

Indexes were mixed on Friday after a strong week.

The KDP High Yield Daily index rose 1 point to close the day at 69.6 with the yield now 3.93%.

The index gained 5 points on Thursday, 8 points on Wednesday, 9 points on Tuesday and 8 points on Monday.

The index posted a cumulative gain of 31 points on the week.

The ICE BofAML US High Yield index shaved off 5.8 bps with the year-to-date return now 1.628%.

The index gained 11.9 bps on Thursday, 10.5 bps on Wednesday, 16.9 bps on Tuesday and 19.9 bps on Monday.

The index posted a cumulative gain of 53.4 bps on the week.

The CDX High Yield 30 index shaved off 9 bps to close Friday at 109.63.

The index gained 12 bps on Thursday, 4 bps on Wednesday, 6 bps on Tuesday and 15 bps on Monday.

The index posted a cumulative gain of 28 bps on the week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.