Hanesbrands, TransDigm price; Ineos falls in junkland; Wynn, Atlas Air lag issue prices

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 10 – Hanesbrands and TransDigm Inc. priced a combined total of $1.6 billion of junk bonds on Friday.

Meanwhile, it was a heavy day in the secondary space with the cash bond market sinking ¾ to 1 point as the two-year Treasury yield closed above 4.5%.

The heavy market conditions were taking their toll on new issuance with the deals to price during Thursday’s session lagging in secondary market activity.

Ineos Finance plc’s 6¾% senior secured notes due 2028 (Ba2/BB/BBB-) crumbled in the secondary space with the notes falling more than 1 point below their issue price in heavy volume.

Rand Parent, LLC’s 8½% first-lien senior secured notes due 2030 (Ba1/BB/BB+), backing the buyout of Atlas Air, and Wynn Resorts, Ltd.’s 7 1/8% senior notes due 2031 (B2/B+) were also lagging their issue prices under Friday’s heavy market conditions.

Happy Friday

Demand for the two deals that priced on Friday was reported to be huge.

TransDigm Inc. priced an upsized $1 billion issue (from $750 million) of 6¾% first-lien senior secured notes due August 2028 (Ba3/B+) at par, in the middle of talk.

The deal was playing to around $5 billion of demand as of Thursday's close, a sellside source said.

And in a Friday drive-by Hanesbrands priced a $600 million issue of 9% eight-year senior notes (B1/BB-) at par, at the tight end of talk.

The deal was heard to have played to reverse inquiry exceeding its size, the sellsider said, adding that it ended up being 4.5-times oversubscribed.

When initial talk in the 9½% area circulated the market upon the Friday morning announcement of the Hanes deal, some observers professed astonishment.

However, there were solid reasons for the company having to pay up, according to a portfolio manager who was in the deal.

In its earnings call Hanesbrands reported that quarterly revenue was down 15.9% compared to the same quarter last year, and gave a disappointing outlook for 2023, the investor recounted.

Hanesbrands also suspended its annual dividend to prioritize debt repayment, the source added.

“Those things suggest that the company has not yet righted the ship,” the manager remarked.

And the company came to the primary market to raise cash in order address a couple of 2024 maturities, its 4 5/8% senior notes and its 3½% senior notes, so they needed the cash, the investor said.

Hence the market extracted a toll from the Winston-Salem, N.C.-based clothing company, which left Friday with a bond that bears interest at 7/8% higher than the sum of the coupons of the two 2024 bonds that it is retiring!

Friday's $1.6 billion of new issues caps off an $8.5 billion week in the primary market, a week that saw the bloom come off the rose, so to speak.

The Thursday session saw three sizable deals price, with all three turning in secondary market performances that have thus far been underwhelming or worse, sources say.

The dollar-denominated Ineos senior secured notes due May 2028 (Ba2/BB/BBB-), a $425 million issue that priced at par on Thursday, having commandeered much of the market's attention earlier in the week, were down 1½ points early Friday afternoon, sources said.

Blame not the issuers nor the dealers, the portfolio manager said on Friday afternoon.

Demand in all of these deals has been intense, and has caused price talk to grind tighter and tighter, the source added.

Bonds that priced in the early part of the year, coming cheap as a concession to a new issue market that was attempting to regain its stride as the new year got underway, and then traded at splendid premiums, attracted big crowds.

When word gets out that a market is cheap, the crowds reliably appear, the investor said.

Looking to the week ahead, one deal is on the active new issue calendar.

Skill Bidco APS is expected to price $765 million equivalent of five-year senior secured notes (B/B+) backing the buyout of Scan Global Logistics by CVC Capital Partners, notably an acquisition that is not backed by committed financing.

Early price discussions were in the 10½% to 11% area, sources say.

When pressed for other possible issuer names for the Feb. 13 week, most market sources turned out empty pockets on Friday.

However a sellside source is watching for Carnival Cruise Line to appear in the week ahead.

Ineos crumbles

Ineos’ new 6¾% senior secured notes due 2028 continued to crumble in secondary market activity on Friday after a weak break.

The 6¾% notes fell more than 1 point below their issue price.

They were changing hands at 98¾ bid, 99 offered heading into the market close.

They closed the previous session wrapped around par.

Ineos priced a $425 million tranche of the 6¾% notes at par on Thursday on top of talk for a 6¾% yield.

The notes priced as part of a €795 million equivalent two-tranche offering that included a €400 million tranche of 6 5/8% notes that also priced at par.

Lagging

Atlas Air’s 8½% first-lien senior secured notes due 2030 were lagging their issue price under Friday’s heavy market conditions.

The 8½% notes were wrapped around 99¾ heading into the market close.

Rand Parent priced an upsized $850 million, from $800 million, issue of the 8½% notes at par on Thursday.

The yield printed at the tight end of the 8½% to 8¾% yield talk.

The LBO deal was backing Apollo Global’s buyout of Atlas Air.

Wynn Resorts’ 7 1/8% senior notes due 2031 also saw a lackluster start in the aftermarket.

The notes were marked at 99¾ bid, par offered in the late afternoon and continued to leak into the close, a source said.

Wynn Resorts priced a $600 million issue of the 7 1/8% notes at par in a Thursday drive-by.

The notes priced low to initial guidance in the 7¾% area.

Wynn’s tender

Refinancing drove Wynn’s latest pass at the high-yield market with proceeds from the $600 million sale of new 7 1/8% notes to be used to fund the tender offer for the company’s 7¾% senior notes due 2025.

Wynn announced a cash tender offer for the $600 million outstanding of its 7¾% notes for a tender price of $1,024.50.

However, the tender price was well below the current call price on the notes, which is about 103.875.

“Why would anyone do that?” a source said.

Wynn announced its intention to redeem any notes not tendered.

However, the call price on the notes steps down to 101.938 in April and the company has the ability to hold proceeds in escrow and redeem the notes at the reduced the call price.

The tender offer “seems like a good happy medium,” a source said.

Fund flows

High-yield ETFs sustained $812 million of daily cash outflows on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds were positive on the day, posting $93 million of inflows on Thursday, the source said.

News of Thursday's daily cash flows follows a Thursday afternoon report that the combined funds saw $871 million of net inflows for the week the Wednesday, Feb. 8 close, according to fund-tracker Refinitiv Lipper.

The dedicated high-yield bond funds have sustained $497 million of net outflows in the year to Thursday's close, following 2022's record $48.9 billion of net outflows, according to the market source.

Indexes

The KDP High Yield Daily index sank 55 points to close Friday at 52.77 with the yield now 7.14%.

The index was down 4 points on Thursday, 9 points on Wednesday, 9 points on Tuesday and 39 points on Monday.

The index sank a cumulative 116 points on the week.

The ICE BofAML US High Yield index dropped 90.2 basis points with the year-to-date return now 3.127%.

The index was down 19.3 basis points on Thursday and 15 bps on Wednesday, inched up 0.9 bp on Tuesday after falling 68.8 bps on Monday.

The index posted a cumulative decline of 192.4 bps on the week.

The CDX High Yield 30 index fell 41 bps to close Friday at 102.25.

The index was down 25 bps on Thursday and 36 bps on Wednesday, gained 35 bps on Tuesday and fell 27 bps on Monday.

The index posted a cumulative decline of 94 bps on the week.

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