Triumph, Teva on deck; Tegna tanks on FCC acquisition opposition; TransDigm, Uniti improve

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 27 – In Monday's dollar-denominated market two issuers stepped forward with megadeals, both of which are expected to price Tuesday.

Teva Pharmaceutical Industries Ltd. announced a $2.06 billion equivalent offer of sustainability-linked senior notes (Ba2/BB-/BB-), and Triumph Group, Inc. will attempt to place $1.2 billion of five-year senior secured first-lien notes.

Meanwhile, the secondary space opened the week strong with buyers returning to the space after the heaviness of the previous session.

The cash bond market gained 3/8 to ½ point, eliminating its losses from the previous week when outsized outflows and rate concerns sparked heavy selling in the market, a source said.

While a green day on Monday, future volatility is expected as the macro data continues to paint a mixed picture of the economy and provide little clarity about the Federal Reserve’s path forward.

Topical news and large, liquid issues were driving activity in the secondary space.

Tegna Inc.’s senior notes (Ba3/BB) were in focus, tanking after the Federal Communications Commission dealt a blow to Standard General’s acquisition of the company.

Tegna’s senior notes fell to a new historic low on the news.

While Tegna’s senior notes cratered due to topical news, TransDigm, Inc.’s 6¾% senior secured notes due 2028 (Ba3/B+) and Uniti Group LP, Uniti Fiber Holdings Inc., Uniti Group Finance 2019 Inc., CSL Capital, LLC’s 10½% senior secured notes due 2028 (B2/B/BB+) improved alongside the broader market.

On deck

In Monday's dollar-denominated market two issuers stepped forward with megadeals, both of which are expected to price Tuesday.

Teva Pharmaceutical Industries announced a $2.06 billion equivalent offer of sustainability-linked senior notes (Ba2/BB-/BB-):

• $500 million 6.5-year notes with initial guidance in the 8% area;

• $500 million 8.5-year notes with initial guidance in the low 8% area;

• €500 million 6.5-year notes with initial guidance in the high 7% area; and

• €500 million 8.5-year notes with initial guidance in the low 8% area.

The offer, which kicked off on Monday conference calls with investors, is scheduled to be marketed through Tuesday, with the deal set to price thereafter.

Triumph Group will attempt to place $1.2 billion of five-year senior secured first-lien notes.

Initial guidance on that deal was 9½% to 9¾%. However late Monday pricing had been carved down to 9% to 9¼%, according to a sellside source who also said that the deal is heard to be playing to $3 billion of demand.

Tegna tanks

Tegna’s senior notes were in focus on Monday, falling to a historic low after the FCC dealt a blow to Standard General’s acquisition of the company.

Tegna’s 5% senior notes due 2029 sank 7 points to trade on an 88-handle, a source said.

The notes were changing hands in the 88 3/8 to 88 5/8 context heading into the market close.

The yield was about 7¼%.

There was $17 million in reported volume.

The notes were trading on a 95-handle heading into Monday’s session after being lifted the previous week by Teton Merger Corp.’s cash tender offer for the notes.

The 4 5/8% senior notes due 2028 also sank 7 points outright to trade on an 89-handle.

The notes were changing hands in the 89 to 89½ context heading into the close with the yield also about 7¼%.

The notes were wrapped around 96 heading into last Friday’s close.

With $35 million in reported volume, the notes were the most actively traded during Monday’s session.

The 4¾% senior notes due 2026 fell 2 points outright to close Monday at 95 3/8 with the yield 6½%.

Tegna’s notes were lifted the previous week after a cash tender offer and consent solicitation alleviated investor concerns about the closing of the offering.

However, those concerns were in full force on Monday after the FCC dealt what sources called a “death blow” to Standard General’s acquisition of the company.

The FCC announced late Friday that it would hold a hearing on the planned acquisition, which was initially slated to close by the end of 2022.

Tegna’s senior notes have gyrated as investors grappled with signs of further delays or steps forward in closing the acquisition.

Monday’s trading levels marked a new historic low for the notes.

TransDigm improves

TransDigm’s 6¾% senior secured notes due 2028 improved alongside the broader market, once again approaching their trading level prior to last Thursday’s $1.1 billion add-on.

The 6¾% notes rose more than ½ point to change hands in the 99½ to 99¾ context heading into the market close, a source said.

The notes closed the previous session wrapped around 99, the reoffer price of last Thursday’s add-on.

While the notes were unchanged by the add-on during Thursday’s session with the notes trading in the 99½ to par context, they sank under last Friday’s heavy market conditions.

Uniti tops par

Uniti’s 10½% senior secured notes due 2028 again topped par as market conditions improved.

The notes gained ½ to 5/8 point in heavy volume and were changing hands in the par to par ¼ context heading into the market close, a source said.

There was $27 million in reported volume.

The at one time strong notes fell to a 98-handle last Tuesday with heavy selling in the market.

While the notes nearly wiped out their losses and were again approaching par last Thursday, they were driven back down to a 99-handle amid the heaviness in the market.

The 10½% notes, which priced at par on Feb. 2, saw a strong start in the aftermarket with the notes holding a 101-handle their first week in the market.

However, the $2.6 billion issue gave back their gains and sank below par as rate concerns dragged down the broader market over the past two weeks.

Fund flows

Outflows from the dedicated high-yield bond funds continued on Friday, the most recent session for which data was available at press time, according to a market source.

The funds sustained $591 million of net outflows on the day.

Those follow last Thursday's $555 million of net outflows.

High-yield ETFs saw $486 million of outflows on the day on Friday, the source said.

Actively managed high-yield funds saw $5 million of outflows on the day.

The combined funds are tracking $1.33 billion of net outflows for the week that will conclude with Wednesday's close.

In the most recent week on record, the week to the Wednesday, Feb. 22 close, the combined funds sustained a massive $6.125 billion of net outflows, the third-largest weekly outflow on record.

The combined funds tallied $9.4 billion of net outflows thus far in 2023, according to the market source.

Indexes

The KDP High Yield Daily index sank 67 points to close Monday at 51.14 with the yield now 7.46%.

The index posted a cumulative decline of 27 points on the week last week.

The ICE BofAML US High Yield index added 43.6 basis points with the year-to-date return now 2.48%.

The CDX High Yield 30 index rose 27 bps to close Monday at 101.57.

The index posted a cumulative loss of 80 bps on the week last week.

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