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Morning Commentary: AAR joins junk calendar; secondary firms; TransDigm improves
By Abigail W. Adams
Portland, Me., Feb. 14 – The high-yield primary market was quiet but not dormant on Wednesday with one deal joining the calendar.
AAR Corp. plans to price $500 million of AAR Escrow Issuer LLC five-year senior notes on Thursday with early guidance for a yield of 7% to 7¼%, according to market sources. The notes are non-callable for two years.
While activity will slow in the coming days after the primary market marked its single highest volume day for issuance in three years on Monday, it will not stop.
Sources expect at least one more deal to surface before the week draws to a close.
The primary market activity comes as markets reprice their rate expectations following Tuesday’s U.S. Consumer Price Index report.
The report reflected an uptick in inflation, which further squashed market hopes for rate cuts in the first half of 2024.
The secondary space saw heavy selling following the CPI print with the market closing the previous session down ½ point.
However, the market was firmer early Wednesday as Treasury yields came in slightly.
The cash bond market added about 1/8 point with several recent deals that struggled under Tuesday’s heavy market conditions improved.
TransDigm Inc.’s two tranches of first-lien senior secured notes (Ba3/B+) returned to issue price after falling to a 99-handle the previous session.
The 6 3/8% senior secured notes due 2029 and 6 5/8% senior secured notes due 2032 continued to trade in the same context.
The notes added ¼ to 3/8 point to trade up to par early in the session, according to a market source.
The notes closed the previous session in the 99 3/8 to 99 5/8 context.
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