Nine issuers tap primary; Aramark, GFL Environmental flat

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 23 – The new deals came fast and furious on Thursday with nine issuers tapping the high-yield primary market – many with issue sizes of $1 billion or more.

Gap, Inc., Netflix Inc., US Foods, Inc., XPO Logistics, Inc., Entegris Inc., Tronox Inc., MGM Resorts International, and Delta Air Lines, Inc. all brought deals.

Expedia Group, Inc. also became the latest investment-grade credit to price off the high-yield desk.

Meanwhile, new issues dominated activity in the secondary space.

However, recent deals were increasingly starting to fall flat in the aftermarket, which sources attributed to the abundance of new supply and tight pricing.

Aramark Services, Inc.’s newly priced 6 3/8% senior notes due 2025 (B1/BB-) and GFL Environmental Inc.’s 4¼% senior notes due 2025 (Ba3/BB-) were hovering around par in active trading.

However, Howmet Aerospace Inc.’s split-rated 6 7/8% senior notes due 2025 (Ba3/BBB-) were trading at a steep premium in the aftermarket.

As Gap Inc. and Delta Air Lines, Inc. prepped new offerings, their outstanding bonds were active with Gap’s 5.95% senior notes due 2021 skyrocketing and Delta’s notes trading off.

Meanwhile, cash continues to return to the high-yield space with high-yield mutual and exchange-traded funds having inflows of $2.219 billion for the week through Wednesday’s close.

Heavy volume

The news flow remained intense in the high-volume high-yield primary market on Thursday.

In drive-by action, Gap priced an upsized $2.25 billion amount of senior secured notes (Ba2/BB) in three tranches.

The deal included $500 million of three-year notes that priced at par to yield 8 3/8%, tight to talk in the 8½% area, and well inside of early guidance in the 9% area.

A downsized $750 million amount of five-year notes priced at par to yield 8 5/8%. The tranche was downsized from $1 billion. The yield printed at the tight end of yield talk in the 8¾% area, and well inside of early guidance in the 9¼% area.

An upsized $1 billion tranche of seven-year notes priced at par to yield 8 7/8%. The tranche size doubled from $500 million. The yield printed at the tight end of yield talk in the 9% area. Initial guidance was in the 9½% area.

The overall deal, which was upsized from $2 billion, was playing to $3 billion of orders early Thursday afternoon, according to a bond trader who added that much of it was done by means of reverse inquiry.

In a deal that had been in the market overnight, Netflix priced $1 billion equivalent of five-year senior bullet notes (Ba3/BB-) in dollar- and euro-denominated tranches.

A $500 million tranche of the notes priced at par to yield 3 5/8%, tight to price talk in the 3¾% area. Initial talk was 4% to 4 1/8%

A €470 million tranche of the notes priced at par to yield 3%, 12.5 basis points inside of talk in the 3¼% area. Early guidance was in the 3½% area.

US Foods priced an upsized $1 billion issue of five-year senior secured notes (B3/BB) at par to yield 6¼%.

The issue size increased from $800 million.

The yield printed at the tight end of the 6¼% to 6½% yield talk, and well inside of early whispers in the high 6% area.

Timing on the deal was moved ahead. When announced, books were scheduled to remain open until Friday morning.

XPO Logistics priced an upsized $850 million issue of five-year senior notes (Ba3/BB-) at par to yield 6¼%.

The issue size increased from $750 million.

The yield printed in the middle of yield talk in the 6¼% area.

Entegris priced an upsized $400 million issue of eight-year senior notes (Ba2/BB) at par yield 4 3/8% in a Thursday drive-by, according to a syndicate source.

The issue size increased from $350 million.

The yield printed at the tight end of yield talk in the 4½% area.

Tronox talked its $400 million offering of senior secured notes due May 1, 2025 (Ba3/B+) to yield in the 6½% area, tight to initial guidance of 6½% to 6¾%.

Timing was moved back. Books close at 10 a.m. ET Friday, and the deal is set to price thereafter. The offer was originally announced as a Thursday drive-by.

Elsewhere, MGM Resorts International appeared with a public offering of senior notes (Ba3/BB-) with initial talk of 7% to 7¼%.

An upsized $750 million deal priced with a 6¾% coupon, and a trader reported that it was heard to be playing to $2.8 billion of demand.

Pricing was at the low end of final talk of 6¾% to 7%. The notes priced at par.

In the crossover/distressed segment of the market Delta Air Lines, Inc. showed up with a $1.5 billion split-rated offering of five-year senior secured first-lien bullet notes (Baa3/BB) with initial talk in the 7% area, a trader said.

The Atlanta-based air carrier is also in the debt capital markets with a $1.5 billion term loan that was completely done by means of reverse inquiry, a trader said.

And Expedia Group showed up with $2 billion of five-year senior notes (Baa3/BBB) in a high-yield-style execution that saw the high-yield and investment-grade syndicates collaborate, according to a trader who added that the bonds are expected to trade on the investment-grade desk.

It was expected to price and allocate on Thursday, however no terms were available at press time.

Flat

Aramark’s 6 3/8% senior notes due 2025 were largely stuck at par in high-volume activity, a source said.

The notes were changing hands in the par to par ½ context throughout the session and were seen trading at par 1/8 heading into the close, a source said.

With $220 million in reported volume, the notes were among the most actively traded issues of Thursday’s session.

Aramark priced an upsized $1.5 billion issue of the 6 3/8% notes at par in a Wednesday drive-by.

The issue size increased from $1.25 billion.

The yield printed at the tight end of talk in the 6½% area. Initial talk was in the high 6% area.

GFL Environmental’s 4¼% senior notes due 2025 were also hovering around par.

The notes were marked in the par to par ½ context and were seen changing hands at par 3/8 heading into the market close, sources said.

The bonds traded with more than $39 million in reported volume.

GFL priced an upsized $500 million issue of the 4¼% notes at par in a Wednesday drive-by.

Pricing came at the tight end of the 4¼% to 4½% yield talk.

The issue size increased from $400 million.

Howmet Aerospace soars

Howmet Aerospace’s split-rated 6 7/8% senior notes due 2025 soared in active trading on Thursday.

The notes traded up to a 102-handle in high-volume activity, according to a market source.

There was more than $147 million in reported volume heading into the market close.

The notes were a good coupon from a solid credit, a market source said.

Howmet priced an upsized $1.2 billion issue of the 6 7/8% notes at par in a Wednesday drive-by.

The issue size increased from $1 billion.

The notes priced on the tight end of talk in the 7% area which tightened from initial talk in the 7¾% area.

Gap jumps

As the secondary space awaited Gap’s megadeal, the clothing retailers’ 5.95% senior notes due April 2021 jumped in high-volume activity.

The notes gained more than 6½ points to trade up to 103 1/8.

More than $78 million of the bonds were on the tape by the late afternoon.

The notes were trading up due to the belief they would be taken out with proceeds from the new offering.

While refinancing the 2021 notes was listed as an official use of proceeds, some sources were skeptical.

“They’re not paying rent,” a source said.

The retailer announced on Thursday that it furloughed 80,000 store employees, cut executive pay and did not pay April rent for its stores in an effort to shore up liquidity.

Delta falls

As Delta Airlines prepped a new offering, its outstanding bonds were trading off.

Delta’s 4 3/8% senior notes due 2028 dropped 5 points to 76 5/8, according to a market source. The notes were yielding about 8.5%.

The 3¾% senior notes due 2029 dropped 4½ points to 72 5/8 with the yield almost 8%.

Both the 3¾% and 4 3/8% notes are unsecured.

They were trading off as Delta prepped an offering of secured notes, which was comparatively cheaper with a shorter duration, a source said.

Delta recently became a fallen angel with S&P Global Ratings and Fitch Ratings downgrading the company to junk due to the impact of the coronavirus.

Indexes down

Indexes again posted losses on Thursday

The KDP High Yield Daily index dropped 14 basis points to close Thursday at 62.76 with the yield 7.37%.

The index was down 19 bps on Wednesday, 90 bps on Tuesday and 24 bps on Monday.

The ICE BofAML US High Yield index dropped 10.4 bps with the year-to-date return now negative10.115.

The index gained 0.8 point on Wednesday after sinking 113.9 bps on Tuesday and 41.8 bps on Monday.

The CDX High Yield 30 index sank 15 bps to close Thursday at 93.49.

The index gained 74 bps on Wednesday after dropping 123 bps on Tuesday and 213 bps on Monday.

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