Delta upsizes; Kohl’s at a discount; Jeld-Wen drives by; Tronox flat; US Foods improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 27 – While three deals that catered to high-yield accounts priced on Monday, only one was junk rated.

Jeld-Wen, Inc. priced a $250 million issue of five-year senior secured notes (Ba2/BB+) in a Monday drive-by.

A recent fallen angel, Delta Air Lines, Inc. priced a massively upsized $3.5 billion issue of five-year senior secured first-lien bullet notes (Baa2/BBB-), which carry investment grade ratings.

And Kohl's Corp. priced an upsized $600 million issue of 9½% five-year senior bullet notes (Baa2/BBB-/BBB-) at a discount.

Meanwhile, the high-yield secondary space was largely unchanged on Monday after closing out the previous week on soft footing.

New paper continued to dominate activity in the secondary space with mixed performances.

New paper from Kohl’s skyrocketed out of the gate while Delta’s new notes were hovering around par.

Tronox Inc.’s recently priced 6½% senior notes due 2025 (Ba3/B+) also fell flat in the aftermarket.

However, US Foods, Inc.’s 6¼% senior notes due 2025 (B3/BB) improved in active trading on Monday.

Outside of the new issues, market players were eyeing Avis Budget Group Inc. and Hertz Corp. with the junk bonds of both rental car companies taking a beating recently.

Jeld-Wen prices in the middle

The pace of the primary market eased on Monday, following a torrid April 20 week that saw $12.5 billion of junk priced in 21 dollar-denominated tranches.

That burst of issuance, following a nearly month-long market closure bracketed by the early March onset of massive global economic contraction brought on by the coronavirus pandemic and the Federal Reserve Bank's move into speculative grade corporate bonds, announced on April 9, created some indigestion, market sources said.

That indigestion remained somewhat in view on Monday, according to a syndicate banker.

Only one straight-up junk issue priced during the session.

Jeld-Wen priced a $250 million issue of five-year senior secured notes (Ba2/BB+) at par to yield 6¼% in a drive-by.

The yield printed in the middle of yield talk in the 6¼% area, and inside of initial talk in the mid-6% area.

High grade names, junk executions

As it has since the post-Fed junk market reopening, earlier in April, the market also focused on a couple of ostensible investment grade trades on Monday.

However, by the style of the executions and the participation of high-yield syndicate members – not to mention the hefty coupons – both deals came with unmistakable high-yield aspects and audiences, sources said.

Following a roadshow, Delta Air Lines priced a massively upsized $3.5 billion issue of five-year senior secured first-lien bullet notes (Baa2/BBB-) at par to yield 7%.

The issue size increased from the $1 billion minimum amount announced early Monday. The offer was announced to the market during the April 20 week at a size of $1.5 billion

The yield printed at the wide end of the 6¾% to 7% yield talk and in line with initial talk in the 7% area.

The Atlanta-based air carrier also syndicated a $1.5 billion term loan on Monday.

While active, the notes were largely flat after breaking for trade. The notes traded as high as 101. However, they quickly lost steam and were changing hands between par and par 3/8 heading into the market close.

The bonds saw more than $190 million in reported volume.

And Kohl's priced an upsized $600 million issue of 9½% five-year senior bullet notes (Baa2/BBB-/BBB-) at 99.99 to yield 9½%.

The Menomonee Falls, Wis.-based department store retailer increased the issue size from $500 million.

The yield printed well inside of initial guidance in the low-to-mid 10% area.

The deal priced on the investment grade syndicate desk but came in a high-yield style execution, talked at a yield as opposed to a spread, with the execution involving the participation of high-yield syndicate members, an informed source said.

The notes skyrocketed after breaking for trade.

They traded up to a 102-handle with more than $213 million in reported volume, a market source said.

Tronox flat

Tronox’s newly priced 6½% senior notes due 2025 fell flat in the aftermarket with the notes largely wrapped around par in high-volume activity, a market source said.

The bonds saw more than $54.5 million in reported volume during Monday’s session.

Tronox priced an upsized $500 million issue of the 6½% notes at par on Friday.

The issue size increased from $400 million.

The yield printed in the middle of yield talk in the 6½% area and tight to initial guidance of 6½% to 6¾%.

US Foods improves

After falling flat in initial aftermarket activity, US Foods’ 6¼% senior notes due 2025 were making gains on Monday.

The notes were changing hands in the par ½ to 101 context during Monday’s session, according to a market source.

More than $18 million was on the tape heading into the market close.

The notes were changing hands between par and par 3/8 on Friday.

US Foods priced a $1 billion issue of the 6¼% notes at par on April 23.

Avis eyed

Market players were eyeing Avis Budget Group’s 5¾% senior notes due 2027 after a rating downgrade the previous week dropped the bid out from under the notes.

The 5¾% notes were changing hands between 54 and 56 on Monday.

The notes, which are part of the ETF basket, used to trade in a tight ¼ point range, a source said.

However, following last week’s downgrades, the bid dropped out from under the notes, with the bid/ask spread now up to 4 points, the source said.

S&P lowered its ratings for Avis to B+ from BB on April 22 and Moody’s Investors Service downgraded Avis corporate family credit ratings to B2 from Ba3 on April 24.

“Their business model entails travel. Their revenue and EBITDA are going to suffer in the near term,” a source said.

Hertz levels off

Hertz's badly battered junk bonds saw a slight rebound on Monday.

The 7 5/8% senior notes due 2022 gained 5 points to close the day at 38 in decent volume, according to a market source.

The notes bottomed out last Friday, trading as low as 28 in intraday activity before closing the day at 33. The notes were changing hands in the mid-60s at the start of last week.

Hertz's 5¼% senior notes due 2024 closed Monday up 4 points at 23.

The 6¼% senior notes due 2022 were up 3 points to close the day at 28.

The notes were working to find their level after cratering last week due to a slew of bad news, sources said.

Hertz was trading off last week after S&P downgraded the company to B- from B+ and Moody’s Investors Service downgraded the company to Caa3 from B3.

The company announced last week that it was laying off nearly half of its workforce in North America and had hired financial advisers to rework its balance sheet.

The company was hoping to secure government aid but thus far has not had the benefit of a government bailout, a source said.

With many believing bankruptcy was looming, the notes were being eyed by distressed debt accounts.

$328 million Friday outflows

The dedicated high-yield bond funds sustained $328 million of net outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $443 million of outflows on the day.

Actively managed high-yield funds were positive on the day, posting $115 million of inflows on Friday, the source said.

Indexes mixed

Indexes were posting gains on Monday after all saw cumulative losses the previous week.

The KDP High Yield Daily index saw a slight increase of 2 basis points to close Monday at 62.49 with the yield now 7.48%.

The index posted a cumulative loss of 176 bps on the week last week.

The ICE BofAML US High Yield index was down 7 bps with the year-to-date return now negative 10.617%.

The index posted a cumulative loss of 238.1 bps on the week last week.

The CDX High Yield 30 index gained 40 bps to close Friday at 93.36.

The index posted a cumulative loss of 404 bps on the week last 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.