High-yield issuers sell $4.35 billion on Thursday; YUM!, Iamgold flat; Quicken Loans lags

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 10 – Five issuers brought a combined six tranches of dollar-denominated junk with a total face amount of $4.35 billion on Thursday, as the post-Labor Day new issue market continued to roar.

Despite heaviness in the stock market, which has now piled up losses in three of the past four market sessions, executions in the high-yield primary market remained sharp.

All of Thursday's deals priced tight to talk except PDC Energy, Inc.'s $150 million add-on to its 5¾% senior notes due May 15, 2026 (Ba3/BB) which, at an issue price of 99, came at the cheap end of price talk (99 to 99.5).

Four of Thursday's six dollar-denominated tranches came upsized.

However all but one of the session's five issuers had been in the market at least overnight, the sole drive-by deal being the above-mentioned PDC Energy trade.

And the post-Labor Day week is poised to end with a bang on Friday, as four issuers are expected to price a combined five tranches totaling $3.55 billion ahead of the coming weekend (see related stories and forward calendar in this issue).

Secondary trading

Meanwhile, the influx of new paper jumpstarted trading activity in the secondary space, although the new deals had mixed receptions.

NuStar Logistics, LP’s two tranches, Weekley Homes LLC and Weekley Homes Finance Corp.’s 4 7/8% senior notes due 2028 (B1/BB-), and Big River Steel LLC’s 6 5/8% senior secured notes due 2029 (Caa1/B) were all trading with large premiums in the secondary space.

While U.S. Concrete, Inc.’s 5 1/8% senior notes due 2029 (B3/BB-) and Hudbay Minerals Inc.’s 6 1/8% senior notes due 2029 (B3/B/B+) were coming in from their highs, they maintained a healthy premium in active trading.

However, YUM! Brands, Inc.’s 3 5/8% senior notes due 2031 (B1/B+) and Iamgold Corp.’s 5¾% senior notes due 2028 (B2/B+) fell flat in the aftermarket.

And Quicken Loans LLC and Quicken Loans Co-Issuer, Inc.’s two tranches (Ba1/BB) were lagging their issue price in active trading.

High-yield mutual and exchange traded funds saw an outflow through Wednesday’s close with $769 million leaving the space, according to the Refinitiv Lipper U.S. Fund Flows report.

NuStar gains

NuStar Logistics’ two tranches of senior notes (Ba3/BB-/BB-) were continuing to gain on Thursday after a strong break the previous session.

NuStar’s 5¾% senior notes due 2025 were changing hands in the 101¾ to 102 context heading into the market close, according to a market source.

The notes traded up to a 101-handle shortly after breaking for trade on Wednesday.

NuStar’s 6 3/8% senior notes due 2030 were changing hands in the 102 to 102¼ context heading into the market close.

The 6 3/8% notes also saw a strong break and traded up to 101 3/8 bid, 101 7/8 offered on Wednesday.

While the deal was from the embattled energy sector, NuStar is a decent credit and the coupons were decent in comparison to recent issues that cleared the market, a source said.

NuStar priced a $600 million tranche of the 5¾% notes and a $600 million tranche of the 6 3/8% notes at par on Wednesday.

Weekley gains

Weekley Homes’ 4 7/8% senior notes due 2028 also continued to gain in active trading on Thursday.

The notes closed Thursday at 101¾ bid, 102 offered.

They were active during the session with more than $84 million in reported volume, a source said.

Weekley Homes’ bonds also saw a strong break and closed Wednesday at 101 bid, 101¼ offered.

The company priced a $400 million issue of the 4 7/8% notes at par in a Wednesday drive-by.

Pricing came at the tight end of yield talk in the 5% area.

Big River at a premium

Big River Steel’s 6 5/8% senior secured notes due 2029 were also trading with a large premium in high-volume activity on Thursday.

The notes traded as high as 102 during the session but settled at 101¼ bid, 101¾ offered, a source said.

The notes were active with more than $112 million in reported volume.

Big River priced an upsized $900 million issue of the 6 5/8% notes at par to yield 6.627%.

The yield printed tight to yield talk in the 6¾% area.

Coming in

While coming in from their highs, new paper from U.S. Concrete and Hudbay Minerals continued to trade with healthy premiums in the aftermarket.

U.S. Concrete’s 5 1/8% senior notes due 2029 were trading on a 101-handle on the break.

However, they lost steam on Thursday and were marked at par ½ bid, par ¾ offered heading into the market close, a source said.

The bonds saw more than $80 million in reported volume.

U.S. Concrete priced an upsized $400 million issue of the 5 1/8% notes at par.

The yield printed at the tight end of yield talk in the 5¼% area.

The issue size increased from $300 million.

Hudbay Minerals was seen as high as 101¼ bid on the break. While they came in slightly, they still closed Thursday strong at par ¾ bid, 101 offered.

Hudbay priced an upsized $600 million issue of the 6 1/8% notes at par.

Pricing came at the tight end of the 6 1/8% to 6 3/8% yield talk.

The issue size was increased from $500 million.

Flat

While the majority of new deals were performing well, YUM! Brands’ 3 5/8% senior notes due 2031 and Iamgold’s 5¾% senior notes due 2028 were stuck at par in the aftermarket.

YUM!’s 3 5/8% senior notes were changing hands in the 99 7/8 to par context in high-volume activity, according to a market source.

With more than $164 million on the tape, the notes were the most actively traded issue during Thursday’s session.

The notes’ lackluster performance was attributed to their tight pricing.

YUM! priced a $1.05 billion issue of the 3 5/8% notes at par on Wednesday. Pricing came at the tight end of yield talk in the 3¾% area.

Iamgold’s 5¾% senior notes due 2028 were also largely hovering around par during Thursday’s session.

The notes saw about $26 million in reported volume.

Iamgold priced a $450 million issue of the 5¾% notes on Wednesday.

The yield printed at the tight end of yield talk in the 5 7/8% area.

Quicken Loans lags

Quicken Loans’ two tranches of senior notes were lagging their issue price on Thursday.

While the notes initially performed well, they faded into Thursday’s close.

Quicken Loans’ 3 5/8% notes due 2029 were being supported by the underwriter at 99 5/8 bid.

“But the rest of the street is lower,” a source said.

The 3 7/8% senior notes due 2031 were also largely trading around the same level and were changing hands in the 99 5/8 to 99¾ context.

Quicken Loans is a solid credit and “eager to get to investment grade,” a source said.

Given the fundamentals of the company, the notes will most likely improve in the long run.

However, with the notes upsizing and the massive supply of new issuance in the secondary on Thursday, their initial reception was dampened, a source said.

Indexes mixed

Indexes were again mixed on Thursday.

The KDP High Yield Daily index was down 8 basis points to close Thursday at 66.92 with the yield 5.36%. The index was down 6 bps on Wednesday and 23 bps on Tuesday.

The ICE BofAML US High Yield index gained 3.8 bps with the year-to-date return now 0.474%.

The index rose 14.4 bps on Wednesday after sinking 28.5 bps on Tuesday.

The CDX High Yield 30 index sank 27 bps to close Thursday at 105.23. The index rose 61 bps on Wednesday after sinking 80 bps on Tuesday.

© 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.