Wesco prices, rips out of gate; INTL FCStone, Ortho-Clinical skyrocket; Molina at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 29 – The domestic high-yield primary market rounded out an active week with one multibillion dollar offering clearing the market.

Wesco Distribution Inc. priced $2.825 billion of senior notes (B2/BB-/BB-) in two resized tranches.

The new paper ripped out of the gate with the notes joining several other recent deals that were putting in strong performances in the secondary space.

INTL FCStone Inc.’s 8 5/8% senior notes due 2025 (Ba3/BB-) and Ortho-Clinical Diagnostics SA’s 7 3/8% senior notes due 2025 (Caa2/CCC) skyrocketed in the aftermarket with both several points above their issue price.

Diversified Healthcare Trust’s 9¾% senior notes due 2025 (Ba1/BB+) and Molina Healthcare, Inc.’s 4 3/8% senior notes due 2028 (B2/BB-) were also trading with steep premiums.

Wesco prices, rockets

An otherwise quiet Friday session saw Wesco Distribution price $2.825 billion of senior notes (B2/BB-/BB-) in two resized tranches.

A downsized $1.5 billion amount of 7 1/8% five-year notes priced at par to yield 7.123%.

The tranche was downsized from $1.825 billion.

The yield printed tight to the 7 1/8% to 7 3/8% yield talk, which had tightened from initial guidance in the mid 7% area.

The $325 million of proceeds was shifted to the long-maturity tranche, an upsized $1.325 billion amount of 7¼% eight-year notes, which priced at 99.244 to yield 7 3/8%.

The tranche was upsized from $1 billion. The yield came 12.5 basis points inside the tight end of yield talk in the 7 5/8% area. Initial guidance was in the high 7% area.

Both issues shot three points higher – trading right on top of one another – following the Friday execution, according to a bond trader in New York.

Wesco cleared the calendar, heading into the weekend.

Barring significant turbulence – be it generated by news headlines concerning the pandemic, trade relations, domestic politics or what have you – the green light remains brightly lit for opportunistic issuers looking to raise cash by selling high-yield bonds in the week ahead, a syndicate banker said on Friday.

INTL FCStone zooms up

INTL FCStone’s 8 5/8% senior notes due 2025 skyrocketed in the aftermarket with the notes several points above their discounted issue price.

The 8 5/8% notes were marked at 101¾ bid, 102¾ offered.

The small issue was met with strong demand during bookbuilding, a source said, with the demand following them into the secondary space.

INTL FCStone priced a $350 million issue of the 8 5/8% notes at 98.5 to yield 9% on Thursday.

The coupon priced tighter than the 8¾% to 9% coupon talk. The price came at the rich end of talk for a discount in the 2-points area.

The small deal was heavily oversubscribed and heard to be playing to $1.5 billion of orders.

Ortho-Clinical jumps

Ortho-Clinical’s 7 3/8% senior notes due 2025 also saw strong demand in the secondary space with buyers pushing the notes higher, a source said.

The 7 3/8% notes were marked at 102 3/8 bid, 103 1/8 offered late Friday afternoon.

The 7 3/8% notes were also heavily oversubscribed during bookbuilding with the small deal playing to more than $2 billion of demand.

Ortho-Clinical priced a $400 million issue of the 7 3/8% notes at par on Thursday.

The yield printed at the tight end of yield talk in the 7½% area. Initial talk was for a yield in the low 8% area.

Diversified Healthcare trades up

Diversified Healthcare’s 9¾% senior notes due 2025 were also putting in a strong performance in the secondary space.

The 9¾% notes were marked at 101¾ bid, 102¼ offered late Friday afternoon.

Diversified Healthcare priced an upsized $1 billion issue of the 9¾% notes at par on Thursday.

The deal was upsized from $500 million.

The yield printed at the wide end of the 9½% to 9¾% yield talk.

Molina at a premium

Molina’s 4 3/8% notes due 2028 were also trading with a premium in the aftermarket.

The 4 3/8% notes traded up to a 101-handle on Friday. They were seen at 101 bid, 101½ offered late Friday afternoon.

The notes were performing well despite the tight pricing with the coupon inside of 5%, a source said.

Molina priced an $800 million issue of the 4 3/8% notes at par on Thursday.

$1.07 billion Thursday inflows

The dedicated high-yield bond funds saw $1.07 billion of net daily inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $570 million of inflows on the day.

High-yield ETFs saw $501 million of inflows on Thursday, the source said.

News of Thursday's inflows follows a Thursday afternoon report that the combined high-yield funds saw $6.32 billion of net inflows during the week to the Wednesday, May 27 close, according to Lipper US Fund Flows.

That's the third largest weekly inflow on record, and all three materialized since the beginning of April, according to the market source.

The biggest of the three record inflows, $7.66 billion, came during the week to April 15. The second biggest was the $7.09 billion inflow seen during the week to April 1, the source said.

Indexes gain

Indexes closed out a strong week with gains.

The KDP High Yield Daily index was up 3 points to close Friday at 64.84 with the yield 6.78%.

The index was up 16 bps Thursday, 54 bps on Wednesday and 45 bps on Tuesday.

The index posted a cumulative gain of 118 bps on the week.

The CDX High Yield 30 index jumped 54 bps to close Friday at 98.29. The index was up 26 bps on Thursday, 84 bps on Wednesday and 171 bps on Tuesday.

The index posted a cumulative gain of 335 bps on the week.

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