Junk prices $4.5 billion in two days; US Foods, Williams Scotsman, Macquarie hold premiums

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 12 – Issuers priced a $2.2 billion face amount of dollar-denominated junk bonds in three tranches on Tuesday, as the Sept. 11 week, with just two sessions in the book, has already had $4.5 billion in new issuance clear the market.

Meanwhile, it was a soft day in the secondary space with the market dipping ahead of the Consumer Price Index report.

The cash bond market was off about 1/8 point as market players awaited the next piece of inflationary data to determine the Federal Reserve’s next move.

While the market cheered the slew of late August macro data that appeared to support the soft-landing narrative, the market has reassessed its exuberance over the past week and a half, a source said.

The market is widely anticipating another pause in rate hikes in September but many additional rate hikes before the year draws to a close.

As the market awaits more data to determine the path the data-driven Fed will take, new paper was in focus as the primary market continued to unleash a torrent of deals.

The paper to price during Monday’s session continued to hold nominal premiums in the aftermarket, although none were able to move beyond a par-handle.

US Foods, Inc.’s two tranches of senior notes (B2/BB-), Williams Scotsman, Inc.’s 7 3/8% senior secured notes due 2031 (B2/BB-) and Macquarie AirFinance Holdings Ltd.’s 8 1/8% senior notes due 2029 (BB+/BB) were hovering just above their issue prices in heavy volume.

NFP Corp.’s 8½% senior secured notes due 2031 (B1/B/BB-) performed the best out of Monday’s deals although the notes remained on a par handle.

$2.2 billion Tuesday

All of Tuesday’s new junk bond transactions came as drive-bys, and all were upsized.

Vistra Operations Co. LLC priced the session’s biggest deal, an upsized $1.1 billion issue (from $1 billion) of eight-year senior notes (Ba2/BB/BB) that came at par to yield 7¾%, in the middle of talk.

The deal was heard to have played to $2 billion of demand, most of it emanating from real-money accounts, a trader said.

The new Vistra 7¾% notes were par 3/8 bid, heading into the Tuesday close, the trader noted.

In addition to the speculative-grade-rated unsecured notes Vistra’s merger financing also included a high-grade $650 million issue of 6.95% 10-year senior secured notes (Baa3/BBB-/BBB-) that priced at a 270 basis points spread to Treasuries. The secured notes were issued at 99.85 and will yield 6.97%.

In the wake of the two exceptionally active opening sessions of the Sept. 11 week the dollar-denominated active forward calendar features $4 billion of announced business, much of it set to price ahead of Friday’s close.

News surfaced Tuesday on just one of those offerings.

French TV producer/distributor Banijay Entertainment SAS talked a $350 million minimum tranche of 5.5-year senior secured notes (B1/B+/BB-) to yield in the 8¼% area, tight to early guidance.

The €910 million equivalent two-part offering also features a €350 million minimum tranche talked to yield in the 7¼% area.

Books are scheduled to close on Wednesday.

US Foods flat

US Foods’ two tranches of senior notes were hovering just above their issue prices in active trade on Tuesday with the tight pricing of the notes leaving them little room for movement.

The longer duration notes outperformed the shorter duration counterpart.

The 7¼% senior notes due 2032 were changing hands in the par 1/8 to par 3/8 context heading into the market close, a source said.

There was $28 million in reported volume.

The 6 7/8% senior notes due 2028 traded on either side of par for the majority of the session but were lifted to close the day in the par to par ¼ context, a source said.

There was $25 million in reported volume.

US Foods priced a $500 million tranche of the 6 7/8% notes and a $500 million tranche of the 7¼% notes at par on Monday.

The 6 7/8% notes priced at the tight end of the 6 7/8% to 7 1/8% yield talk; the 7¼% notes priced at the tight end of the 7¼% to 7½% yield talk.

Williams Scotsman stuck

Williams Scotsman’s 7 3/8% senior secured notes due 2031 were stuck trading in a tight range in heavy volume on Tuesday.

The notes traded in the par to par 3/8 context throughout the session and stood poised to close the day flat at par ¼, a source said.

There was $41 million in reported volume.

Williams Scotsman priced a $500 million issue of the 7 3/8% notes at par in a Monday drive-by.

The yield printed at the tight end of yield talk in the 7½% area.

Macquarie active

Macquarie AirFinance’s 8 1/8% senior notes due 2029 maintained the nominal premium gained on the break in heavy volume.

The notes were trading in the par to par ½ context on Tuesday and stood poised to close the day wrapped around par ¼, a source said.

There was $54 million in reported volume.

Macquarie AirFinance priced a $500 million issue of the 8 1/8% notes at par in a Monday drive-by.

The yield printed at the tight end of yield talk in the 8¼% area.

NFP outperforms

NFP’s 8½% senior secured notes due 2031 were the outperformers of the deals to price during Monday’s session.

The notes gained about ¼ point on Tuesday to close the session in the par ½ to par 5/8 context, a source said.

There was $41 million in reported volume.

NFP priced an upsized $350 million, from $300 million, issue of the 8½% notes at par in a Monday drive-by.

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

Fund flows

High-yield ETFs had a healthy $404 million of daily cash inflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed funds were flat to slightly negative on Monday, sustaining $6 million of outflows on the day, the source said.

The combined funds are tracking $40 million of net inflows for the week that will conclude with Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index shaved off 5 bps to close Tuesday at 50.25 with the yield 7.58%.

The index added 2 bps on Monday.

The ICE BofAML US High Yield index was off 4.6 bps with the year-to-date return now 6.97%.

The index gained 13.1 bps on Monday.

The CDX High Yield 30 index was down 16 bps to close Tuesday at 102.67.

The index was up 20 bps.

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