PG&E eyed; Lummus, Radio Systems on tap; W.R. Grace at a premium; Wynn Macau flat; Ford gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 15 – The domestic high-yield primary market was quiet on Monday with no deals pricing.

However, three deals joined the forward calendar, including PG&E Corp.’s highly anticipated three-tranche offering. The $3.75 billion megadeal is expected to price on Friday.

Radio Systems Corp. also plans to price a $625 million offering late in the week.

And Lummus Technology Inc. plans to price a $460 million offering on Tuesday.

Meanwhile, the secondary space was quiet but firm on Monday following news the Federal Reserve’s Secondary Market Corporate Credit Facility would begin the purchase of individual bonds.

While soft at the open, the market reversed course following the announcement and ended the day with gains.

“This is not the first time Fed headlines have affected the market. It feels like they’re going to be propping things up,” a source said.

With no deals pricing on Monday, trading volume was light with activity continuing to center around recent issues.

W. R. Grace & Co.’s recently priced 4 7/8% senior notes due 2027 (Ba3/BB-/BB+) were active and trading with a healthy premium.

However, Wynn Macau Ltd.’s 5½% senior notes due 2026 (B1/BB-/BB+) were wrapped around par.

Delta Air Lines Inc.’s new 7 3/8% senior notes due 2026 (Baa3/BB/BB+) remained in focus with the notes holding above par.

Ford Motor Co.’s 8½% senior notes due 2023 jumped in active trading on Monday with the issue among those eligible for purchase by the Federal Reserve.

PG&E roadshows $3.75 billion

The news flow in the high-yield primary market eased a bit on Monday.

No junk deals were priced.

PG&E detailed a high-yield megadeal that the market has been watching for during the past two weeks.

The San Francisco-based electric and natural gas utility is expected to price $3.75 billion of senior secured high yield notes (B1/BB-/BB) on Friday.

The offering is comprised of tranches of five-, eight-and 10-year notes, with proceeds to finance the company's exit from Chapter 11 bankruptcy.

The calendar

Lummus Technology talked its $460 million offering of eight-year senior notes (Caa1/B-) to yield 9% to 9¼%.

Official talk comes tight to initial guidance in the mid-to-high 9% area.

The deal is set to price on Tuesday.

In addition to price talk came document changes.

The company also disclosed that it will make a $35 million draw on its revolver.

And Radio Systems set an investor conference call for 10 a.m. ET on Tuesday to present a $625 million offering of CD&R Smokey Buyer, Inc. five-year senior secured notes.

The LBO deal prices late in the June 15 week.

W.R. Grace at a premium

W.R. Grace’s 4 7/8% senior notes due 2027 were trading with a healthy premium in secondary market activity.

The notes were changing hands in the 101½ to 102 context on Monday with about $23 million in reported volume, sources said.

The company is a solid BB credit and the notes were trading in-line with most recent issues from decent credits.

“Deals like this tend to trade to a couple points premium,” a source said.

W.R. Grace priced an upsized $750 million issue of the 4 7/8% notes at par on Friday.

The issue size increased from $550 million.

The yield printed in the middle of the 4¾% to 5% yield talk.

Wynn Macau flat

Wynn Macau’s 5½% senior notes due 2026 fell flat in the aftermarket with the notes largely wrapped around par, a source said.

The lack of movement in the notes was attributed to investor jitters surrounding the gaming sector.

While initially the subject of the market rally, names in the sector were hard hit by the volatility that roiled the market late last week.

However, despite the volatility, the deal did not struggle to clear the primary.

Wynn Macau priced a $750 million issue of the 5½% notes at par on Friday.

The yield printed in the middle of yield talk in the 5½% area.

Delta active

Delta’s 7 3/8% senior notes due 2026 continued to see active trading in the secondary space.

However, the notes were largely unchanged on Monday.

They were holding above par after dropping well below in last Thursday’s sell-off.

The 7 3/8% notes were changing hands in the par to par ½ context heading into Monday’s close with $27.5 million on the tape, sources said.

The notes were “rightfully crushed,” last Thursday, a source said, and traded as low as 97½ before rebounding back to par on Friday.

Delta’s notes, alongside the junk bonds from other airline carriers, are expected to whip around with the headlines as markets grapple with concern over a second wave of the pandemic.

Delta priced a $1.25 billion issue of the 7 3/8% notes at 99.986 on June 10.

Ford gains

Ford’s 8½% senior notes due 2023 made large gains in active trading on Monday.

The notes jumped almost 3 points to close the day at 107.

There was more than $23 million of the bonds on the tape by the late afternoon.

The issue is among the junk bonds of recent fallen angels that are eligible for purchase by the Federal Reserve.

$326 million Friday outflows

The dedicated high-yield bond funds saw $326 million of net outflows on Friday, according to a market source.

Actively managed high yield funds saw $295 million of outflows on the day.

High yield ETFs sustained $31 million of outflows on Friday, the source said.

Leading up to these outflows the market saw a record stretch of $46.4 billion of inflows in the past 11 weeks, the market source said.

In the year to Friday's close the dedicated high-yield bond funds have seen $30.7 billion of net inflows.

Indexes mixed

Indexes were mixed on Monday.

The KDP High Yield Daily index shaved off 7 bps to close Monday at 65.82 with the yield now 6.35%. The index posted a cumulative loss of 91 bps on the week.

The ICE BofAML US High Yield index slipped 10.1 bps with the year-to-date return now negative 4.144%.

The CDX High Yield 30 index gained 115 bps to close Monday at 101.72.

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