Moog, iStar price; Twitter in focus, holds premium; Select Medical active; Diamond Sports up again

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 6 – The domestic high-yield primary market closed out an active week with another $1.05 billion pricing in two deals.

Moog Inc. priced an upsized $500 million issue of eight-year senior notes (Ba3/BB) and iStar Inc. priced an upsized $550 million issue of 5.5-year senior bullet notes (Ba3/BB-) during Friday’s session.

The week ahead also promises to be active with a robust forward calendar that includes Cox Media Group/Terrier Media Buyer, Inc.’s $1,165,000,000 offering (Caa1/CCC+), EnerSys’ $300 million offering (expected ratings Ba3/BB+), and AmWINS Group, Inc.’s $250 million add-on to its 7¾% senior notes due July 1, 2026 (existing ratings B3/B-).

Meanwhile, markets were “on fire,” on Friday following a better-than-expected jobs reports with the high-yield secondary space closing out a mixed week on firm footing, a market source said.

New paper remained the focus of trading activity.

Twitter, Inc.’s newly priced 3 7/8% senior notes due 2027 (Ba2/BB+) were the most actively traded issue in the secondary space with the notes maintaining their slight premium.

Select Medical Corp.’s 6¼% senior notes due Aug. 15, 2026 (B3/B-) were also active and trading at a large premium to their reoffer price following Thursday’s add-on.

Outside of the new paper, Sinclair Broadcast Group Inc.’s two tranches of senior notes issued by Diamond Sports Group LLC and Diamond Sports Finance Co. continued their upward momentum on Friday after hitting their lowest point since pricing earlier in the week.

Big book for Moog

On Friday the primary market wrapped up a week of vigorous issuance, much of it coming in razor-sharp executions that played to big investor demand.

Moog Inc. was certainly a case in point.

Moog priced an upsized $500 million issue of eight-year senior notes at par to yield 4¼%.

The issue size increased from $400 million.

The yield printed at the tight end of the 4¼% to 4½% yield talk which tightened from early guidance of 4½% to 4¾%.

At the time the upsized deal launched at 4¼%, it was playing to $3 billion of demand, a trader said.

The notes saw a strong break and traded as high as 102¼, a source said. They were marked at 101 7/8 bid, 102 1/8 offered after in the late afternoon.

iStar returns

Elsewhere, iStar Inc. returned to the market on Friday to price an upsized $550 million issue of 5.5-year senior bullet notes at par to yield 4¼%.

The issue size increased from $500 million.

The yield printed tight to guidance in the 4 3/8% area, according to a bond trader who said that the deal, which came just over a week after the company priced a $100 million add-on to its 4¾% senior notes due 2024 on Nov. 26, was in part propelled into the market by $200 million of reverse inquiry.

The week ahead

Given Friday's eye-popping non-farm payrolls report that a historically high portion of Americans who qualify in the count are presently employed, and also the past week’s tight (sometimes ultra-tight) executions in the junk bond market – with investors actually herding some issuers into the market by means of reverse inquiry – 2019 figures to have one more active week to play out in the primary market, sources say.

One and one only, a debt capital markets banker asserted on Friday.

But it could be a busy one, as syndicate sources professed visibility on junk offers expected to materialize in the week ahead.

No names, of course.

However, look for a first-time issuer to announce a deal on Monday, a trader said, adding that the deal in question will run a roadshow and price by the end of the Dec. 9 week.

Look for an existing issuer to also run a roadshow, and price by the end of the week, as well.

Look for BofA Securities Inc. to be involved in both of those offers, as well as a small add-on, the trader said.

And the high-yield drive-through window will be open, sources said on Friday.

The week will get underway to a decent active calendar.

Cox Media Group/Terrier Media Buyer, Inc. is in the market with $1,165,000,000 of eight-year senior notes with early guidance in the low 8% area.

Also on the road is EnerSys, with $300 million of eight-year notes guided in the 4½% to 4¾% area.

And AmWINS Group, Inc. is marketing a $250 million add-on to its 7¾% senior notes due July 1, 2026.

All of those are expected to clear the market ahead of the Friday 13 close.

Following the Friday 13 close, the sound of crickets (or perhaps sleigh bells) should pervade the new issue market, sources say.

It's possible that the early part of the Dec. 16 week might see a deal or two, a banker said on Friday.

But it's more likely that following next Friday's close the 2019 primary market will have run its course, the banker asserted.

Twitter in focus

Twitter’s newly priced 3 7/8% notes due 2027 were the focus of trading activity on Friday with more than $100 million in reported volume by the late afternoon.

The notes held on to their slight premium and continued to gain despite their tight pricing.

The 3 7/8% notes were seen at par 3/8 bid, par ½ offered after closing Thursday at par ¼, sources said.

Twitter’s issue was the first eight-year piece of paper to price with a 3 handle since September, a market source said.

The pricing is indicative of how tight the high-yield market has become, a source said.

The social media company’s debut high-yield issue was in demand during bookbuilding and performed well in the secondary space.

However, it will be interesting to see how the 3 7/8% notes fare over the long term, a market source said.

“People will be watching it,” the source said.

Twitter priced an upsized $700 million issue of the 3 7/8% notes at par on Thursday.

The yield printed at the tight end of yield talk in the 4% area.

Official talk came tight to earlier guidance in the 4 1/8% area. Initial guidance had the notes coming to yield in the mid-4% area.

The deal was heard to be five-times to six-times oversubscribed at 4%, a source said.

Select Medical trades up

Select Medical’s 6¼% senior notes due 2026 were trading at a large premium to their reoffer price in high-volume activity following Thursday’s add-on.

The 6¼% notes were seen at 107 1/8 bid, 107 3/8 offered, a market source said.

The bonds saw more than $50 million in reported volume by the late afternoon, making it one of the most actively traded issues during Friday’s session.

Select Medical priced an upsized $675 million add-on to the 6¼% notes at 106 to yield 5.178% in a Thursday drive-by.

The issue size increased from $625 million.

The issue price came at the rich end of the 105.5 to 106 price talk. Initial talk was in the 105 to 105.5 area.

The deal was heard to be at least two-times oversubscribed, sources said.

Diamond Sports rebound continues

After hitting their lowest levels since pricing earlier in the week, Diamond Sports’ secured and unsecured tranches of senior notes continued their upward momentum on Friday.

Diamond Sport’s 5 3/8% senior secured notes due 2026 rose back to par on Friday, a market source said.

The notes closed Thursday at 99, an improvement from earlier in the week when they were trading on a 98 handle, their lowest level since pricing.

The 6 5/8% unsecured notes due 2027 rose 1 3/8 points to close the week at 95 7/8. The notes closed Thursday at 94½.

The 6 5/8% notes were trading on a 93 handle on Wednesday, their lowest level since pricing.

Diamond Sports’ secured and unsecured tranches are large liquid issues.

With the secured tranche a high-beta name, the 5 3/8% notes tend to trade up in decent volume when there’s a bull move in the market, a source said.

The two tranches of senior notes have been under pressure since parent company Sinclair Broadcasting reported third-quarter earnings in early November.

Since Sinclair acquired the Fox Sports regional sports networks from Disney through Diamond Sports, a subsidiary formed for the acquisition, it has been in a programming dispute with Dish.

The dispute has resulted in a blackout of the networks on Dish, which has hit Sinclair’s EBITDA, a market source said.

However, the deal was a solid one that was well liked by investors, the source said.

Sinclair Broadcast priced a $1.83 billion tranche of the 6 5/8% notes and a $3.05 billion tranche of the 5 3/8% notes at par in July.

$233 million Thursday inflows

The dedicated high-yield bond funds saw $233 million of net inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $153 million of inflows on the day.

Actively managed high-yield funds saw $80 million of inflows on Thursday, the source added.

News of Thursday's daily flows trails a Thursday afternoon report that the junk funds sustained $154 million of net outflows in the week to the Wednesday, Dec. 4 close, according to Lipper US Fund Flows.

The breakdown has all of that cash, and more, flowing from the actively managed funds, the source said, noting that the junk ETFs saw $1 million of inflows, in the most recent week, while the actively managed funds sustained $155 million of outflows.

With funds that report to Lipper on a monthly basis, rather than on a weekly basis, reporting $188 million of inflows for the month of November, the net November flows came to negative-$4 million.

That follows two back-to-back months of robust inflows: $2.4 billion in October, and $5.1 billion in September, the market source said.

In the year to Thursday's close the dedicated junk funds have seen $18 billion of net inflows, an astonishing reversal of fortune given that the year 2018 to the Nov. 5 close had seen $46.9 billion of net outflows, according to the market source.

Indexes

Indexes closed out a mixed week on strong footing.

The KDP High Yield Daily index gained 4 points to close Friday at 70.96 with the yield now 5.15%.

The index was up 8 bps on Thursday and 6 bps on Wednesday after sinking 5 bps on Tuesday and 7 bps on Monday.

The index saw a cumulative gain of 6 bps on the week.

The ICE BofAML US High Yield index climbed 26.5 bps on Friday with year-to-date returns now 12.529.

The index gained 8.5 bps on Thursday and 28.5 bps on Wednesday after sinking 8.8 bps on Tuesday and 8.7 bps on Monday. The index saw cumulative gains of 46 bps on the week.

The CDX High Yield 30 index rose 24 bps to close Friday at 107.80. The index slid 3 bps on Thursday, gained 23 bps on Wednesday, and sank 10 bps on Tuesday.

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