Hanesbrands, TransDigm in focus, hold strong premium; American Airlines below par

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 13 – While the high-grade new-issue market went on a Monday tear, the sound of crickets pervaded the junk bond market, sources said.

Skill Bidco APS’ $765 million equivalent offering of five-year senior secured notes (B/B+) backing the buyout of Scan Global Logistics remains on the calendar with pricing expected over the course of the week.

ADT Inc. and EnerSys also announced redemptions of outstanding issues, raising speculation that they may soon tap the new-issue market.

Meanwhile, the secondary space firmed on Monday following the heaviness in the market last week with the cash bond market adding 1/8 point as the market awaits Tuesday’s release of the Consumer Price Index report.

The report is sure to be a market-moving event with credit weak since the U.S. Nonfarm Payroll report threw cold water on market bets for a pause and even a reduction in Fed rates, a source said.

The two-year Treasury yield, which has become a barometer for anticipated pain in the high-yield market, continued to add despite a strong day for risk assets with the yield closing at 4.54%.

While indecision hung over the broader market, new and recent issues dominated the tape with the deals to price during last Friday’s session putting in strong aftermarket performances.

TransDigm Inc.’s 6¾% senior secured notes due 2028 (Ba3/B+) dominated activity in the secondary space, continuing to trade with a healthy premium.

Hanesbrands, Inc.’s 9% senior notes due 2031 (B1/BB-) held onto the strong gains made at the break with the notes closing near their highs.

Wynn Resorts, Ltd.’s 7 1/8% senior notes due 2031 (B2/B+) shook off last Friday’s weakness, returning to a par-handle in active trade.

However, American Airlines, Inc.’s 7¼% first-lien senior secured notes due 2028 (Ba3/B-) continued to struggle despite a lift in the broader market and remained on a 99-handle.

Primary calendar eyed

The market awaits official price talk and timing on the Skill Bidco APS $765 million equivalent offering of five-year senior secured notes (B/B+) backing the buyout of Scan Global Logistics by CVC Capital Partners, an acquisition that is not backed by committed financing.

The deal, on a timeline which has it pricing during the present week, is heard to be playing to orders in excess of deal-size, a trader said, adding that color from the dealer, Pareto Securities, has not been forthcoming.

Early price discussions were in the 10½% to 11% area, sources say.

In the meantime, ADT subsidiary ADT Security Corp. announced it would undertake the partial redemption of its 4 1/8% senior notes due 2023 (slightly more than $600 million outstanding), and EnerSys announced it would redeem all $300 million of its 5% senior notes due 2023.

Neither company disclosed financing details, which means they might turn up in the high-yield new-issue market in order to raise the cash, the trader said.

TransDigm in focus

TransDigm’s 6¾% senior secured notes due 2028 dominated activity in the secondary space with the notes continuing to trade with a healthy premium in the heavy volume.

The 6¾% notes traded in a range of par 3/8 to 101 during the session with the notes trading in the par 5/8 to par ¾ context heading into the market close.

There was $60 million in reported volume.

In a heavily oversubscribed offering, TransDigm priced an upsized $1 billion, from $750 million, issue of the 6¾% notes at par on Friday.

The yield printed in the middle of yield talk in the 6¾% area.

The deal was heard to be more than 5x oversubscribed.

Hanesbrands near highs

Hanesbrands’ 9% senior notes due 2031 held the strong premium gained on the break, closing near their highs.

The 9% notes traded as high as 102¼ in intraday activity.

However, they closed the day in the 101 5/8 to 102 context, a source said.

There was $27 million in reported volume.

The notes skyrocketed on the break and closed the previous session wrapped around 102.

Hanesbrands’ 9% notes played to strong demand with the yield attractive for the well-known credit, a source said.

Hanesbrands priced a $600 million issue of the 9% notes at par on Friday in a heavily oversubscribed offering.

The yield printed at the tight end of the 9% to 9¼% yield talk.

However, the notes priced cheap to the index with the company tapping the market in a refinancing deal after releasing weak earnings and a disappointing outlook, sources said.

Wynn shakes weakness

Wynn’s recently priced 7 1/8% senior notes due 2031 shook off the weakness of the previous session and returned to a par handle in active trade.

The 7 1/8% notes rose ¼ point to close Monday in the par to par ¼ context.

There was $18 million in reported volume.

The notes saw a lackluster start in secondary market activity, closing last Friday in the 99 ¾ to par context.

However, the weakness in the notes was attributed to the general heavy market conditions on Friday.

Wynn priced a $600 million issue of the 7 1/8% notes at par on Feb. 9.

American Airlines struggles

While a green day for the broader market, American Airlines’ new 7¼% first-lien senior secured notes due 2028 continued to struggle in active trade.

The 7¼% notes remained on a 99-handle and were changing hands in the 99½ to 99¾ context heading into the market close.

There was $23 million in reported volume.

The notes saw a strong break but gave back all gains and dropped below par amid heavy market conditions on Friday.

American Airlines priced a $750 million issue of the 7¼% notes at par on Feb. 8 with the notes trading as high as 101 out of the gate.

Fund flows

High-yield ETFs sustained $1.38 billion of daily cash outflows on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds were positive on the day, posting $176 million of inflows on Friday, the source said.

The combined funds are tracking $2.34 billion of net outflows on the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index fell 9 points to close Monday at 52.68 with the yield 7.18%.

The index sank a cumulative 116 points on the week last week.

The ICE BofAML US High Yield index inched up 9.3 basis points with the year-to-date return now 3.22%.

The index posted a cumulative decline of 192.4 bps on the week last week.

The CDX High Yield 30 index gained 36 bps to close Monday at 102.61.

The index posted a cumulative decline of 94 bps on the week last week.

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