Junk primary market stages $5.38 billion midweek comeback; Endo jumps on opioid settlement

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 21 – A big Wednesday session in the high-yield new issue market saw four issuers price five tranches, raising a combined total $5.38 billion.

Meanwhile, it was another strong day in the secondary space with the market nearly wiping out its losses from Monday’s rout.

The cash bond market was up another ¼ point with the energy sector leading the market higher as crude oil futures surged.

Several energy names were bid up as WTI crude oil futures jumped to settle at $70.32, an increase of $3.12 or 4.64%.

However, Endo Finance LLC’s 6% senior notes due 2028 (Caa2/CCC+) were once again the major gainers in the secondary space following news of a settlement of its opioid litigation in Tennessee.

Meanwhile, as Carnival’s latest offering was in the works, the cruise line operator’s 5¾% senior notes due 2027 were posting gains in active trading.

Big Wednesday

In a Wednesday primary deal that it brought to fund its recently concluded tender, Carnival Corp. priced $2,405,500,000 of seven-year first priority senior secured bullet notes (Ba2/BB-) at par to yield 4%, at the tight end talk.

Elsewhere, McGraw-Hill Education, Inc. priced $1.625 billion of high-yield notes backing Platinum Equity's buyout of the company.

The deal, which engendered investor pushback because of what were described as extremely weak debt incurrence covenants, decreased twice while in the market, while the pricing on both tranches – one secured, the other unsecured – widened substantially.

Builders FirstSource, Inc. also ended up in megadeal territory when it priced an upsized $1 billion issue (from $800 million) of 4¼% 10.5-year senior notes (B1/B+) at par, at the tight end talk (see related stories in this issue).

Endo gains continue

Endo’s 6% senior notes due 2028 remained outperformers in the secondary space with the notes up another 3 points as news broke of the settlement of its opioid litigation in Tennessee.

The 6% notes traded as high as 69 during Wednesday’s session. They were changing hands in the 68½ to 68¾ context heading into the market close.

The notes continued their upward momentum on Wednesday following news that Tennessee had accepted a proposed settlement to the opioid litigation it was facing.

The notes have gained 8 points since Monday on rumors of the proposed settlement.

In addition to Endo’s settlement with Tennessee, the attorneys general of several states announced a $26 billion settlement with four drugmakers and distributors to resolve thousands of lawsuits the companies were facing.

However, Endo was not involved in the settlement and still faces litigation in California and New York, the Wall Street Journal reported.

Carnival active

As Carnival’s latest offering was in the works, the cruise line operator’s 5¾% senior notes due 2027 were posting gains in active trading.

The 5¾% notes rose 1½ points in the high-volume activity.

They jumped to a 102-handle and were changing hands in the 102 5/8 to 102 7/8 context heading into the market close.

The yield on the notes was about 5.2%.

While the notes made large gains on Wednesday, they are still recovering from Monday’s sell-off when the notes sank to par.

Prior to Monday’s rout, the notes were trading on a 103-handle, according to Trace data.

Indexes

The KDP High Yield Daily index gained 16 bps to close Wednesday at 70.03 with the yield now 3.75%.

The index slid 2 points on Tuesday and 33 points on Monday.

The ICE BofAML US High Yield index rose 25.4 basis points with the year-to-date return now 3.834%. The index gained 19.5 basis points on Tuesday after a 51.5 bps drop on Monday.

The CDX High Yield 30 index gained 35 bps to close Wednesday at 109.61.

The index was up 28 bps on Tuesday after sinking 53 bps on Monday.

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