Primary breaks record for new deal volume; Centene, VICI megadeals price, trade up in aftermarket

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 21 – Following the pricing of two megadeals on Thursday, the Nov. 18 week became the biggest week for dollar-denominated issuance year to date with $15.58 billion clearing the primary market.

Centene Corp. priced its $7 billion three-part senior notes offering (Ba1/BBB-/BB+) which played to massive demand, sources said.

VICI Properties Inc. also priced an upsized $2.25 billion amount of senior notes (B1/BB/BB) in two tranches.

While records have already been broken for new deal activity, Friday also promises to be a busy session.

Enviva Partners, LP and Enviva Partners Finance Corp. is slated to price a $450 million offering of six-year senior notes (B1/B+/BB-).

Aveanna Healthcare LLC’s $560 million offering, Telesat Canada’s $500 million offering, and Compass Minerals International $500 million offering may also price on Friday.

Meanwhile, Vici and Centene’s megadeals dominated the secondary space after breaking for trade with all tranches trading at a large premium to their issue price.

Thursday’s deals overshadowed the issues that priced during Wednesday’s session.

Mattamy Group Corp.’s 5¼% senior notes due 2027 (B1/BB) were not active in the secondary space.

Gates Global LLC’s 6¼% senior notes due 2025 (Caa1/B) were lagging their issue price.

Hertz Corp.’s recently priced 6% senior notes due Jan. 15, 2028 (B3/B-) continued to see active trading with the notes up slightly from their lows.

Massive book for Centene

Centene Corp. crossed the finish line Thursday with its huge $7 billion three-part senior notes offering and demand was massive, sources say.

Details are as follows:

• An upsized $1 billion add-on to the Centene Corp. 4¾% senior notes due Jan. 15, 2025 priced at 102.875, 12.5 basis points beyond the rich end of the 102.25 to 102.75 price talk and esd upsized from $750 million;

• A $2.5 billion tranche of eight-year notes priced with a 4¼% coupon at 99.16 to yield 4 3/8%, 12.5 bps beneath the tight end of the 4½% to 4 5/8% yield talk (initial talk was in the 4¾% area, the tranche size range was $2.5 billion to $3 billion);

• A $3.5 billion tranche of 10-year notes priced at par to yield 4 5/8%, 12.5 bps beneath the tight end of the 4¾% to 4 7/8% yield talk (initial talk was in the 5% area, the tranche size range was $3 billion to $3.5 billion).

The deal played to a whopping $21 billion of orders with the heaviest demand coming in the long tranche, according to a trader.

The eight-year paper also played to massive demand, the source said.

VICI Properties upsized

Also in the market with a megadeal on Thursday was VICI Properties, which priced an upsized $2.25 billion amount of senior notes in two tranches.

The deal included $1.25 billion of seven-year notes which priced at par to yield 4¼%.

The yield printed in the middle of yield talk in the 4¼% area, and in line with early guidance in the low-to-mid 4% area.

It also included a $1 billion tranche of 10-year notes which priced at par to yield 4 5/8%, at the tight end of yield talk in the 4¾% area, and early guidance in the high 4% area.

The overall amount of issuance increased from $1.75 billion.

It was heard to be playing to more than $3 billion of orders on Wednesday.

Biggest week of the year

With Thursday's total in the book, the week of Nov. 18 becomes the biggest week for issuance in 2019 to date.

The Nov. 18 week has seen $15.58 billion to Thursday's close, topping the previous record holder, the Sept. 9 week which priced $15.47 billion.

In order to find a bigger week than the present one it is necessary to turn back the pages of the calendar all the way to the early part of 2017.

The week of March 6, 2017 had issuance totaling $17.53 billion.

In the wake of Thursday's $9.26 billion there is a $2 billion active forward calendar, some or all of which could clear ahead of Friday's close.

Hence, there is a good chance that wherever the Nov. 18 week ends up, in terms of total issuance, the record will hold through the end of the year.

That's because there has been a rush, among issuers, to get deals done before Thanksgiving, sources say.

When the Thanksgiving table clears, and the market resumes on Monday, it will already be December, a month which is truncated by the end-of-year holidays.

Moreover, the active part of December, the two weeks to the Dec. 13 close, are not expected to see especially vigorous activity in the new issue market, an investor said.

Active Friday ahead

As to that $2 billion active calendar mentioned above, solid news surfaced on just one of the remaining four deals on Thursday.

Enviva Partners talked their $450 million offering of six-year senior notes to yield 6½% to 6¾%.

Official talk comes in line with initial guidance in the mid-to-high 6% area.

The order books are 1½-times oversubscribed, with six to seven accounts heard to be in the deal with as much as $225 million of reverse inquiry, a trader said, late Thursday afternoon.

Books were scheduled to close Thursday for all accounts except those seeing the company on Thursday. Pricing is set for Friday.

That leaves three sizable offers which have spent all or part of the past week on the high-yield road, coming with timelines that brought those roadshows to a close ahead of the coming weekend.

Aveanna Healthcare is selling $560 million seven-year first-lien senior secured notes (CCC), in the market with initial talk in the mid-to-high 9% area.

Telesat Canada has been conducting a roadshow for $500 million of eight-year senior secured notes (Ba3/BB-) with initial talk in the 5% area.

And Compass Minerals International has been marketing $500 million of eight-year senior notes (B1/B+) with initial guidance of 6% to 6¼%.

Centene in focus

Centene’s newly priced tranches dominated activity in the secondary space with the new paper trading at a large premium to its issue price.

Centene’s 4¼% notes due 2027 were seen at 101½ bid, 102 offered, according to a market source.

Another source pegged the notes at 102 bid, 102¼ offered late Thursday.

The 4 5/8% senior notes due 2029 were seen at 103¼ bid, 104 offered.

Centene’s 4¾% senior notes due 2025 were marked at 103¾ bid, 104¼ offered following its add-on.

VICI trades up

VICI’s newly priced tranches were also putting in a strong performance in the secondary space.

The 4¼% notes due 2026 were marked at 101½ bid, 102 offered, according to a market source.

The 4 5/8% notes due 2029 were seen at 102¼ bid, 102¾ offered.

Mattamy scarce

Mattamy Group’s 5¼% senior notes due 2027 were not active in the secondary space, a market source said.

Holders appeared to be hanging on to their allocations in the heavily oversubscribed offering.

Mattamy priced an upsized $500 million issue of the 5¼% notes at par in a Wednesday drive-by. The issue size increased from $450 million.

The yield printed in the middle of yield talk in the 5¼% area and tight to initial guidance in the low-to-mid 5% area.

The deal was heard to be playing to $1.5 billion of orders.

Proceeds from the new offering will be used to take out the Toronto-based homebuilder’s 6 7/8% notes due 2023.

The company launched a tender offer to purchase the 6 7/8% notes for 103.623 plus interest.

The tender offer sparked activity in the 6 7/8% notes which were trading largely flat at 103¾ over the past two sessions.

Gates Global lags

Gates Global’s 6¼% senior notes due 2025 were lagging their issue price in secondary trading.

The 6¼% notes were seen at 99½ bid, par offered on Thursday, according to a market source.

Gates Global priced a $568 million issue of the 6¼% notes at par in a Thursday drive-by.

The yield printed at the wide end of the 6% to 6¼% yield talk. Initial talk was in the low 6% area.

Hertz active

After sinking more than 2 points during Wednesday’s session, Hertz’s recently priced 6% senior notes due 2028 were up slightly in active trading on Thursday.

While the 6% notes dipped early in the session to 96½, they closed Thursday up ¼ point and were marked at 97½ bid, 98 offered, sources said.

The notes have struggled since pricing.

With some large sellers in the market, buyers were able to capitalize on the weakness and move the notes around, a market source said.

Indexes

Indexes continued to lose ground on Thursday.

The KDP High Yield Daily index dropped 6 bps to close Thursday at 70.72 with the yield now 5.29%.

The index was down 10 bps on Wednesday, 14 bps on Tuesday and 7 bps on Monday.

The ICE BofAML US High Yield index dipped 4.4 bps with the year-to-date return now 11.519%.

The index was down 12.1 bps on Wednesday, 17.2 bps on Tuesday, and 1 bp on Monday.

The CDX High Yield 30 index slid 2 bps to close Thursday at 106.8. The index dropped 21 bps on Wednesday, 27 bps on Tuesday and 10 bps on Monday.

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