Enviva prices, Compass Minerals, Telesat, Aveanna price; Centene, VICI continue to gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 22 – The domestic high-yield primary market continued to churn out new issuance on Friday with four deals totaling $2.01 billion clearing the market.

Aveanna Healthcare LLC priced a $560 million issue of seven-year first-lien senior secured notes (B2/B-), Enviva Partners, LP and Enviva Partners Finance Corp. priced an upsized $550 million issue of six-year senior notes (B1/B+/BB-), Compass Minerals International priced a $500 million issue of eight-year senior notes (B1/B+), and Telesat Canada, along with Telesat LLC, priced a downsized $400 million issue of 7.5-year senior secured notes (Ba3/BB-).

Friday’s deals increased the total amount of issuance during the Nov. 18 week to $17.09 billion, further solidifying it as a record-setter for dollar-denominated deals.

Meanwhile, the secondary space closed the week flat with the market experiencing “indigestion” after the record-breaking week, a market source said.

While several of the deals to price in the flurry of primary market activity over the past two weeks fell flat in the secondary space, Thursday’s megadeals were not among them.

Centene Corp.’s newly priced tranches of senior notes (Ba1/BBB-/BB+) continued to gain in high-volume activity.

VICI Properties Inc.’s two tranches of senior notes (B1/BB/BB) also remained well above their issue prices.

Outside of new issues, California Resources Corp.’s bellwether 8% senior notes due 2022 continued their downward spiral with the notes declining 14 points on the week.

Busy end to a big week

On Friday, Aveanna Healthcare priced a $560 million issue of seven-year first-lien senior secured notes at par to yield 9¾%.

The yield printed at the tight end of the 9¾% to 10% yield talk and at the wide end of initial guidance in the mid-to-high 9% area.

There were also document changes.

In a deal heard to be well oversubscribed, Enviva Partners priced an upsized $550 million issue of six-year senior notes at par to yield 6½%.

The issue size increased from $450 million.

The yield printed at the tight end of the 6½% to 6¾% yield talk. Initial guidance was in the mid-to-high 6% area.

The deal was oversubscribed with six to seven accounts said to be in the deal with as much as $225 million of reverse inquiry, according to a trader.

The demand for Enviva’s notes followed it into the secondary space with the notes trading up to 102 5/8 after breaking for trade, a market source said.

Compass Minerals priced a $500 million issue of eight-year senior notes at par to yield 6¾% on Friday.

Pricing, which was on the march since the deal hit the market early in the Nov. 18 week, came 25 basis points wide of the wide end of the 6¼% to 6½% yield talk.

Initial guidance was 6% to 6¼%.

There were also covenant changes.

And Telesat Canada priced a downsized $400 million issue of 7.5-year senior secured notes at par to yield 4 7/8%.

The yield printed in the middle of the 4¾% to 5% yield talk. Initial guidance was in the 5% area.

The week ahead

Look for the holiday-abbreviated pre-Thanksgiving week to be a lot quieter than the past week, sources said.

It will get underway to an empty active forward calendar.

In the wake of the Thanksgiving holiday it will be December, which is unlikely to continue November's torrid pace, simply because the end-of-year holidays virtually closes the high-yield new issue bourse.

There is business in view for the early part of December, an investment banker said on Friday.

However, December could be a relatively quiet month, the source added.

High-yield investors have realized 13%-plus returns on the year and may be keen to finish the year in order to book those phenomenal returns, the banker said.

Centene gains continue

Centene’s newly priced split- rated tranches continued to dominate activity in the secondary space with the notes again making gains.

The 4 5/8% senior notes due 2029 climbed another 1½ points and stood poised to close Friday at 105, sources said.

They were marked at 103¼ bid, 104 offered late Thursday afternoon.

The 4 5/8% notes were the most actively traded in the secondary space with more than $220 million in reported volume.

Centene’s 4¼% senior notes due 2027 were also up more than 1½ points and stood poised to close Friday on a 103 handle.

The tranche saw more than $166 million in reported volume.

Centene’s 4¾% senior notes due 2025 saw light volume during Friday’s session with the notes largely unchanged from Thursday’s level of 103¾ bid, 104¼ offered.

Centene’s tranches were trading extremely well after a strong break, a market source said.

The general consensus is that the health insurer will be upgraded to investment grade.

“If you believe that, then they were priced cheap,” a source said.

Centene priced its $7 billion three-tranche offering on Thursday.

The company priced a $2.5 billion tranche of the 4¼% notes at 99.16 to yield 4 3/8%. Pricing came low to talk for a 4½% to 4 5/8% yield.

A $3.5 billion tranche of the 4¾% notes priced at par. Pricing was also on the shallow end of the 4¾% to 4 7/8% yield talk.

The deal also included a $1 billion add-on to Centene’s 4¾% senior notes due Jan. 15, 2025, which priced at 102.875. Pricing was beyond the rich end of talk for a reoffer price of 102.25 to 102.75.

The deal was heard to be playing to $21 billion in orders with demand for the longer duration notes the heaviest.

VICI at a premium

VICI’s two tranches of senior notes also continued to climb in the secondary, although some sources were apprehensive about the credit.

The 4 5/8% senior notes due 2029 climbed another ½ point and were seen changing hands at 103 1/8 in the late afternoon with more than $43.5 million on the tape.

The 4 5/8% notes were marked at 102¼ bid, 102¾ offered after breaking for trade on Thursday.

The 4¼% senior notes due 2026 also gained about 1/8 point and stood poised to close Friday at 102 1/8, according to a market source.

However, volume was lighter in the tranche with about $16 million in reported volume.

The 4¼% notes were marked at 101½ bid, 102 offered on Thursday.

The large liquid issue was oversubscribed during bookbuilding and was heard to be playing to $3 billion of orders on Wednesday.

However, some sources felt the credit was dubious. The real estate investment trust specializing in casino properties has a lot of subpar assets, a source said.

California Resources new low

California Resources’ 8% senior notes due 2022 again dropped to a new low during Friday’s session.

The 8% notes were down another 4 points to close Friday at 23½.

The Los Angeles-based energy company’s 8% notes have been setting new lows all week and have dropped 14 points since Monday.

News California was placing a moratorium on new oil wells that use fracking techniques sent California Resources’ capital structure spiraling downward.

A pullback in crude oil futures on Friday contributed to the downward pressure on the notes.

After posting two days of gains, the barrel price of WTI crude oil for December delivery settled on Friday at $57.77, a decrease of 55 cents or 0.94%.

Thursday flows

The daily cash flows of the combined high-yield funds were negative on Thursday, the most recent session for which data was available at press time, according to an investor.

The combined funds saw $281 million of net outflows on the day.

High-yield ETFs sustained $331 million of outflows on Thursday.

High-yield asset managers saw $50 million of inflows on the day, the investor added.

News of Thursday's daily flows follows a Thursday afternoon report that the combined high-yield bond funds saw $250 million of net inflows in the week to the Wednesday, Nov. 20 close, according to Lipper US Fund Flows.

Indexes

Indexes closed Friday mixed although all posted losses on the week.

The KDP High Yield Daily index dropped 10 bps to close Friday at 70.62 with the yield now 5.28%.

The index was down 6 bps on Thursday, 10 bps on Wednesday, 14 bps on Tuesday and 7 bps on Monday for a cumulative loss of 47 bps on the week.

The ICE BofAML US High Yield index gained 5.3 bps with the year-to-date return now 11.572%.

The index dipped 4.4 bps on Thursday, was down 12.1 bps on Wednesday, 17.2 bps on Tuesday, and 1 bp on Monday for a cumulative loss of 29.4 bps.

The CDX High Yield 30 index climbed 30 bps to close Friday at 107.10.

The index slid 2 bps on Thursday, dropped 21 bps on Wednesday, 27 bps on Tuesday and 10 bps on Monday for a cumulative loss of 30 bps on the week.

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