Charter leads junk primary; Golden Nugget tranches mixed; Calumet outperforms

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 13 – A busy Thursday session in the high-yield primary market saw four issuers price an overall $2.8 billion amount of issuance in five junk-rated, dollar-denominated tranches.

Three of Thursday's four issuers came at the drive-through window.

The biggest of these was from the Charter Communications, Inc. subsidiaries CCO Holdings LLC and CCO Holdings Capital Corp. which priced an upsized $1.2 billion issue (from $1 billion) of 4¾% 10-year senior notes (B1/BB+/BB+) at par, tight to talk.

The order book was heard to contain $3 billion by midafternoon, according to a trader who added that there was a significant amount of reverse inquiry in the deal.

Initially the bonds were wrapped around the issue price, when they began trading in the secondary market, sources said.

However late in the day one trader was seeing par bids.

Demand allowed the company to drive a hard bargain in pricing the deal, the trader said.

Thus far into 2022 new issue activity is not keeping up with the demand for paper, the source added.

The session's marquee deal priced Thursday at the conclusion of a roadshow.

MI Windows and Doors, LLC priced an upsized $500 million issue (from $400 million) of 5½% eight-year senior notes (B3/B/BB-) at par, 25 basis points through talk (5¾% to 6%) and deep inside of initial guidance in the low 6% area.

It was heavily oversubscribed, playing to $4 billion of orders, according to a trader who added that allocations were tough, and a lot of accounts got zeroed (see related stories in this issue).

Secondary

Meanwhile, volatility continued in the secondary space with the market ending its rally and closing the day down 3/8 point, despite a declining 10-year Treasury yield.

The 10-year Treasury yield broke through the 1.7% threshold and fell as low as 1.694% before climbing and closing the day at 1.703%.

However, selling resumed in risk assets with the tech sector getting smoked, a source said. The Nasdaq Composite closed the day down 2.51%.

The economic data released on Thursday was mixed with jobless claims on the rise and the Price Product Index report, another measure of inflation, coming in below expectations.

However, the PPI report, excluding food and energy which showed signs of price deceleration, reflected an 8.3% year-over-year increase, which was greater than anticipated.

People are nervous about inflation and rate increases, a source said.

The market is now anticipating a rate increase as early as March with four to five increases in the coming year.

The sell-off was also attributed to pre-earnings jitters with big banks kicking off earnings season prior to the market open on Friday.

While the overall market was under pressure on Thursday, trading activity was centered on new deals, which held up well.

While the new issues held up amid the market volatility, they closed near the low of the day.

Meanwhile, high-yield mutual and exchanged traded-funds saw a substantial outflow of $2.236 billion leave the space in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

The outflow is the first of 2022 with funds adding $584 million the previous week.

Calumet outperforms

Calumet Specialty Products Partners, LP and Calumet Finance Corp.’s 8 1/8% senior notes due 2027 (Caa1/B-) outperformed on Thursday with the notes trading at a strong premium to their issue price, despite the heaviness in the market.

The 8 1/8% senior notes traded as high as 102¼ during Thursday’s session, a source said.

However, they came in to close the day in the 101 5/8 to 102 context.

There was $62 million in reported volume.

While the company is from a lower credit tier, it is from the energy sector, which has been hot in recent months, a source said.

The deal also offered a hefty coupon and the heavily oversubscribed offering was small with the strong demand helping drive its secondary performance.

Calumet priced an upsized $325 million, from $300 million, issue of the 8 1/8% notes at par on Wednesday.

The yield printed tighter than talk for a yield of 8¼% to 8½%.

The offering was heard to have played to $1.25 billion in demand.

Golden Nugget mixed

Fertitta Entertainment, LLC’s new tranches were mixed in high-volume activity with the unsecured notes outperforming their secured counterpart.

The entertainment and hospitality company’s 4 5/8% senior secured notes due 2029 (B2/B+) traded as high as par 5/8 during Thursday’s session, a source said.

However, they succumbed to selling pressure into the close and ended the day trading in the 99 7/8 to par context.

There was $100 million in reported volume.

Fertitta’s 6¾% senior notes due 2030 (Caa2/CCC+) traded as high as 101.

However, they also lost steam as the session progressed and were changing hands in the par 1/8 to par 5/8 context heading into the close, a source said.

Fertitta priced a downsized $1 billion, from $1.85 billion, tranche of the 4 5/8% notes and a downsized $1.25 billion, from $1.85 billion, tranche of the 6¾% notes at par on Wednesday.

The 4 5/8% notes priced in the middle of the 4½% to 4¾% yield talk, which widened from initial talk for a yield in the 4½% area.

The 6¾% notes priced at the wide end of the 6½% to 6¾% yield talk, which widened from early guidance in the 6¼% area.

Proceeds from the junk bonds were shifted to the concurrent term loan which upsized to $3.3 billion from $1.85 billion.

Indexes

The KDP High Yield Daily index gained 2 points to close the day at 65.31 although the yield remained flush at 4.14%.

The index gained 11 points on Wednesday and 6 points on Tuesday after falling 20 points on Monday.

The CDX High Yield 30 index fell 36 basis points to close Thursday at 108.38.

The index gained 4 bps on Wednesday, 31 bps on Tuesday and 4 bps on Monday.

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