BellRing on deck; volatility quiets junk trading; Tegna, Meritor gain on buyouts; Macy’s up

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 22 – Volatility continued to roil risk assets on Tuesday as Western nations respond via sanction to Russian forces entering separatist regions in eastern Ukraine.

While the secondary space remained under pressure, the high-yield new issue market heard its first deal announcement in over a week on Tuesday.

BellRing Distribution, LLC is in the market with an $840 million offering of 10-year senior notes with pricing expected on Thursday.

Despite the weakness in the secondary space, Tuesday was a quiet session with many on the sidelines amid the geopolitical uncertainty.

“Nobody wants to sell,” a source said.

Topical news and merger and acquisition activity were the drivers of trading activity on Tuesday with several issues on the rise despite the weakness in the market.

Tegna Inc.’s capital structure was on the rise on Tuesday with Standard General announcing its acquisition of the company following a years-long pursuit.

Meritor Inc.’s 6¼% senior notes due 2025 were also on the rise following news of its acquisition.

Macy’s, Inc.’s senior notes also saw significant movement to the upside with the capital structure up 2 to 4 points following earnings and a rating upgrade.

BellRing on deck

The high-yield new issue market heard its first deal announcement in over a week, on Tuesday, when BellRing Distribution began a brief roadshow for an $840 million offering of 10-year senior notes.

The deal is in the market with initial guidance in the 7% area, and is expected to price on Thursday.

Tegna’s acquisition

Tegna’s senior notes were making large gains in high-volume activity on Tuesday following news of a buyout by Standard General.

The 4 5/8% senior notes due 2028 were the most actively traded issue during Tuesday’s session.

The notes rose 2¼ points to trade in the par to par 3/8 context, a source said.

They closed Friday at 97¾ bid, 98½ offered.

There was $45 million in reported volume.

Tegna’s 5% senior notes due 2029 also jumped above par. The notes rose 1 3/8 points to par ¼. There was $21 million in reported volume.

While volume was light, Tegna’s 4¾% senior notes due 2026 jumped 1½ points to par ½.

News broke Tuesday that Standard General would acquire Tegna for $24 a share plus the assumption of debt, bringing the enterprise value of the deal to $8.6 billion.

The announcement marks the culmination of Standard General’s multiyear pursuit for the broadcaster with the initial $22 bid in September 2021 increased to $24, Bloomberg reported.

The deal was a credit positive for the broadcaster, a source said.

Meritor’s acquisition

Meritor’s 6¼% senior notes due 2025 were also on the rise in active trading with the auto parts company one of a slew of acquisition announcements made on Tuesday, a source said.

The 6¼% senior notes due 2025 rose about 1 point to a 104-handle.

They were changing hands at 104 3/8 heading into the close, a source said.

There was $17 million in reported volume.

News broke Tuesday that Cummins Inc. would acquire the company for $36.50 in cash for each Meritor share and assume debt for a total enterprise value of $3.7 billion.

Cummins Inc. is an investment-grade company, a source said.

Macy’s gains

Macy’s senior notes were on the rise on Tuesday following better-than-expected earnings and a ratings upgrade.

While volume was light, the 4.3% senior notes due 2043 were the major winners of the session.

The notes jumped 3 5/8 points to close the day at 84, according to a market source.

The 5 1/8% senior notes due 2042 rose 1 7/8 points to close the day at 88 3/8.

The jump came after the department store chain beat expectations with its fourth-quarter earnings report.

Fitch upgraded Macy’s long-term issuer default ratings to BBB- from BB+ citing its improved top line and ability to sustain pre-pandemic EBITDA levels. (See related article in this issue)

$383 million Friday outflows

The dedicated high-yield bond funds sustained $383 million of net outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $270 million of outflows on the day.

Actively managed high-yield funds sustained $113 million of outflows on Friday, the source said.

The combined funds had sustained $17.9 billion of year-to-date net outflows at the end of last week, according to the market source.

Indexes

The KDP High Yield Daily index slid 10 points to close Tuesday at 62.41 with the yield now 5.22%.

The index posted a cumulative loss of 29 points on the week.

The CDX High Yield 30 index fell 24 basis points to close Tuesday at 105.14.

The index posted a cumulative gain of 3 bps on the week last week.

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