Ardagh, Ocwen price; Edgewell lags; Plantronics flat; Cheniere at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 26 – The high-yield primary market saw two deals price on Friday.

Ardagh Metal priced the largest green bond junk deal to ever clear the market – a $2.75 billion four-tranche, dual-currency offering.

Ocwen Financial Corp. also priced a $400 million issue of PHH Mortgage Corp. five-year senior secured notes (B2/B-) at a discount.

Australia-based mining firm Thiess Group Holdings Pty. Ltd. was expected to price its restructured $1.3 billion offering of senior secured bullet notes (Ba1/BBB-/BBB-) on Friday.

However, no terms were available at press time.

Meanwhile, the secondary space remained soft on Friday with focus remaining on Treasuries.

The space saw a minor reprieve with the 10-year Treasury yield falling to 1.423% after breaking 1.6% on Thursday.

However, selling continued in low-coupon and longer-duration bonds.

Lower Treasury yields “relieved a little bit of pressure on rate-sensitive names, but guys are still trying to reduce their interest rate and duration risk,” a source said.

Several recently priced deals were struggling in the aftermarket.

Edgewell Personal Care Co.’s 4% senior notes due 2029 (Ba3/BB) were lagging their issue price.

Plantronics Inc. (Poly)’s 4¾% senior notes due 2029 (B2/B) fell flat in the aftermarket.

However, Cheniere Energy Partners, LP’s 4% senior notes due 2031 (Ba2/BB/BB) bucked the trend with the notes putting in a solid performance in the aftermarket.

Friday’s primary

Ardagh Metal came Friday with the biggest chunk of green bonds ever to clear the junk market, sources say.

The four-part deal – two secured tranches and two unsecured tranches, in dollars and euros – upsized to approximately $2.75 billion equivalent from $2.65 billion equivalent.

The entire upsize came in the unsecured tranches.

The deal was heard to be around two-times oversubscribed at the original $2.65 billion amount, sources say.

Pricing did not move much. The deal was announced late Wednesday. Initial talk came out late Thursday. Official talk – on top of initial talk in all four tranches – came out Friday morning.

All four tranches, respectively, priced in the middle of official talk.

Elsewhere, Ocwen Financial Corp. priced a $400 million issue of PHH Mortgage Corp. 7 7/8% five-year senior secured notes (B2/B-) at 99.486 to yield 8%, in the middle of talk.

Demand for as much as half the deal came from asset-backed accounts, a market source said (see related stories in this issue).

Meanwhile, Australia-based mining firm Thiess was expected to price its restructured $1.3 billion offering of senior secured bullet notes (Ba1/BBB-/BBB-) on Friday.

However, no terms were available at press time.

Earlier in the week the market saw changes in the abandonment of a proposed eight-year secured tranche, and an increase in rate talk – 5½% to 6%, from early guidance in the 5% area, sources say.

There were also covenant changes.

The order book was heard to be around deal size, a trader said late Friday, adding that a Friday night execution was by no means out of the question for Thiess, as dealers would be keen to get the transaction out the door.

Junk sluffs off rate volatility, so far

Volatility in the Treasury bond market continues to generate jitters in equities.

The Dow fell 1.5% on Friday and 1.8% on the week, a trader noted.

High-yield bonds, however, have so far held in amid the volatility, sources say.

The damage in the high-grade bond market is unmistakable, an investor said on Friday.

The year-to-date return of the Merrill Lynch investment grade index, for triple-B rated bonds, is negative-3.3%, according to the source.

“Investment grade bonds are getting kicked in the teeth, but if you look at the high-yield composite index, it has returned 90 basis points, year to date,” the source noted.

And the double-B index, just south of the investment-grade/speculative-grade border, has returned 26 bps, year to date.

“That's a huge spread between double-Bs and triple-Bs,” the investor added.

Apart from the damage in high-grade bonds, sharply rising Treasury rates are not in and of themselves a bad thing, the source asserted.

Rather, they are the sign of a healthy economy, for one thing, the investor said.

March is set to get underway in the new issue market with a modest active calendar.

CPI Card Group is in the market with $310 million of five-year secured notes slated to price early in the week. Initial guidance is in the 9¼% area.

And Vericast Corp. is marketing $2 billion of secured notes in two tranches: $1.3 billion first-lien notes with guidance in the 9% area, and $700 million of second-lien notes with guidance in the 12% area.

Jefferies & Co. has the helm on both of those deals.

Edgewell lags

Edgewell Personal Care’s 4 1/8% senior notes due 2029 were struggling in the aftermarket with the notes lagging their issue price.

There were a “stack of sellers” trying to get out of the notes at issue price, a source said.

However, their clearing price appeared to be 99¾.

The notes were marked at 99 5/8 bid, 99 7/8 offered heading into the market close, a source said.

Edgewell priced a $500 million issue of the 4 1/8% notes on Thursday.

The yield printed in the middle of the 4% to 4¼% yield talk.

Flat

Plantronics’ 4¾% senior notes due 2029 fell flat in active trading.

The 4¾% notes were wrapped around par for the majority of Friday’s session.

The notes were changing hands in the 99 7/8 to par context heading into the market close.

Plantronics priced a $500 million issue of the 4¾% notes at par on Thursday.

The yield printed at the wide end of the 4½% to 4¾% yield talk.

Cheniere gains

While the secondary space remained soft on Friday with several recent deals falling flat, Cheniere Energy’s new 4% senior notes due 2031 bucked the trend.

The notes rose ¼ point on Friday and were marked at par ¾ bid, 101 offered heading into the market close.

The notes were active with a good two-way flow, a source said.

While there were lots of flippers involved in the trading activity, there were strong buyers as well.

Cheniere priced an upsized $1.5 billion, from $1 billion, issue of the 4% notes at par on Thursday.

Pricing came at the wide end of the 3 7/8% to 4% yield talk.

$199 million Thursday outflows

The dedicated high-yield bond funds had $199 million of daily net outflows on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $130 million of outflows on the day.

High-yield ETFs sustained $69 million of outflows on Thursday, the source said.

News of Thursday's daily flows comes on the heels of a Thursday report that the combined funds sustained big outflows of $2.217 billion, according to the Refinitiv Lipper Fund Flow Report Newsline.

It was the fourth $1 billion-plus outflow seen in the first eight weeks of 2021, and the largest weekly outflow since the week to last Oct. 28, the market source said.

The combined high-yield funds have sustained $4.6 billion of net outflows, year-to-date, after seeing inflows of $44.9 billion in 2020, the source added.

Indexes down

The KDP High Yield Daily index dropped 23 points to close Friday at 69.39 with the yield 4.05%.

The index was down 14 points on Thursday, 2 points on Wednesday, 8 points on Tuesday and 2 points on Monday.

The index posted a cumulative loss of 49 points on the week.

The CDX High Yield 30 index gained 4 bps to close Friday at 108.21.

The index dropped 97 bps on Thursday, gained 28 bps on Wednesday and 26 bps on Tuesday after dropping 40 bps on Monday.

The index posted a cumulative loss of 79 bps on the week.

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