Truck Hero, Drawbridge price; Watco adds; Targa, Hilton, Indigo flat; MEG, CHS, Uniti soar

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Jan. 20 – Following a torrid Tuesday session which put up the biggest daily issuance total in well over a year, the pace of the primary slowed somewhat on Wednesday.

Three issuers priced deals.

Meanwhile, it was another strong day in the secondary space following the successful inauguration of President Joseph Biden.

New paper dominated the tape following the torrent of drive-by deals from Tuesday’s session.

However, the new paper followed different trajectories.

Targa Resources Partners LP and Targa Resources Partners Finance Corp.’s 4% senior notes due 2032 (Ba3/BB), Indigo Natural Resources LLC’s 5 3/8% senior notes due 2029 (B3/BB-), and Hilton Domestic Operating Co. Inc.’s 3 5/8% senior notes due 2032 (Ba2/BB) fell flat in high-volume activity.

Howard Hughes Corp.’s two tranches of senior notes (Ba3/BB-/BB) were trading with a slight premium.

“No runaways there,” a source said.

However, MEG Energy Corp.’s 5 7/8% senior notes due 2029 (B3/B-) and Uniti Group LP’s 6½% senior notes due 2029 (Caa2/CCC) rose to a 101-handle.

And CHS/Community Health Systems Inc.’s 6 7/8% junior-priority secured notes due 2029 (Caa3/CCC-/CC) outperformed with the notes broaching 103 in active trading.

Riskier Wednesday

Demand for new high-yield paper remains intense, even for the riskier deals, sources said on Wednesday.

Witness Truck Hero Inc.'s upsized $600 million issue (from $550 million) of 6¼% senior notes due February 2029 (Caa2/CCC) which priced at par on Wednesday.

Not only did the deal come at the tight end of talk, investors vigorously chased it in to the secondary market where the par-pricing deal was 102¼ bid, 102¾ offered at the close, a trader said.

Or take the new CHS/Community Health Systems Inc. 6 7/8% junior-priority secured notes due April 2029 (Caa3/CCC-/CC) which priced Tuesday at par in a massively upsized $1.775 billion issue (from $750 million).

Those notes were 102½ bid, 103 offered on Wednesday, the trader said.

Wednesday also featured the unveiling of one of the high-yield market's most aggressive structures, a PIK toggle holdco deal backing a dividend.

US LBM plans to sell $400 million of BCPE Ulysses Intermediate, Inc. six-year HoldCo PIK toggle notes on Thursday.

It takes a position on an active forward calendar that is substantial, featuring $2.68 billion of dollar-denominated business expected to clear ahead of Friday's close.

Most conspicuous among them is the Ineos Quattro downsized €1.7 billion equivalent (from €2 billion equivalent) three-part deal.

Its sole dollar-denominated portion is a $500 million tranche of Ineos Quattro Finance 2 plc five-year first lien senior secured notes (BB/BB+) talked to yield in the 3½% area.

Late Wednesday, when books closed, it was heard to be playing to $4 billion of orders, a trader said.

Flat

Several of the deal to price during Tuesday’s session fell flat in the aftermarket, which sources attributed to their tight pricing and the issuers’ sectors.

Targa Resources’ 4% senior notes due 2032 were wrapped around par in high-volume activity, a source said.

There was more than $141 million in reported volume.

The midstream energy company priced an upsized $1 billion, from $750 million, issue of the 4% notes at par.

Pricing came at the tight end of the 4% to 4¼% yield talk.

Indigo Natural Resources’ 5 3/8% senior notes due 2029 were also wrapped around par with $32 million in reported volume on Wednesday.

The notes have been stuck at par since breaking for trade on Tuesday, a source said.

The natural gas company priced a $700 million issue of the 5 3/8% notes at par.

Pricing came at the tight end of yield talk in the 5½% area.

Hilton’s 3 5/8% senior notes due 2032 were also wrapped around par with more than $100 million in reported volume.

The hospitality company priced a $1.5 billion issue of the 3 5/8% notes at par on Tuesday.

Pricing came at the tight end of yield talk in the 3¾% area.

A slight premium

Howard Hughes’ 4 1/8% senior notes due 2029 and 4 3/8% senior notes due 2031 were trading with a slight premium during Wednesday’s session.

Both tranches were wrapped around par ¼ heading into Wednesday’s close.

Both tranches saw more than $80 million in reported volume during the session.

The real estate development and management company priced a $650 million tranche of the 4 1/8% notes and a $650 million tranche of the 4 3/8% notes at par on Tuesday.

The 4 1/8% notes priced at the tight end of yield talk in the 4¼% area.

The 4 3/8% tranche priced at the tight end of yield talk in the 4½% area.

101-handle

While several deals from the energy sector fell flat in the aftermarket, MEG Energy’s 5 7/8% senior notes due 2029 were not among them.

The 5 7/8% notes rose to a 101-handle, according to a market source.

They were changing hands at 101 3/8 shortly before Wednesday’s close with more than $37 million on the tape.

With proceeds being used to take out the company’s 7% notes due 2024, holders of the old notes most likely switched in to the new, resulting in increased demand for the offering, a source said.

MEG priced a $600 million issue of the 5 7/8% notes at par.

Pricing came at the tight end of yield talk in the 6% area.

Uniti Group’s 6½% senior notes due 2029 were also putting in a strong performance in the secondary space.

The notes were changing hands in the 101 to 101¼ context moving into the market close.

There was more than $80 million of the bonds on the tape during Wednesday’s session.

Uniti priced an upsized $1.11 billion, from $750 million, issue of the 6½% notes at par on Tuesday.

Pricing came at the tight end of yield talk in the 6 5/8% area.

Outperformer

CHS’s 6 7/8% senior notes due 2029 were the outperformer of the deals to price on Tuesday.

The 6 7/8% senior notes were broaching 103 in high-volume activity and stood poised to close the day at 102 7/8, according to a market source.

There was more than $80 million on the tape.

CHS priced an upsized $1.775 billion, from $750 million, issue of the 6 7/8% notes at par on Tuesday.

Pricing came at the tight end of yield talk in the 7% area.

$818 Tuesday outflows

The dedicated high-yield bond funds sustained $818 million of net daily outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $878 million of outflows on the day.

Actively managed high-yield funds, meanwhile, saw positive flows of $60 million on Tuesday, the source said.

Indexes gain

Indexes continued to rocket higher on Wednesday.

The KDP High Yield Daily index rose 10 points to close Wednesday at 69.30 with the yield now 4.17%.

The index gained 4 points on Tuesday.

The ICE BofAML US High Yield index gained 16.3 bps with the year-to-date return now 0.651%.

The index was up 12.1 bps on Tuesday.

The CDX High Yield 30 index was up 4 bps to close Wednesday at 109.05.

The index was up 27 bps on Tuesday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.