Caesars Entertainment, PRA Group, Garda price; Savers Value on deck; Transocean rises

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 23 – For the second consecutive week the high-yield new issue market got off to a healthy start.

The Monday session saw a trio of issuers each bring single tranches of junk-rated, dollar-denominated notes to raise a combined total of $2.8 billion.

All three deals upsized.

All three priced at the tight ends of talk.

All three cleared the market in a.m.-to-p.m. executions. However only one was announced as a drive-by deal. The other two priced Monday afternoon on accelerated timelines.

Caesars Entertainment Inc. priced the session's sole announced drive-by, an upsized $2 billion issue (from $1.25 billion) of seven-year senior secured notes (Ba3/B), which came at par to yield 7%.

It was a blowout, sources said.

At close of books it was playing to $8.4 billion of orders, according to a sellside source who spotted the new Caesars Entertainment 7% secured notes trading late Monday at par ½ bid, par ¾ offered.

Elsewhere Garda World Security Corp. priced an upsized $400 million issue (from $350 million) of five-year senior secured notes (B2/B) at par to yield 7¾%.

And PRA Group, Inc. priced an upsized $400 million issue (from $350 million) of five-year senior notes (Ba2//BB+) at par to yield 8 3/8%.

Timing on both Garda and PRA was accelerated, as both had been expected to remain in the market until Tuesday.

As the dust settled on Monday's action, one dollar-denominated offering remained on the active new-issue calendar.

Savers Value Village, Inc. plans to sell a $500 million offering of Evergreen AcqCo 1 LP/TVI, Inc. senior secured notes due April 2027 (expected ratings B2/B).

The deal, being marketed on a Tuesday through Thursday virtual roadshow, is in the market with initial guidance in the 10% area, and is coming on the back of $400 million of reverse inquiry, a sellside source said.

Beyond the active calendar there are a couple of potential issuer names, source say.

UK-based Harbour Energy plc and NRG Energy are both possible issuers in the run-up to Friday's close, sources say.

Meanwhile, it was a slow day in the secondary space as market players awaited Monday’s drive-by deals to break for trade.

While quiet, the space was firm with several recent deals adding to the strong gains made since pricing.

Transocean Inc.’s most recently priced 8¾% senior secured notes due 2030 (B2/B-) hit new heights on Monday with the notes trading up to a 102-handle.

Nine Energy Service, Inc.’s 13% senior secured notes due 2028 (Caa2/CCC) also continued to climb with the notes currently holding the title of the best performing new deal of 2023.

While active, Norwegian Cruise Line’s 8 3/8% senior secured notes due 2028 (B1/BB-) continued to put in a lackluster aftermarket performance with the notes remaining wrapped around par.

Transocean gains

Transocean’s 8¾% senior notes due 2028 hit new heights on Monday with the notes trading up to a 102-handle.

The 8¾% notes added about ½ point to change hands in the 102 3/8 to 102 5/8 context.

Monday marked the highest level for the notes since the $1.175 billion issue priced at par on Jan. 17.

Nine Energy

Nine Energy’s 13% senior secured notes due 2028 continued to add to the spectacular gains made since breaking for trade with the notes currently holding the title of the best performing new deal of 2023.

The 13% notes added another ½ point with the notes trading in the 103 to 103¼ context during Monday’s session.

The notes have risen more than 8 points since the $300 million offering priced at 95 on Jan. 19.

Sources pointed to the cheapness of the deal, its small size, and the recent demand for CCC credits with a decent profile as factors in the issue’s outperformance.

Flat-lined

While the majority of deals to price in 2023 have seen strong aftermarket performances, Norwegian’s 8 3/8% senior secured notes due 2028 have been a laggard.

The 8 3/8% notes remained active on Monday although with little movement in price.

The notes remained in the 99 7/8 to par 1/8 context throughout the session, a source said.

The notes have been stuck at par since the $600 million issue priced at par on Jan. 19.

While the notes played to strong demand during bookbuilding with the deal upsizing and pricing through talk, the tight pricing left them nowhere to go in the aftermarket, a source said.

Cruise lines will also be closely watched with the sector serving as a de facto recession indicator for the market.

Indexes

The KDP High Yield Daily index added 4 points to close Monday at 53.36 with the yield 6.87%.

The index posted a cumulative loss of 12 points on the week.

The CDX High Yield 30 index gained 44 basis points to close Monday at 102.55.

The index posted a cumulative loss of 89 bps on the week last week.

Fund flows

The dedicated high-yield bond funds saw $213 million of net daily cash outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $149 million of outflows on the day.

Actively managed high-yield funds saw $64 million of outflows on Friday, the source said.

The combined funds are tracking $1.01 billion of net outflows in the week that will conclude with Wednesday's close, according to the market source.

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