Primary prices over $5 billion in one session; secondary firm; solid recent issues

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Dec. 15 – The high-yield bond primary market was on fire on Tuesday with eight junk issuers placing nine tranches.

This is the second consecutive Tuesday with over $5 billion of issuance in one session.

Meanwhile, the high-yield secondary space was firm on Tuesday.

New paper remained in focus with the majority of deals to hit the secondary space trading with solid premiums.

While the notes did not reach the same heights as some of last week’s deals, new paper from EnLink Midstream, LLC, ATS Automation Tooling Systems Inc., GFL Environmental, Inc., and Ascent Resources Utica Holdings LLC/ARU Finance Corp. were trading with decent premiums in the aftermarket.

$5 billion plus day

Eight junk issuers placed a whopping $5.16 billion face amount of notes in a total of nine tranches during a torrid Tuesday session in the primary market.

Three of those issuers upsized their deals. One downsized.

Executions appeared razor-sharp. Two tranches priced through talk. Five priced at the tight ends. And two priced at the rich ends.

Tuesday's bigger deals included E.W. Scripps Co.’s downsized $550 million tranche (from $700 million) of 3 7/8% senior secured notes due Jan. 15, 2029 (Ba3/BB-/BB) and its $500 million tranche of 5 3/8% senior unsecured notes due Jan. 15, 2031 (Caa1/CCC+/B-).

Both priced at par, at the tight ends of talk.

Books for both tranches were heard to be north of $2 billion, a trader said.

Also NCL Corp. Ltd. priced an upsized $850 million issue (from $500 million) of 5 7/8% 5.25-year senior bullet notes (B).

The yield printed 12.5 basis points through talk.

Not long after the deal was announced Tuesday morning demand was heard to be in excess of $4 billion.

As happened on Monday, a pair of issuers announced deals expected to be in the market until Wednesday, only to close the books early, and price them as accelerated Tuesday drive-bys.

They were Tallgrass Energy Partners which priced an upsized $750 million issue (from $500 million) of 6% 10-year senior notes (B1/BB-/BB-) at par, at the tight end of talk, and Affinity Gaming which priced a $475 million issue of 6 7/8% seven-year senior secured notes (B3/B-) at par, 12.5 basis points through talk.

How much deeper into the waning year of 2020 can the red-hot primary market possibly continue to run? – Prospect News demanded of sources who picked up the telephone on Tuesday.

Most clung to forecasts they issued on Monday, or late last week: The whole thing will likely wind down after Thursday, they say.

However, one, a trader, was by no means willing to bet the farm on that forecast.

High-yield energy issuers, in particular, might come as late in the year as they can if they think there is an audience, the trader said.

ATS gains continue

ATS Automation Tooling Systems’ newly priced 4 1/8% notes due 2028 (B2/B+) continued to gain momentum on Tuesday after a strong break.

The notes traded as high as 102 and were changing hands in the 101 5/8 to 101 7/8 context heading into the market close, according to a market source.

While the issue was small, the notes were active with $46 million in reported volume.

The notes saw a strong break, trading up to 101 bid shortly after pricing.

The deal was interesting with the small Canadian-based industrial automation business well-run, a source said.

ATS priced an upsized $350 million, from $300 million, issue of the 4 1/8% notes at par in a Monday drive-by, according to market sources.

Pricing came at the tight end of yield talk in the 4¼% area and tighter than initial guidance in the mid-to-high 4% area.

EnLink trades up

EnLink Midstream’s 5 5/8% senior notes due 2028 (Ba2/BB+/BB+) were gaining momentum in active trading on Tuesday.

The notes were changing hands in a range of par ¾ to 101¼ heading into the market close, a source said.

There was more than $48 million in reported volume heading into the close.

The notes closed the previous session at par 5/8.

EnLink priced a $500 million issue of the 5 5/8% notes at par on Monday.

Pricing came tighter than the 5¾% to 6% yield talk. Initial guidance was in the low 6% area.

GFL active

GFL Environmental’s 3½% senior secured notes due 2028 (Ba3/BB-) were also trading with a decent premium in the secondary space.

The notes were changing hands in a range of par ¼ to 101 throughout Tuesday’s session with the notes gaining momentum into the close.

The notes were changing hands in the par 5/8 to 101 context heading into the close.

“That’s just ridiculous,” a source said, of the trading level.

However, the waste management company’s 3¾% senior secured notes due 2025 were trading with a 3 1/8% yield, an indication of how tight the market has become.

GFL’s new 3½% notes were active with $72 million in reported volume heading into the close.

GFL priced a downsized $750 million, from $1 billion, issue of the 3½% notes at par on Monday.

Pricing came at the wide end of the 3¼% to 3½% yield talk but at the tight end of the 3½% to 3¾% early guidance.

Ascent at a premium

Ascent Resources’ 8¼% senior notes due 2028 were coming in from their highs following a strong break. However, they maintained a large premium in active trading.

Ascent’s 8¼% notes were trading in the par ¾ to 101 context heading into the market close, according to a market source.

While the issue was small, the notes were active with $53 million on the tape.

The notes closed the previous session at 101¼.

Ascent priced a $300 million issue of eight-year senior notes (Caa1/B-/B) at par to yield 8¼% on Monday.

Pricing came tighter than yield talk in the 8½% area. Initial talk was in the high 8% to 9% area.

$710 million Monday outflows

High-yield ETFs sustained $710 million of outflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $30 million of inflows on the day, the source said.

The combined funds are tracking $1.24 billion out net outflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes gain

Indexes continued to post nominal gains on Tuesday.

The ICE BofAML US High Yield index was up 4.5 bps with the year-to-date return now 5.345%.

The index gained 13.4 bps on Monday.

The CDX High Yield 30 index rose 31 bps to close Tuesday at 109.16.

The index was up 1 bp on Monday.

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