Frontier notes price to big demand, pique secondary interest; high-yield space steadies

By Paul A. Harris and Cristal Cody

Tupelo, Miss., Oct. 5 –With the stock indexes posting solid Wednesday gains – the S&P 500 index advanced 1.05% on the day – signals flashed green in the high-yield new issue market.

Five issuers priced single tranches, raising a combined total of $3.1 billion in a session replete with accelerated timings, and one upsize.

And all five of Tuesday's issuers priced their deals at the tight ends of price talk.

Frontier Communications Holdings, LLC and Frontier Communications Parent, Inc. priced the session's biggest deal, a $1 billion issue of 6% 8.25-year senior notes (Caa2/CCC+) that came at par.

Heard to have played to at least $2.5 billion of demand, the notes were “hanging on to par for dear life” late Tuesday afternoon, according to a bond trader who had them at par bid, par 1/8 offered.

In terms of demand, it followed the notes into the aftermarket.

“There’s a lot of trades today,” another source said. The notes, according to the second source “were hovering between par 5/8 and a low of 99 7/8.”

The notes were quoted closing the day at 99 7/8 bid, a market source said.

Tuesday primary

Also in the Tuesday market, Thor Industries, Inc. upsized its issue of 4% eight-year senior notes (B1/BB-) to $500 million from $400 million.

And Bonanza Creek Energy, Inc./Civitas Resources, Inc. ($400 million 5% five-year senior notes) and Gannett Holdings LLC ($400 million 6% five-year first-lien senior secured notes) both moved up timing, pricing deals that had been expected to remain in the market until the middle of the week (see related stories in this issue).

Meanwhile, new 4½% senior notes due 2030 (B1/BB-/BB) from Sunoco were priced late in the day and not immediately seen in the secondary market by the close.

“It just priced so there’s no secondary reaction to the deal yet but it priced at the tight end of price talk,” a source said.

Broader market tone

Oil rallied a second day on OPEC production increases in November.

“The High Yield CDX was off an eighth, the two biggest ETFs were flat to down by 1% or so, so not bad,” one source said.

Overall market tone was mixed Tuesday but improved from Monday’s pressure.

“It was steady as she goes,” another source said. “Equities were bouncing around, but rates were still around 150 [basis points] on the 10-year, so everyone is focused on rates and the impact to the high-yield market. There was nothing terribly concerning or giving any cause of concern so it was a nice status quo steady day.”

Monday fund flows

The dedicated high-yield bond funds sustained $193 million of net daily outflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $213 million of outflows on the day.

Actively managed high-yield funds were cash-positive on Monday, posting $20 million of inflows on the day, the source said.

The combined funds are tracking $59 million of net inflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes soft

The iShares iBoxx High Yield Corporate Bond ETF ended 4 cents lower at $87.06 after declining 31 cents on Monday.

The KDP High Yield Daily index was 69.88 with a yield of 3.76% on Tuesday versus 69.90 with a yield of 3.73% on Monday.

The CDX High Yield 30 index dropped to 109.04 from 109.12 on Monday.

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