Teva, Houghton Mifflin, Sinclair, Kaiser Aluminum, Allegheny price; iHeart, Boyd weaken

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 19 – For the second consecutive day the dollar-denominated primary market topped the $2.5 billion mark, as the high-yield new issue machine continued to crank on Tuesday.

Issuers raised $2.65 billion of proceeds by means of dollar-denominated issuance during the session.

The day's biggest issuer was Teva Pharmaceutical Industries, which priced approximately $2.1 billion equivalent of long five-year senior bullet notes (Ba2/BB) in two upsized tranches.

In drive-by action, Kaiser Aluminum Corp. priced a $500 million issue of senior notes due March 1, 2028 (Ba3/BB+), and Sinclair Television Group, Inc. priced $500 million of 10.25-year senior notes (B1/B).

Allegheny Technologies Inc. accelerated timing on a deal that was initially announced as Wednesday business and priced a $350 million issue of eight-year senior notes (B2/B).

And Houghton Mifflin Harcourt Publishers Inc. priced a downsized $306 million issue of 9% 5.25-year senior secured notes (B3/B/BB-) in a deal initially slated to price last Friday.

Meanwhile, new paper remained the focus of trading activity with recent deals putting in a mixed performance in the secondary space.

Teva’s new dollar-denominated notes dominated activity in the secondary space with the notes trading in a wide range.

iHeartCommunications, Inc.’s new 4¾% senior notes due 2027 (B1/BB-) weakened on Tuesday after a strong start out of the gate.

Boyd Gaming Corp.’s 4¾% senior notes due 2027 (B3/B+) also came in during Tuesday’s session and were largely stuck at their issue price.

However, Mattel, Inc.’s 5 7/8% senior notes due 2027 (B1/BB-) were trading well above their issue price.

Outside of the new paper, California Resources Corp.’s bellwether 8% senior notes due 2022 dropped to their lowest level in recent history after California placed a moratorium on new oil wells that use fracking techniques.

Vigorous issuance continues

The high-yield new issue machine continued to crank on Tuesday with issuers raising $2.65 billion in dollar-denominated issuance.

The day's biggest issuer was Teva Pharmaceutical Industries which priced approximately $2.1 billion equivalent of long five-year senior bullet notes (Ba2/BB) in two upsized tranches.

Teva Pharmaceutical Finance Netherlands III BV priced an upsized $1 billion amount of notes at par to yield 7 1/8%.

The tranche size increased from $750 million.

The yield printed at the end of the 7 1/8% to 7¼% yield talk, which had been revised from revised from earlier talk the 7½% area. Initial talk was in the high 7% area.

The dollar-denominated notes were playing to massive demand, according to an investor, who said that books were heard to contain $5.8 billion of orders, on Tuesday morning.

The 7 1/8% notes dominated activity in the secondary space after breaking for trade with more than $140 million in recorded volume.

The notes were trading in a wide range of 99 7/8 to par 5/8, a market source said.

Meanwhile, Teva Pharmaceutical Finance Netherlands II BV priced an upsized €1 billion issue of notes at par to yield 6%. The tranche size increased from €750 million.

The yield printed at the tight end of the 6% to 6 1/8% yield talk, which had been revised from earlier talk in the 6 3/8% area. Initial talk was in the mid-to-high 6% area.

Elsewhere, in a drive-by, Kaiser Aluminum Corp. priced a $500 million issue of senior notes due March 1, 2028 (Ba3/BB+) at par to yield 4 5/8%.

The yield printed at the tight end of yield talk in the 4¾% area, and inside of initial guidance in the high 4% area to 5%.

Sinclair Television Group also showed up with a quick-to-market issue, pricing $500 million of 10.25-year senior notes (B1/B) at par to yield 5½%.

The yield printed at the wide end of the 5¼% to 5½% yield talk.

And Allegheny Technologies accelerated timing on a deal that was initially announced as Wednesday business.

The Pittsburgh-based specialty metals manufacturer priced a $350 million issue of eight-year senior notes (B2/B) at par to yield 5 7/8%.

The yield printed at the tight end of yield talk in the 6% area and inside of initial guidance in the low 6% area.

In a deal that remained in the market over the past weekend, Houghton Mifflin Harcourt Publishers priced a downsized $306 million issue of 9% 5.25-year senior secured notes (B3/B/BB-) at 98.00 to yield 9½%.

The issue size was decreased from $350 million with the shift of $50 million of proceeds to the concurrent term loan B.

The coupon and price came on top of revised talk. The yield printed in line with revised talk. Earlier talk was 8½% to 8¾%. Initial talk was 8¼% to 8½%.

In the first two sessions of the Nov. 18 week issuers raised $5.25 billion.

With the massive Centene Corp. $7 billion three-part deal in the wings, ostensibly headed for a Thursday execution, the Nov. 18 week could be on a course to be 2019's biggest.

In order to do so the present week would have to top the week beginning Sept. 9, which saw $15.47 billion.

iHeart weakens

iHeartCommunications’ new 4¾% senior notes due 2027 weakened in active trading on Tuesday after a strong start out of the gate.

The 4¾% notes traded in a range of 99 7/8 to par 3/8 during Tuesday’s session. However, the majority of prints were at par.

The notes saw more than $39 million in reported volume.

While the 4¾% notes were softer on Tuesday, they had a strong start out of the gate.

The notes were seen at par ½ bid, 101 offered shortly after breaking for trade on Monday, a market source said.

Like many of the recent deals to hit the secondary space, iHeartCommunications’ new 4¾% notes priced tight, leaving them little room for movement in the secondary, a market source said.

iHeartCommunications priced $500 million of the 4¾% notes at par in a Monday drive-by.

The yield printed at the tight end of yield talk in the 4 7/8% area and inside of early guidance in the 5% area.

While iHeartCommunications’ new 4¾% notes were in focus, the media company’s 5¼% senior notes due 2027 dipped in light volume.

The 5¼% notes were changing hands at 102½ on Tuesday. Prior to iHeartCommunications’ new offering, the notes were on a 103 handle.

Holders of the 5¼% notes may have been selling to make room for the new offering, which had a higher yield, a market source said.

Boyd Gaming flat

Boyd Gaming’s newly priced 4¾% senior notes due 2027 were wrapped around their issue price in the secondary space.

The 4¾% notes were seen at 99 7/8 bid, par 1/8 offered in the mid-afternoon. They stood poised to close the day at par 1/8, sources said.

The bonds saw more than $126 million in reported volume, making the issue one of the most active in the secondary space.

The 4¾% notes were coming in slightly after closing Monday with a premium. The notes traded up after breaking for trade and closed Monday at par 3/8, according to a market source.

Boyd Gaming priced an upsized $1 billion issue of the 4 ¾% notes at par in a Monday drive-by.

The issue size increased from $750 million.

The yield printed at the tight end of the 4¾% to 5% yield talk and inside of initial talk in the 5% area.

Mattel at a premium

Mattel’s new 5 7/8% notes due 2027 were among the outperformers of recent deals with the notes trading almost 1 point above their issue price.

The notes traded as high as par ¾ and stood poised to close Tuesday at par ½, sources said. More than $75 million of the bonds were on the tape during Tuesday’s session.

While the 5 7/8% notes gained steam in active trading, they were seen at 99 bid shortly after breaking for trade on Monday.

Mattel priced a $600 million issue of the 5 7/8% at 99.203 to yield 6% in a Monday drive-by.

The yield printed in the middle of yield talk in the 6% area and tight to initial guidance in the low 6% area.

California Resources sinks

California Resources’ 8% senior notes due 2022 sank to their lowest level in more than two years on Tuesday, a market source said.

A down day for crude oil futures compounded with negative news for the company sent the notes spiraling downward.

The 8% notes were trading “all over the place” and changed hands as high as 36 and as low as 25 during the session, a market source said.

They stood poised to close the day at 28½.

A holder of a large position may have been selling in bits and pieces and meeting the bids of different buyers, a source said.

The bonds saw more than $25 million in reported volume during Tuesday’s session.

Tuesday was a down day for the energy sector in general with concern over an oil glut pressuring crude oil futures.

The barrel price of WTI crude oil for December delivery settled at $55.16, a decrease of $1.89, or 3.31%, on Tuesday.

However, news that California had halted approval of new oil wells that use fracking techniques hit the Los Angeles-based energy company hard. In addition to the 8% notes hitting their lowest level in recent history, California Resources’ stock closed the day down almost 27%.

The moratorium in California was called for after leaks were discovered at a facility operated by Chevron Corp.

In announcing the moratorium, the governor of California spoke of a transition away from fossil fuels to clean energy, which many interpreted as a sign of tougher regulations for energy companies.

Monday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $20 million of inflows on the day.

Actively managed high-yield funds saw $550 million of inflows on Monday, the source said.

With three of the present reporting week's five sessions now in the book, the combined funds are tracking $223 million of net inflows for the week that will conclude with Wednesday's close, according to the source.

Indexes down

Indexes extended their losses on Tuesday after all opened the week on soft footing.

The KDP High Yield Daily index dropped 14 bps to close Tuesday at 70.88 with the yield now 5.22%. The index was down 7 bps on Monday.

The ICE BofAML US High Yield index was down 17.2 bps with the year-to-date return now 11.684%. The index was down 1 bp on Monday.

The CDX High Yield 30 index dropped 27 bps to close Tuesday at 107.03. The index was down 10 bps on Monday.

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