Junk: Howard Midstream prices; Trinity at a premium; Univar improves; funds lose $730 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 29 – Howard Midstream Energy Partners, LLC brought an upsized new issue, and FTAI Infrastructure, Inc. priced an add-on in the high-yield primary market on Thursday.

Howard priced $550 million of five-year senior notes (B3/B+) at par to yield 8 7/8%. The deal was upsized from $500 million.

The yield printed in the middle of talk.

The deal played to $400 million of reverse inquiry, a sellside source said.

The San Antonio-based midstream company came to market to address a $600 million draw on its revolver, the sellsider noted.

A portfolio manager who was sizing up the Howard deal on Thursday morning said that one interesting aspect of the company is its joint venture in the 200-mile Nueva Era cross-border pipeline connecting producers in South Texas directly with end-users in Mexico, where, said the investor, there seems to be a perennial shortage of natural gas.

Elsewhere Thursday, in a quickly shopped deal, FTAI Infrastructure priced a $100 million add-on to the FTAI Infra Escrow Holdings, LLC 10½% senior secured notes due June 1, 2027 (B2/B-) at 95.5 resulting in an 11.968% yield to maturity.

In the wake of Thursday’s action the active forward calendar stood empty.

The new issue market could remain dormant until after the July 4 Independence Day holiday, the investor said.

Although not everyone in the market is going to be able to take off July 1 through July 4 inclusive, a lot of people will be working from home on Monday, July 3, the portfolio manager said, adding that the likelihood of dollar-denominated new issue activity on that day is extremely remote.

Expect the new issue market to reactivate after Independence Day, the investor said.

Look for credits from the energy services sector, the source advised.

Mixed day in secondary

Meanwhile, it was a mixed day in the secondary space with the strong move in Treasury yields causing some divergence in the market.

While the CDX index added, the exchange-traded funds were lower as market players grappled with macro data that continued to exceed expectations.

The latest GDP print bested analyst expectations by a large margin.

While recession fears subsided, rate risk continued to drag down risk sentiment with markets grappling with the reality that future rate hikes are in store.

New and recent issues continued to dominate the tape with liquidity expected to thin heading into the July 4 holiday in the United States.

Trinity Industries, Inc.’s 7¾% senior notes due 2028 (Ba2/BB+/BB) were trading with a strong premium to their issue price in active trade.

Windsor Holdings III, LLC’s 8½% senior secured notes due 2030 (B2/B+) backing the buyout of Univar Solutions Inc. continued to improve in active trade with the notes once again approaching par.

Rand Parent, LLC’s 8½% first-lien senior secured notes due 2030 (Ba1/BB/BB+), backing the buyout of Atlas Air, continued their strong uptrend following earnings, although the notes remained one of the worst performing deals of 2023.

High-yield mutual funds and ETFs once again saw outflows with $730 million leaving the space in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

Trinity at a premium

Trinity Industries’ 7¾% senior notes due 2028 were trading at a strong premium to their issue price on Thursday despite a rate move that pressured BB names in particular.

The 7¾% notes were marked at par ¾ bid, 101¼ offered and were trading in a tight range of par 7/8 to 101 heading into the market close, a source said.

There was $41 million in reported volume.

Trinity priced a $400 million issue of the 7¾% notes at par on Wednesday.

The yield printed at the wide end of yield talk in the 7 5/8% area.

Univar improves

Univar’s once struggling 8½% senior secured notes due 2030 continued to improve in active trade on Thursday with the notes again approaching par.

The 8½% notes gained another ¼ point to trade in the 99 5/8 to 99 7/8 context heading into the market close, a source said.

There was $17 million in reported volume.

The notes have gained strength over the past week and returned to a 99-handle during Wednesday’s session.

The notes have had a rough start in the secondary market since pricing at par on June 22.

They opened the week at 98¾ but made strong gains over the past two sessions.

Atlas Air improves

Atlas Air’s 8½% first-lien senior secured notes due 2030 made strong gains after posting earnings with the notes up more than 2 points.

The 8½% notes launched the day up ¼ point at 89 but continued to shoot higher as the session progressed.

The notes closed the day on a 91-handle.

They were changing hands in the 91¼ to 91¾ context with the yield about 10¼%.

“They’re an interesting one to look at,” a source said. “They got beaten up.”

The $850 million issue, which priced at par on Feb. 9 in support of Apollo’s buyout of Atlas Air, have been underwater the entirety of their time in the secondary space.

However, the notes have regained some footing in June after bottoming out at 85 7/8 in late May, a source said.

Indexes

The KDP High Yield Daily index fell 12 points to close Thursday at 50.45 with the yield now 7.4%.

The index added 13 points on Wednesday, 10 points on Tuesday and 6 points on Monday.

The CDX High Yield 30 index gained 20 bps to close Thursday at 102.09.

The index was up 17 bps on Wednesday, 49 bps on Tuesday after falling 29 bps on Monday.

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