Junk market raises $1.58 billion; SoftBank megadeal eyed; Starwood at a premium; Exela jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 30 – Amid moderate to heavy news flow in the high-yield primary market three issuers priced single-tranche dollar-denominated deals, raising an overall total of $1.58 billion, with all three issuers coming at the conclusions of brief roadshows.

Meanwhile, the secondary space remained unchanged and closed the second quarter with credit spreads near all-time tights.

New paper remained in focus in the secondary space although topical news pushed some outstanding issues into the forefront.

Everi Holdings Inc. saw a strong break and jumped to a 102-handle while Elastic NV was changing hands with a nominal premium to its issue price.

Starwood Property Trust, Inc.’s 3 5/8% senior green notes due 2026 (Ba3/B+/BB+) continued to trade with a large premium to their issue price.

However, Exela Technologies Inc.’s 10% first-lien senior notes due 2023 were the major gainers in the secondary space with the notes jumping more than 20 points on the heels of a secondary offering.

Primary

Two of Wednesday's trio of issuers upsized their deals.

Executions were razor-sharp, with two of the three deals pricing through talk, while the other priced at the tight end of talk.

Also on Wednesday, SoftBank Group Corp. provided details on its approximately $6.75 billion equivalent megadeal which features senior notes (BB+) in four dollar-denominated tranches and four euro-denominated tranches.

When word of the SoftBank deal circulated early in the week timing had it remaining in the market into the July 5 week.

However SoftBank's deal is unlikely to be around anywhere near that long, sources said on Wednesday.

Word in the market on Wednesday afternoon had the deal already playing to around $16 billion of demand across all eight tranches, a trader said.

The break

New issues continued to be the focus of trading activity on Wednesday with the deals to clear the primary market on Wednesday putting in mixed performances in the aftermarket.

Both Everi’s 5% senior notes due 2029 and Elastic’s 4 1/8% senior notes due 2029 were trading at a premium to their issue prices.

However, new paper from Everi jumped to a 102-handle, while Elastic hovered around par.

Everi’s 5% notes stood poised to close the day at 102½, according to a market source.

Elastic’s 4 1/8% senior notes were set to close at par ¼.

Starwood at a premium

Starwood Property’s 3 5/8% senior green notes due 2026 continued to trade with a large premium on Wednesday.

The notes remained in the par ¾ bid, 101 context – a level reached shortly after breaking for trade, sources said.

They stood poised to close the day at par 7/8 with more than $33 million of the bonds on the tape.

Starwood priced a $400 million issue of the 3 5/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 3¾% area.

Exela soars

Exela’s 10% first-lien senior notes due 2023 shot back into focus on Wednesday with the notes jumping more than 20 points in heavy volume, making them the largest gainers in the secondary space.

The 10% notes closed the day at 63¾, according to a market source.

There was more than $61 million in reported volume.

The notes had been trading in the 30s for much of June.

However, the notes skyrocketed after the company announced that it had completed its $100 million at-the-market equity program launched in late May and started an additional $150 million at-the-market equity program.

$597 million Tuesday inflows

The dedicated high-yield bond funds saw a chunky $597 million of net inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs took in the lion's share, by far, seeing $552 million of inflows on the day.

Actively managed high-yield funds saw $45 million of inflows on Tuesday, the source said.

The combined funds are tracking $1.87 billion of inflows for the week to Wednesday's close, which would be the largest weekly inflow since early April, according to the market source.

Indexes

Indexes were again mixed on Wednesday with some flat with others posting nominal gains.

The KDP High Yield Daily index rose 4 points to close the day at 70.15 with the yield now 3.71%.

The index was up 5 points on Tuesday and 4 points on Monday.

The CDX High Yield 30 index was flat at 110.2.

The index shaved off 3 basis points on Tuesday and 17 bps on Monday.

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