Clear Channel prices; Mattel drops post cancellation; NCR gains continue; Exela tanks

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 9 – The domestic and European primary markets each saw one deal price during Friday’s session although both deals were downsized.

Clear Channel Outdoor Holdings, Inc. priced a downsized $1.25 billion issue of eight-year senior secured notes at par to yield 5 1/8%.

In Europe, Swissport Group Sarl priced a downsized €660 million of high yield notes in two tranches.

Meanwhile, the secondary space closed out the week on soft footing although volume was light.

Clear Channel’s 5 1/8% notes dominated activity with the notes trading at a slight premium to their issue price.

There were better buyers for some of the recent issues to hit the secondary space, a market source said.

NCR Corp.’s two-tranche senior note offering continued to gain on Friday.

Albertsons’ recently priced 5 7/8% senior notes due 2028 staged an impressive rebound with the notes now well above their issue price after trading below it earlier in the week.

Mattel, Inc.’s 6¾% senior notes due 2025 were in focus and trading down on news the toy company was canceling its recently priced 6% senior notes due 2027 due to an anonymous whistleblower letter.

Exela Technologies Inc.’s 10% senior notes due 2023 tanked in active trading after reporting disappointing numbers for its second-quarter earnings report.

Two downsized deals

Both of Friday's junk bond trades came in downsized transactions which saw borrowers shifting proceeds to concurrent term loans.

Clear Channel Outdoor Holdings priced a downsized $1.25 billion issue of eight-year senior secured notes (B1/B+) at par to yield 5 1/8%.

The issue was downsized to $1.25 billion from $1.26 billion as the San Antonio-based outdoor advertising company cut the discount on its concurrent $2 billion term loan by 50 basis points, thereby generating additional proceeds from the loan.

The yield printed at the tight end of the revised 5 1/8% to 5¼% yield talk.

That talk had tightened from earlier official talk of 5¼% to 5½%. Early guidance was in the mid-5% area.

In Europe, Swissport Group priced a downsized €660 million amount of high-yield notes in two tranches.

The deal included a downsized €410 million tranche of five-year senior secured notes (Caa2/CCC) which priced at par to yield 5¼%.

The tranche size decreased from €500 million. The yield printed at the tight end of the 5¼% to 5½% yield talk.

Swissport also priced a downsized €250 million tranche of 5.5-year senior unsecured notes (Caa2/CCC) at par to yield 9%.

The tranche size decreased from €280 million. The yield printed in the middle of yield talk in the 9% area.

The combined notes offer was downsized from €780 million with €120 million shifted to the concurrent term loan, increasing its size to €850 million from €730 million.

In both cases, demand across the entire structure, bonds and loans, was healthy, according to an asset manager who is active in euro-denominated and dollar-denominated bonds and loans.

Swissport bonds and loan paper, in particular, were well spoken-for before the deal was ever announced, the manager said.

Cost of capital is one reason for moving proceeds to floating-rate tranches from fixed-rate tranches, particularly if you have a view that benchmark rates are headed lower, a debt capital markets banker said on Friday.

The week ahead

Clear Channel Outdoor and Swissport cleared the active calendar.

There will be business in the week ahead, sources said on Friday, although no one proffered any issuer names or market segments.

Beyond the Aug. 12 week, however, the junk market is apt to become generally quiet during the run-up to the extended Labor Day holiday weekend, set to get underway following the Friday, Aug. 30 close, the asset manager said.

Post-Labor Day, the junk market could become a busy place, the debt capital markets banker said, but added that a healthy primary market will hinge on an abatement of trade war brinksmanship of the kind that has taken place during the past week between China and the United States.

Clear Channel dominates

Clear Channel’s 5 1/8% senior notes due 2027 dominated activity in the secondary space after breaking for trade.

The notes traded up to par 5/8 bid, par 7/8 offered but came in to close the day at par 3/8, sources said.

There was more than $103 million in reported volume during Friday’s session.

NCR gains

NCR’s two tranches of senior notes (B2/BB) continued their upward momentum on Friday.

The 5¾% senior notes due 2027 were up another ¼ point to close the day at 102, according to a market source.

The 6 1/8% senior notes due 2029 gained another ½ point to close the day at 102½.

Both tranches have jumped since breaking for trade.

The notes closed out Thursday’s session at 101¾. NCR priced both tranches at par late Wednesday.

Albertsons rebounds

After dipping below par at the start of the week, Albertsons’ recently priced 5 7/8% senior notes due 2028 (B3/BB-) saw an impressive rebound in the secondary space.

The 5 7/8% notes closed Monday below par. However, they slowly traded up throughout the week and closed Friday at 102.

The notes were lifted with better buyers in the space, a source said.

Albertsons priced a $750 million issue of the 5 7/8% notes at par on Aug. 1.

While the notes were initially trading at a premium to their issue price, they were trading below par last Friday and Monday amid general weakness in the market.

Mattel in focus

Mattel’s 6¾% senior notes due 2025 were in focus on Friday after the surprise announcement the toy manufacturing company was canceling its recently priced 6% senior notes due 2027.

The 6¾% notes dropped 3 5/8 points to close Friday at 101¼, according to a market source.

The notes were in focus on an otherwise light-volume day with $52 million in reported volume during Friday’s session.

Mattel announced late Thursday that it was canceling its recently priced 6% senior notes due 2027.

The notes were scheduled to settle on Thursday, the day of their cancellation.

Mattel priced a $250 million issue of the 6% notes at par on Aug. 1.

While the small issue saw limited trading activity after its initial break, the notes traded as high as par ¾ last Friday.

Those trades will now have to be unwound due to the cancellation.

Exela tanks

Exela Technologies’ 10% senior notes due 2023 tanked in active trading on Friday after reporting second-quarter earnings.

The 10% senior notes dropped 11½ points to close the day at 57½, according to a market source.

More than $50 million of the bonds were on the tape during Friday’s session.

Exela reported a net loss of $34.1 million and adjusted EBITDA of $69.4 million for the second quarter.

Losses for the global business process automation company increased year over year while EBITDA declined.

Mixed Thursday flows

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

High-yield ETFs saw $295 million of inflows on the day.

However, actively managed high-yield funds, the asset managers, sustained $205 million of outflows on Thursday, the source said.

News of Thursday's daily flows trails a Thursday afternoon report that the combined funds saw a whopping $4.07 billion of outflows in the week to the Wednesday, Aug. 7 close, according to Lipper US Fund Flows.

That's the biggest weekly outflow since October 2018, and the eighth largest outflow on record, the market source said.

However, an official from a high-yield syndicate insisted that the weekly fund flow number is a backward-looking metric and added that the junk bond market is not in as dire a condition as such an eye-popping number might portend.

The official pointed to Friday's three junk bond tranches, where one tranche priced in the middle of price talk, one at the tight end of talk, and one at the tight end of downwardly revised price talk, and asserted that they were solid executions which certainly didn't signal widespread investor apprehensions.

In addition to Friday's deals, the $1 billion two-part NCR Corp. deal that priced on Wednesday was a good execution that bore no traces of a market gripped by fear, the official said.

The primary market is open, the official maintained.

Investors have cash to put to work and deals are getting done.

Indexes mixed

Indexes closed Friday mixed although all saw cumulative losses on the week.

The KDP High Yield Daily index rose 11 bps to close Friday at 70.89 with the yield now 5.71%.

The index was up 11 bps on Thursday after dropping 22 bps on Wednesday, 14 bps on Tuesday and 51 bps on Monday.

The index was down 65 bps on the week.

The ICE BofAML US High Yield index was down slightly on Friday although it was still brushing up against 10% returns, which it slid below on Monday.

The index slid 3.4 bps with the year-to-date return now 9.931%.

The index gained 52.3 bps on Thursday, dropped 28.9 bps on Wednesday, gained 20.9 bps on Tuesday, and dropped 77.9 bps on Monday.

The index dropped 37 bps on the week.

The CDX High Yield 30 index dropped 31 bps to close Friday at 106.1. The index gained 31 bps on Thursday, shaved off 10 bps on Wednesday, gained 37 bps on Tuesday and sank 93 bps on Monday.

The index saw a cumulative loss of 66 bps on the week.

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