Junk: Talen prices; Benteler holds gains; Cleveland-Cliffs active; Six Flags falls further

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 28 – The domestic high-yield primary market cleared one deal on Friday with one more remaining in the market with pricing expected towards the latter end of next week.

Talen Energy Supply, LLC priced an upsized $1.2 billion issue of seven-year senior secured notes (Ba3/BB/BB+) after the deal underwent covenant changes with the notes breaking strong in the aftermarket.

Heartland Dental, LLC remains in the market with a $500 million offering of five-year senior secured notes (B2/B) with pricing expected in the mid-to-late week ahead.

Meanwhile, it was another strong day in the secondary space with the cash bond market adding another ¼ point as a risk-on sentiment returned amid continued strength in equities, a source said.

“There are a decent amount of buyers today,” the source said.

New and recent issues remained in focus with a mixed performance in the aftermarket.

Benteler International AG’s new 10½% senior secured notes due 2028 (Ba3/BB-) held on to the strong gains made after rocketing on the break.

However, Six Flags Entertainment Corp.’s new 7¼% senior notes due 2031 (B3/B) continued to succumb to selling pressure with the notes falling further below their discounted issue price.

Cleveland-Cliffs Inc.’s recently priced 6¾% senior guaranteed notes due 2030 (Ba3/BB-/BB-) continued to see active trade on Friday although the notes remained on a 97-handle.

Talen prices

Talen Energy priced Friday’s sole, public dollar-denominated deal, an upsized $1.2 billion issue (from $825 million) of seven-year senior secured notes (Ba3/BB/BB+) that came at par to yield 8 5/8%.

The yield printed at the tight end of yield talk in the 8¾% area. Initial guidance was in the 8¾% to 9% area.

The deal underwent investor-friendly covenant changes, on the heels of which orders for the bonds were heard to be around $3 billion, a trader said.

Late Friday the trader saw the new Talen 8 5/8% notes due June 2030 getting lifted, at par ½ bid, 101 offered.

Heading into the weekend the active forward calendar sported a single dollar deal for the first week of May.

Heartland Dental plans to sell $500 million of five-year senior secured notes (B2/B), which are expected to price mid-to-late in the week ahead.

Initial talk has the notes coming to yield in the 10% area.

Pressed for additional color on the May 1 week market sources turned out empty pockets on Friday.

Benteler holds gains

Benteler’s 10½% senior secured notes due 2028 held on to the strong gains made after rocketing on the break in active trade on Friday.

The notes continued to trade in the 102 to 102½ context.

The notes from the automotive parts supplier offered a chunky yield for secured paper, a source said.

The deal was also heavily oversubscribed with demand following the notes into the secondary space.

Benteler priced a $500 million tranche of the 10½% notes at par on Thursday as part of a two-tranche, dual-currency offering.

The 10½% notes priced at the tight end of the 10½% to 10¾% price talk.

The deal also included a €525 million tranche of five-year senior secured notes that priced at par to yield 9 3/8%.

Six Flags under pressure

Six Flags’ 7¼% senior notes due 2031 continued to face selling pressure on Friday with the notes falling further below their discounted issue price.

The notes broke below a 98-handle to close the day in the 97¾ to 98¼ context, a source said.

There was $25 million in reported volume.

The low yield was dragging the notes down in the aftermarket with the notes pricing low to the B index which has been yielding about 8½%, sources said.

Six Flags priced the 7¼% notes at 99.248 to yield 7 3/8% on Wednesday.

Cleveland-Cliffs active

Cleveland-Cliffs’ recently priced 6¾% senior guaranteed notes due 2030 remained active on Friday although with little movement in price.

The notes continued to trade on a 97-handle and closed the day wrapped around 97½, a source said.

The yield was about 7¼%.

There was $30 million in reported volume.

The 6¾% notes have struggled since the $750 million issue priced at par on April 11 with the notes largely flatlining on a 97-handle.

The notes have had renewed attention in recent sessions after the mining company reported earnings earlier in the week.

While earnings sparked activity in the issue, there was little price movement in the notes.

Fund flows

High-yield ETFs had $350 million of daily cash inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds sustained $94 million of outflows on the day.

News of Thursday’s daily cash flows follows a Thursday afternoon report that the combined funds had $594 million of net inflows for the week to the Wednesday, April 26 close, according to fund-tracker Refinitiv Lipper.

That total and more went into the junk ETFs, which had $682 million of inflows on the week, the market source said.

Year-to-date the combined high-yield funds have sustained $8.7 billion of net outflows, the source added.

Indexes

The KDP High Yield Daily index gained 11 points to close Friday at 51.98 with the yield now 7.08%.

The index gained 4 points on Thursday, fell 8 points on Wednesday and gained 6 points on Tuesday and 9 points on Monday.

The index posted a cumulative gain of 22 points on the week.

The CDX High Yield 30 index gained 20 points to close Friday at 101.38.

The index rose 53 basis points on Thursday after falling 9 bps on Wednesday, 54 bps on Tuesday and 1 bp on Monday.

The index posted a cumulative gain of 9 bps on the week.

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