Junk primary idle; secondary ‘on fire’; Raising Cane’s adds; Six Flags, Cedar Fair active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 2 – In the face of a big rally in risk assets, the high-yield primary market remained idle on Thursday.

However, several telegraphed deals are expected to come to market shortly, including a leveraged buyout financing transaction from Veritiv Corp. and debt refinancing deals from EG Group and Ineos Quattro.

Meanwhile, the secondary space shot higher on Thursday as buyers returned to the market in full force on the heels of the Federal Open Market Committee’s Wednesday announcement.

The cash bond market jumped more than 1 point with year-to-date returns regaining a 6-handle as markets cheered on the end of the rate hike campaign.

“Everything is on fire,” a source said. “There have been some huge movements.”

Raising Cane’s Restaurants LLC’s 9 3/8% senior notes due 2029 (B3/B/BB-) continued to add after a strong break, with the notes jumping 1 point amid the market rally.

News that Cedar Fair LP and Six Flags Entertainment Corp. will merge in an $8 billion all-stock transaction sparked activity in the companies’ junk bonds.

While Six Flag’s 7¼% senior notes due 2031 (B3/B) were largely unchanged after getting bid up the previous session, Cedar Fair’s 5¼% senior notes due 2029 (B3/B) were lower.

Some badly battered credits from earlier in the week saw a reprieve on Thursday. CommScope Holding Co., Inc.’s senior notes pared their losses from the double-digit plunge earlier in the week.

Meanwhile, outflows continued with high-yield mutual funds and exchange-traded funds losing $952.7 million in the week through Wednesday’s close, according to a market source.

Primary market eyed

The junk primary market was quiet on Thursday.

The Federal Open Markets Committee’s Wednesday decision to stand pat, leaving the benchmark Fed Funds rate unchanged, and the dramatic decline in the yield of the 10-year Treasury might have been expected to set the table for an on-the-run issuer to ride Thursday’s capital markets rising tide with a drive-by deal, a trader said.

Some market sources said that the banks have potential deals from issuers that fit such a description, dusted off and ready to quick shop as circumstances arise.

The market conditions that prevailed on Thursday could hardly be improved, the trader remarked.

The active calendar ended the session empty.

There are several telegraphed deals thought to be near at hand, sources said.

The $2.13 billion of debt financing supporting the leveraged buyout of Veritiv by Clayton, Dubilier & Rice LLC includes $600 million of high-yield bonds via left lead Goldman Sachs.

That deal is expected to surface in the near term, likely in the Nov. 6 week, a market source said.

Elsewhere EG Group is headed to market with senior secured notes, including some dollar-denominated notes, as part of a $2 billion equivalent debt refinancing effort that also features a $500 million equivalent amount of dollar- and euro-denominated syndicated term loan debt that was scheduled to launch on Wednesday.

Meantime Ineos Quattro plans to sell €800 million equivalent of dollar- and euro-denominated secured notes, which are part of a debt-refinancing and acquisition funding effort that also includes €2 billion equivalent of proposed syndicated loans that were set to kick off on a lender call at the beginning of the present week.

Finally, pending official word, some market watchers have been removing the Global Aircraft Leasing Co., Ltd. (GALC) and Global Sea Containers II Ltd. $1.95 billion offering of five-year senior PIK toggle notes (Ba2//BB-) from their active calendars.

It has been radio silence on GALC for a fortnight, sources said.

Raising Cane’s rises

Raising Cane’s 9 3/8% senior notes due 2029 added to the strong gains made on the break with the notes up another 1 point during Thursday’s session.

The 9 3/8% notes traded as high as 102 1/8 in intraday activity.

However, they settled to trade in the 101 5/8 to 101 7/8 context heading into the market close.

There was $31 million in reported volume.

In a heavily oversubscribed offering, Raising Cane’s priced $500 million of the 9 3/8% notes at par on Wednesday.

Pricing came at the tight end of yield talk in the 9½% area.

The deal was heard to have played to $2 billion in demand.

FUN dips

Cedar Fair’s 5¼% senior notes due 2029 and Six Flags’ 7¼% senior notes due 2031 moved in different trajectories following news the amusement park operators would combine in an $8 billion all-stock transaction.

Cedar Fair’s 5¼% notes due 2029 fell about 1 point to an 88-handle on the news.

The notes were trading in the 88 to 88½ context heading into the market close with the yield about 7 7/8%.

There was $28 million in reported volume.

While down on Thursday, the notes maintained the gains made on the week after rising 3 to 4 points on Wednesday following reports that a merger deal was imminent.

While Cedar Fair’s notes dipped, Six Flags’ 7¼% senior notes due 2031 were largely unchanged.

The notes continued to trade on a 95-handle after also getting lifted the previous session.

The 7¼% notes were trading in the 95 to 95½ context heading into the market close with the yield about 8 1/8%, a source said.

There was $40 million in reported volume.

Cedar Fair and Six Flags announced Wednesday that they would merge.

Cedar Fair shareholders will receive 1 share of the new company, which will continue to trade under Cedar Fair’s ticker “FUN,” for each share owned, and Six Flags shareholders will receive 0.58 share for each share owned.

Their merger will not trigger a change of control, with the bonds most likely to be left outstanding, a source said.

While the merger is expected to create a company with pro forma $3.4 billion of revenue and result in $200 million of cost savings, according to the company, sources were skeptical about the value of the combined entity.

CommScope jumps

CommScope’s badly battered senior notes jumped on Thursday after a double-digit decline earlier in the week with buyers returning to the market.

CommScope’s 6% senior notes due 2025 (Caa1/CCC+) rose 5 points.

The notes traded as high as 74 in the market’s early exuberance but were wrapped around 73½ heading into the market close, a source said.

There was $19 million in reported volume.

The 8¼% senior notes due 2027 shot up 9 points to trade in the 47 to 48 context heading into the market close.

The yield was 36 3/8%.

There was $19 million in reported volume.

While the notes made large gains on Thursday, they still remain down more than 10 points on the week.

The 6% notes due 2025 were trading on an 89-handle and the 8¼% notes due 2027 on a 61-handle last Friday.

CommScope was destroyed earlier in the week after the company issued an earnings warning and market chatter abounded about a large holder looking to exit their position in the company.

Indexes

The KDP High Yield Daily index gained 39 basis points to close Thursday at 48.48 with the yield 7.96%.

The index added 11 bps on Wednesday and 3 bps on Tuesday after shaving off 5 bps on Monday.

The ICE BofAML US High Yield index surged 125.1 bps with the year-to-date return now 6.241%.

The index added 32.8 bps on Wednesday after falling 30 bps on Tuesday and 3.5 bps on Monday.

The CDX High Yield 30 index gained 72 bps to close Thursday at 100.66.

The index was up 61 bps on Wednesday and 24 bps Tuesday.

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