Medline looms on busy HY calendar; Grifols, Rockcliff, HealthEquity move up; Uniti lags

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 29 – News volume in the high-yield primary market remained heavy, on Wednesday, as three issuers priced $1.55 billion face amount of junk in four tranches.

On the substantial active forward calendar, the Medline Industries buyout deal is in focus, with pricing expected Thursday.

Meanwhile, the secondary space was largely unchanged after Tuesday’s rout with the 10-year Treasury yield holding above 1.5% and equity benchmarks mixed.

Deadlock surrounding the debt ceiling, Federal Reserve chair Jerome Powell’s comments fueling concerns surrounding inflation and end-of-quarter repositioning were also weighing on the market.

While there was some selling pressure, the selling was orderly and bids were still slow to get hit, a source said.

New and recent issues remained in focus with the majority of new deals performing well despite the weakness in the market.

“Generally speaking, guys have cash and are looking to put it to work,” a source said. New issues remained their focus.

Grifols, SA’s 4¾% senior notes due 2028 (B3/B/B+) and Rockcliff Energy II LLC’s 5½% senior notes due 2029 (B3/B+/B+) were both on a 102-handle.

HealthEquity, Inc.’s 4½% senior notes due 2029 and TopBuild Corp.’s 4 1/8% senior notes due 2032 (Ba2/BB+) were both on a 101-handle.

However, Uniti Group LP’s 6% senior notes due 2030 were a notable exception with the notes lagging their issue price despite efforts to push them above par.

LSB, Foot Locker

Among Wednesday’s $1.55 billion of new deals, LSB Industries, Inc. priced a $500 million issue of seven-year senior secured notes (B3/B-) at par to yield 6¼%.

The yield printed at the tight end of yield talk in the 6 3/8% area.

It was fully done in reverse inquiry, and ended up playing to an order book that was four-times oversubscribed, with the bonds going out Wednesday evening at 101 bid, 101¾ offered, a trader said.

Elsewhere Foot Locker, Inc. priced a $400 million issue of eight-year senior notes (Ba2/BB+) at par to yield 4% in a drive-by.

The yield printed at the tight end of the 4% to 4¼% yield talk, and was heard to have been playing to more than $2.9 billion of demand from 194 accounts, according to the trader who spotted the notes trading at par bid, par ¾ offered, late Wednesday.

Upcoming

In the wake of Wednesday's action there remained a whopping $10 billion active forward calendar, all of it expected to clear ahead of Friday's close.

Most conspicuous among the prospective late-week issuers is the Medline Industries buyout deal.

Dealers rejiggered the financing on Wednesday, shifting $1.5 billion of proceeds to the secured notes and bank loans, from the unsecured notes.

A $3.77 billion-plus tranche of 7.5-year senior secured notes (B1/B+/BB-) is talked 3 7/8% to 4% versus initial talk in the low 4% area.

A downsized $2.5 billion tranche (from $4 billion) of eight-year senior unsecured notes (Caa1/B-/B-) is talked to yield 5¼% to 5½%, versus initial talk in the 6% area.

Final sizing of the secured portion remains to be determined.

Pricing is expected Thursday.

102-handles

While the market remained heavy on Wednesday, new and recent issues continued to perform well with Grifols’ 4¾% senior notes due 2028 and Rockcliff’s 5½% senior notes due 2029 (B3/B+/B+) trading up to a 102-handle.

Grifols’ 4¾% senior notes due 2028 were marked at 102 bid, 102½ offered.

Grifols priced a $705 million tranche of the 4¾% notes at par.

Pricing came at the tight end of the 4¾% to 5% yield talk and inside of initial talk in the low-to-mid 5% area.

The offering also included a €1.4 billion tranche of notes that priced at par to yield 3 7/8%.

In another issue that was trading above its issue price, Rockcliff Energy’s 5½% senior notes due 2029 continued to trade at 102¼ bid, 102¾ offered – a level reached shortly after breaking for trade.

There was about $43 million in reported volume.

Rockcliff priced an upsized $700 million, from $600 million, issue of the 5½% notes at par on Tuesday.

The yield printed tighter than the 5 5/8% to 5 7/8% yield talk.

While the overall market has been weak, the energy sector has been strong amid surging crude oil futures.

While crude oil futures came in on Wednesday with WTI crude settling at $74.83, a decrease of 46 cents or 0.61%, further upside is expected.

101-handles

HealthEquity’s 4½% senior notes due 2029 and TopBuild’s 4 1/8% senior notes due 2032 were also putting in strong performances in the secondary space with both on a 101-handle.

HealthEquity’s 4½% senior notes were marked at 101¼ bid, 101¾ offered, a source said.

There was about $27 million on the tape.

HealthEquity priced a $500 million issue of the 4½% notes at par on Tuesday.

Pricing came at the tight end of the 4½% to 4¾% yield talk.

TopBuild’s 4 1/8% senior notes due 2032 were marked at 101 bid, 101½ offered.

There was $57 million in reported volume.

TopBuild priced a $500 million issue of the 4 1/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 4¼% area.

Uniti lags

While the majority of new deals to price during Tuesday’s tumult performed well in the aftermarket, Uniti’s 6% senior notes due 2030 were the notable exception.

While there was an effort to push the notes above par, “the market was firm,” and pushed them below, a source said.

The notes stood poised to close the day at 99 5/8 bid, 99 7/8 offered.

Uniti Group priced a $700 million issue of the 6% notes at par on Tuesday.

The yield printed in the middle of yield talk in the 6% area.

Tuesday flows

Despite Tuesday's market session playing out against a quarterly high in rates, and the largest losses in the S&P 500 index since May, net outflows from the dedicated high-yield bond funds were mild, according to a market source.

High-yield ETFs sustained $141 million of net outflows on the day.

Actively managed high-yield funds were positive on Tuesday, posting $72 million of inflows on the day, the source said.

Indexes

The KDP High Yield Daily index gained 5 basis points to close the day at 69.99 with the yield now 3.68%. The index sank 26 bps on Tuesday and was down 8 bps on Monday.

The CDX High Yield 30 index gained 4 bps to close Wednesday at 109.42.

The index fell 32 bps on Tuesday after rising 3 bps on Monday.

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