Bombardier, CareTrust sell high-yield bonds; Lumen flat; Precision Drilling at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 3 – The new issue market put up another $2.1 billion in three U.S. dollar-denominated tranches on Thursday.

Meanwhile, the secondary space was soft on Thursday with concern over inflation and a tapering of the Federal Reserve’s bond buying program weighing on the market, sources said.

New issues continued to dominate the tape although with mixed trajectories.

Lumen Technologies’ 5 3/8% senior notes due 2029 (B2/BB-/BB) fell flat in high-volume activity.

However, Precision Drilling Corp.’s 6 7/8% senior notes due 2029 (B3/B/B+) were trading at a premium to their discounted issue price.

Outside of recent issues, several issues in Bombardier’s capital structure were active and posting gains on the heels of the company’s latest deal and tender offer for its 2022 and 2023 notes.

Meanwhile, the outflows continued with high-yield mutual and exchange-traded funds seeing $385 million leave the space in the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flows report.

Primary

High-yield investors and traders who follow the name had been watching for Montreal-based aerospace firm Bombardier Inc. – a name well-known to the junk bond market – to show up for the past couple of months in order to refinance pending bond maturities, sources say.

On Thursday the company priced an upsized $1.2 billion issue (from $1 billion) of five-year senior notes (Caa2/CCC) at par to yield 7 1/8%.

The yield printed 12.5 basis points inside of the 7¼% to 7½% yield talk. Initial guidance was in the mid-to-high 7% area.

The deal was driven by a significant amount of reverse inquiry, sources said.

The market anticipated that the company would ultimately double the size of Thursday's deal, to $2 billion, in order to take advantage of the strong present conditions in the high-yield new issue market, and address more of its looming maturities, sources said.

The deal was heard to be playing to a decent book, a trader said.

However, instead of going for the big upsize, in order to take out more debt, the company elected instead to drive a harder bargain on pricing.

Hence the decent book that built when pricing discussions were in the mid-7% area, dwindled as pricing tightened, first to the tight end of talk, and finally inside of talk.

Because of that decision it won't be long before Bombardier must return to the primary market in order to refinance some more of its near-term bond maturities, the trader said.

Lumen flat

Lumen’s 5 3/8% senior notes due 2029 fell flat in the aftermarket, which sources attributed to the general weak market conditions on Thursday.

The 5 3/8% senior notes traded as low as 99 5/8 and as high as par ¼ during Thursday’s session.

However, they were marked at 99 7/8 bid, par 1/8 offered heading into the close, sources said.

The notes were active with $98 million in reported volume.

Lumen priced a $1 billion issue of the 5 3/8% notes at par on Wednesday.

The yield printed in the middle of yield talk in the 5 3/8% area.

Precision at a premium

Precision Drilling’s 6 7/8% senior notes due 2029 were trading at a premium to their discounted issue price on Thursday.

The notes traded as high as 101¼ during the session.

However, they came in from their highs and were changing hands in the par to par ¾ context heading into the close, a source said.

There was more than $40 million in reported volume.

Precision Drilling priced a $400 million issue of the 6 7/8% notes at 99.253 to yield 7% on Wednesday.

The yield printed tighter than talk for a yield in the 7¼% area.

Bombardier active

Bombardier’s short-dated senior notes were active on the heels of the company’s latest offering and the beginning of a tender offer for its 2022 and 2023 notes.

The business jet manufacturer’s 7 7/8% senior notes due 2027 were the most active in the capital structure with the notes continuing to trade around 101¾, a source said.

There was more than $30 million of the bonds on the tape heading into the close.

Bombardier’s 7½% senior notes due 2024 gained about ½ point to close the day at 104¼.

The 7½% senior notes due 2025 were also up about ½ point to 101¼, a source said.

The refinancing deal was good news for the company’s capital structure with investors becoming increasingly more confident in the once struggling manufacturer.

The 2024 notes were trading in the low 60s and the 2025 notes were in the mid-50s at this time last year, according to Trace data.

However, both issues have steadily climbed as the company has engaged in asset sales and pared back its product line.

The 2024 and 2025 notes popped above par for the first time in more than a year in May.

Indexes mixed

Indexes were mixed on Thursday with some flat while others posted losses.

The KDP High Yield Daily index inched up 1 point to close the day at 69.63 with the yield now 3.85%.

The index rose 5 points on Wednesday and 4 points on Tuesday.

The ICE BofAML US High Yield index fell 1.8 bps with the year-to-date return now 2.496%.

The index rose 14.3 bps on Wednesday and 9.7 bps on Tuesday.

The CDX High Yield 30 index shaved off 17 bps to close Thursday at 109.67.

The index gained 5 bps on Wednesday and 10 bps on Tuesday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.