Recent junk paper floods market; Uber, Kennedy-Wilson, Bombardier flat; NRG at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 10 – Five issuers priced single-tranche high-yield bond deals on Tuesday, raising a combined total of $1.65 billion.

Meanwhile, the tone in the secondary space was negative on Tuesday with a torrent of recent new paper and some selling pressure from exchange-traded funds contributing to the weakness in the space.

The majority of new deals that priced on Monday were gridlocked at par, a source said.

Those deals included Kennedy-Wilson, Inc.’s 4¾% senior notes due 2030 (B1/BB); Uber Technologies, Inc.’s 4½% senior notes due 2029 (B3/B-); and Bombardier Inc.’s 6% senior notes due 2028 (Caa1/CCC+).

“There was such an onslaught of deals, it was too much to handle,” a source said.

NRG Energy, Inc.’s 3 7/8% senior notes due 2032 (Ba2/BB+) were a notable exception. While the notes remained on a par-handle, they were trading at a premium to their issue price.

Sunnova shines

Notable among the names to price on Tuesday, Sunnova Energy Corp. priced an upsized issue of green notes inside of talk.

And they traded up smartly on the break.

The Houston-based provider of residential solar, battery storage and system protection services priced an upsized $400 million issue (from $300 million) of 5 7/8% five-year green senior notes (B1/B-) at 98.75 to yield 6.164%.

The bonds traded up 1½ points to 2 points in active Tuesday afternoon trading, a bond trader said.

The new ModivCare Inc. 5% eight-year senior notes (B2/B) were also 1½ points to 2 points better, in active trading, on Tuesday afternoon, the trader said.

The upsized $500 million issue (from $400 million) priced at par to yield 4.998% on Tuesday.

Both Sunnova and ModivCare priced at the conclusions of roadshows.

The session also saw a buildup of the active forward calendar (see related stories in this issue).

Flat

The majority of new paper to price during Monday’s session saw a lackluster reception in the secondary space with most deals stuck at par.

Kennedy-Wilson’s 4¾% senior notes due 2030, “never went anywhere,” a source said.

They were marked at par bid, par ¼ offered heading into the market close.

The real estate investment company priced an upsized $600 million, from $500 million, issue of 4¾% notes at par on Monday.

The yield printed in the middle of yield talk in the 4¾% area.

Uber’s 4½% senior notes due 2029 dipped below par in intraday activity but fought its way back heading into the close.

The notes were marked at par bid, par 1/8 offered and were selling with trades into the bid at the end of Tuesday’s session.

Uber priced a $1.5 billion issue of the 4½% notes at par on Monday.

The yield printed at the tight end of the 4½% to 4¾% yield talk.

While the notes were not performing well in the secondary, the deal was heard to have played to $2.5 billion of orders.

Bombardier’s 6% senior notes due 2028 were also seen at par bid, with the bids getting hit, heading into the market close, a source said.

Bombardier priced a $750 million issue of the 6% notes at par in a Monday drive-by.

The yield printed at the wide end of the 5 7/8% to 6% yield talk.

NRG at a premium

While the majority of new deals to price during Monday’s session fell flat on a weak day for the market, NRG Energy’s 3 7/8% senior notes due 2032 were a notable exception.

While the notes remained on a par-handle, they were trading at a premium to their issue price.

The 3 7/8% notes were marked at par ½ bid, par ¾ offered heading into Tuesday’s close.

The performance of the notes was largely a product of demand with new paper from the energy sector light in recent weeks, a source said.

NRG priced a $1.1 billion issue of the 3 7/8% notes at par on Monday.

The yield printed at the wide end of yield talk in the 3¾% area.

Monday fund flows

Actively managed high-yield bond funds had $56 million of inflows on Monday, according to a market source.

High-yield ETFs were flat to negative on the day, sustaining $7 million of outflows on Monday.

The combined funds are tracking $356 million of net inflows for the week that will conclude with Wednesday's close, the source said.

Indexes

The KDP High Yield Daily index shaved off 0.05 basis point to close Tuesday at 69.98 with the yield now 3.74%.

The index dropped 4 bps on Monday.

The ICE BofAML US High Yield index shaved off 3.1 bps with the year-to-date return now 3.761%.

The index was down 9.2 bps on Monday.

The CDX High Yield 30 index fell 21 bps to close Tuesday at 109.04.

The index was down 19 bps on Monday.

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