Junk floodgates open, $5.3 billion prices; Rayonier, Nine Energy on tap; Bombardier rises

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 17 – Tuesday stands out statistically as an extraordinarily active day in the junk bond primary market, with delivery from issuers on deals that were noted as on deck late last week.

Meanwhile, it was a soft day in the secondary space with the cash bond market off ¼ point as the strong rally of the previous week began to wane, a source said.

While macro data was the primary market mover over the past two weeks, attention is now shifting to earnings with recession-wary investors paying close attention to company fundamentals.

Secondary trading was also muted as market players awaited the deluge of paper in the pipeline to break for trade.

Trading activity was largely driven by the issuers coming to market with new offerings sparking activity in the issuers’ outstanding notes.

Bombardier Inc.’s senior notes were lifted on the heels of its latest offering with the refinancing a credit positive for the company.

Nine Energy Service, Inc.’s 8¾% senior notes due 2023 (Caa3/CCC) were also lifted with proceeds from its latest offering to be used to refinance the notes.

DISH Network Corp.’s 11¾% senior notes due 2027 (Ba3/B+) were lower after the company announced its add-on.

Huge Tuesday

With market watchers expecting a big week in high-yield new issues, the Tuesday session, following the extended holiday weekend, lived up to expectations.

And then some!

Six drive-by issuers each priced a single tranche of dollar-denominated, junk-rated notes, bringing Tuesday's total to $5.3 billion, the biggest day in the primary market in a year-and-a-half.

Three of the six issues upsized.

All came at the tight or rich ends of talk.

At least five of Tuesday's six deals were oversubscribed by midday, some heavily, sources said.

Highlights included DISH Network Corp. pricing a massively upsized $1.5 billion add-on (from $500 million) to its 11¾% senior secured notes due Nov. 15, 2027 (Ba3/B+) which priced at 102 to yield 11.079%.

Elsewhere Transocean Inc. priced $1.175 billion of seven-year senior secured notes (B2/B-) at par to yield 8¾%.

The RIG deal was 2.2-times oversubscribed at midday.

The Switzerland-based driller returned to the primary market for the second time in just over a week, on Tuesday. On Jan. 9 Transocean Titan Financing Ltd. priced a $525 million issue of amortizing 8 3/8% senior secured notes due February 2028.

The most recent day to see a greater amount of issuance than Tuesday's $5.3 billion was July 21, 2021, during which $5.38 billion cleared the market in five tranches.

Bombardier lifted

Bombardier’s junk bonds were lifted in active trade on the heels of the aerospace company’s latest offering.

The 7½% senior notes due Dec. 1, 2024 (B3/B-), which will be redeemed with proceeds from the latest offering, climbed 1½ points with the notes trading up to their takeout price.

The notes were wrapped around 102 heading into the market close with $7 million in reported volume.

Bombardier’s longer dated debt issues were also on the rise with the refinancing deal a credit positive for the company, a source said.

The 7 7/8% senior notes due 2027 rose ½ point to close Tuesday at par 3/8 with the yield 7½%.

There was $18 million in reported volume.

The 7 1/8% senior notes due 2026 remained wrapped around par in heavy volume.

There was $16 million in reported volume.

Nine Energy’s redemption

Nine Energy’s 8¾% senior notes due 2023 were on the rise following news the notes would be redeemed with proceeds from its latest offering.

The 8¾% notes gained 1 point to close Tuesday wrapped around par with the yield about 8½%.

There was $7.5 million in reported volume.

DISH weaker

DISH’s 11¾% senior notes due 2027 were weaker in heavy volume after the company announced an add-on to the notes.

The 11¾% notes fell 1 point to a 102-handle and were changing hands in the 102¼ to 102¾ context prior to the add-on pricing, a source said.

The add-on comes just days after the 11¾% notes traded up to an all-time high of 105 in the strong rally of the previous week.

The 11¾% notes initially priced at 98.171 to yield 12¼% in November 2022.

Fund flows

High yield ETFs saw $398 million of daily cash inflows on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds sustained $35 million of outflows on the day.

The combined funds had $1.4 billion of net inflows for the year to Friday's close, according to the market source.

Indexes

The KDP High Yield Daily index shaved off 1 point to close Tuesday at 53.43 with the yield now 6.85%.

The index posted a cumulative gain of 70 points on the week last week.

The ICE BofAML US High Yield index gained 7.1 basis points with the year-to-date return now 3.976%.

The index posted a cumulative gain of 162.7 bps on the week last week.

The CDX High Yield 30 index was down 36 bps to close Tuesday at 102.64.

The index posted a cumulative gain of 104 bps on the week last week.

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