Junk: EG Group prices; Spirit Aero, NOVA gain after strong break; OneMain, InfraBuild up

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 10 – EG Group capped off the second-biggest week for high-yield new issuance in 2023, to date, on Friday.

The U.K.-based convenience store chain and petrol retailer priced a $1.6 billion equivalent of EG Global Finance plc five-year senior secured notes (B3/B-/B+) in two tranches.

A $1.1 billion tranche priced at par to yield a 12% coupon, the wide end of the 11¾% to 12% yield talk. Initial guidance was in the 11½% area.

A €468 million tranche ($500 million equivalent) priced at par to yield 11%, in the middle of yield talk that was set in the 11% area.

With EG Group in the tally issuance for the Nov. 6 week comes to $8.7 billion, the second biggest week of the year, and the biggest week since the one beginning Sept. 11, which had $9.5 billion.

The week that concluded Friday was only the fourth week this year to top the $8 billion mark.

Pressed for pending new issue business in the week ahead, there are some “might-be’s” and “should-be’s, market conditions permitting, sources said on Friday.

One source disclosed being tipped on a possible drive-by from a to-be-named Canadian financial institution.

This source’s hunch is that the issuer in question could be goeasy Ltd., potentially coming to the market to address its 5 3/8% senior notes due December 2024.

Meanwhile, the secondary space had a firm close to a largely flat week with the market recovering from Thursday’s weak session.

The cash bond market was up about ¼ point on Friday, a source said.

The historic inflow of $6.26 billion in the week through Wednesday’s close helped fuel the significant gains of late last week and continued to help lift the market.

With the primary market in high gear amid improved market conditions, new issues continued to dominate activity in the space.

And while pricing has tightened considerably since the end of October, the majority of new deals continued to put in strong aftermarket performances.

Spirit AeroSystems, Inc.’s 9¾% senior secured second-lien notes due 2030 (B3/B-) and NOVA Chemicals Corp.’s 8½% senior secured first-lien notes due 2028 (Ba1/BB+) continued to gain after strong breaks.

OneMain Finance Corp.’s 9% senior notes due 2029 (Ba2/BB) were active following the add-on of the previous session with the notes trading at a premium to their reoffer price.

InfraBuild Australia Pty Ltd.’s 14½% senior secured notes due 2028 (B3/B+) also maintained a nominal premium to their discounted issue price.

Spirit, NOVA gain

New issues continued to put in strong performances in the aftermarket with Spirit AeroSystems’ 9¾% senior secured second-lien notes due 2030 and NOVA Chemicals’ 8½% senior secured first-lien notes due 2028 continuing to gain after strong breaks.

Spirit Aero’s 9¾% notes added ½ point to close Friday on a 101-handle.

They were changing hands in the 101¼ to 101½ context heading into the market close.

There was $79 million in reported volume.

Spirit AeroSystems priced a $1.2 billion issue of the 9¾% notes on Thursday.

The yield printed in the middle of yield talk in the 9¾% area.

While the company has recently been plagued with quality control issues that affected parts supplied to Boeing, a recent supply agreement with Boeing helped alleviate investor concern about the fundamentals of the company.

The notes were also optically cheap with a hefty coupon for secured paper, a source said.

NOVA Chemicals’ 8½% senior secured first-lien notes due 2028 also continued to add after a strong break, although activity in the name dwindled.

The 8½% notes also traded up to a 101-handle with the notes closing the day in the 101 to 101½ context, a source said.

There was $10 million in reported volume.

NOVA Chemicals priced a $400 million issue of the 8½% notes at 99.989 to yield 8½% on Thursday.

The coupon, price and yield came on top of talk.

At a premium

OneMain Finance’s 9% senior notes due 2029 were active following an add-on the previous session with the notes trading at a premium to their reoffer price.

The 9% notes were up ½ point to close the day wrapped around par, a source said.

There was $32 million in reported volume.

While the notes were trading at a premium to the reoffer price of the add-on, they remain below their level prior to the add-on pricing.

OneMain Finance priced a $250 million add-on to the 9% notes at 99.5 to yield 9.115% in a Thursday drive-by.

The issue price came at the rich end of the 99.25 to 99.5 price talk.

The notes were trading in the par ¾ to 101 context prior to the add-on pricing.

Infrabuild’s 14½% senior secured notes due 2028 were trading with a nominal premium to their discounted issue price.

The notes were changing hands in the 98 to 98½ context, a source said.

However, volume was light with the notes largely tucked away.

Infrabuild priced a $350 million issue of the 14½% notes at 98 to yield 15.084% on Thursday.

The coupon and price came on top of talk.

Fund flows

The dedicated high-yield bond funds had $806 million of daily net inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $764 million of inflows on the day.

Actively managed high-yield funds had $42 million of inflows on Thursday, the source said.

News of Thursday’s daily flows trails a Thursday report that the combined funds had a whopping $6.2 billion of net inflows on the week to the Wednesday, Nov. 8 close, the market source said.

That’s the fourth largest weekly inflow on record.

The biggest weekly inflow on record is $7.66 billion in the week ending April 15, 2020.

Notwithstanding that massive burst of cash in the week to Wednesday’s close, the dedicated junk funds year-to-date cash flows remain at negative-$17.3 billion, according to the market source.

Indexes

The KDP High Yield Daily index fell 5 basis points to close Friday at 48.65 with the yield 7.89%.

The index was down 9 bps on Thursday, 3 bps on Wednesday and 1 bp on Tuesday after inching up 1 bp on Monday.

The index posted a cumulative loss of 17 bps on the week.

The CDX High Yield 30 index added 48 bps to close Friday at 102.53.

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