Primary prices $4.85 billion in six tranches; WillScot, Axalta, Virgin Media trade up

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 2 – The domestic high-yield primary market’s drive-by window was wide open on Tuesday with five issuers pricing a cumulative $4.85 billion in six tranches.

Altice USA Inc. priced $1.725 billion in two tranches; Citgo Petroleum Corp. priced $1.125 billion; MGM Growth Properties Operating Partnership LP and MGP Finance Co-Issuer, Inc. priced $800 million; Endeavor Energy Resources LP and EER Finance Inc. priced $600 million; and Tenet Healthcare Corp. priced $600 million.

New paper continued to be in demand with the majority of deals upsizing and pricing tight or tighter than talk.

Meanwhile, the secondary space continued to grind tighter despite the civil unrest spreading throughout the country.

“The market seems to be ignoring anything going on outside the market,” a source said.

ETF buying was continuing to prop up the market with ETFs surging on Tuesday as investors piled into risk assets, sources said.

New paper remained in focus with several recent deals putting in strong performances in the secondary space.

WillScot Corp.’s 6 1/8% senior notes due 2025 (B3/B), Axalta Coating Systems Ltd.’s 4¾% senior notes due 2027 (B1/BB-), and Virgin Media Finance plc’s 5% senior notes due 2030 (Ba3/BB-) were all well above their issue prices in secondary market activity.

$4.85 billion in six tranches

A torrid Tuesday in the new issue market saw five issuers bring a combined six junk-rated, dollar-denominated tranches, and raise a total of $4.85 billion.

All Tuesday's business came quick-to-market.

Executions were razor sharp, with issues pricing tight to talk, and even through talk.

Altice USA priced $1.725 billion of 10.5-year notes in two tranches.

The deal included $1.1 billion of senior guaranteed notes (Ba3/BB) which priced at par to yield 4 1/8%. The yield printed at the tight end of yield talk in the 4¼% area. Initial talk was 4¼% to 4½%.

It also included $625 million of senior unsecured notes (B3/B) which priced at par to yield 4 5/8%. The yield printed at the tight end of yield talk in the 4¾% area. Initial talk was in the 5% area.

At noon Tuesday the deal, across both tranches, was heard to be playing to $5 billion of orders from 100 accounts, a trader said.

Citgo Petroleum priced an upsized $1.125 billion issue of five-year senior secured notes (B3/B+/BB) at par to yield 7%.

The issue size increased from $750 million

The yield printed at the tight end of the 7% to 7¼% yield talk. Initial talk was in the mid-7% area.

The deal was heard to be four-times to five-times oversubscribed early Tuesday afternoon, according to a trader.

MGM Growth Properties priced an upsized $800 million issue of five-year senior bullet notes (B1/BB-/BB+) at par to yield 4 5/8%.

The issue size increased from $500 million.

The yield printed 12.5 basis points through the 4¾% to 5% yield talk. Initial price talk was in the 5¼% area.

Endeavor Energy priced an upsized $600 million issue of 6 5/8% five-year senior notes (B1/BB-/BB+) at par to yield 6.622%.

The issue size increased from $500 million.

The yield printed 12.8 basis through the 6¾% to 7% yield talk. Initial guidance was in the low 7% area.

And Tenet Healthcare priced a $600 million issue of eight-year senior secured first-lien notes (B1/BB-/B+) at par to yield 4 5/8%.

The yield printed at the tight end of yield talk in the 4¾% area. Initial guidance was in the low 5% area.

The deal was heard to be four-times oversubscribed late Tuesday morning, a trader said.

In the wake of Tuesday's drive-by action the active forward calendar stood empty.

Virgin Media gains

Virgin Media’s 5% senior notes due 2030 were making gains in active trading on Tuesday.

The 5% notes had a strong break and immediately traded up to 101 bid, 101¼ offered.

The notes continued to climb and were marked at 101½ bid heading into the market close, a source said.

Virgin Media priced a $675 million issue of the 5% notes at par on Monday.

The yield printed at the tight end of the 5% to 5¼% yield talk. Initial talk was 5¼% to 5½%.

WillScot in focus

WillScot’s 6 1/8% senior notes due 2025 “came out strong and didn’t lose any steam,” a market source said.

The notes traded up to 102 after freeing for trade and continued to gain during Tuesday’s session.

The 6 1/8% notes were marked at 102¼ bid, 102½ offered in the late afternoon.

There was more than $55 million in reported volume heading into the market close, according to a market source.

WillScot priced an upsized $650 million issue of the 6 1/8% notes at par on Monday.

The yield printed tight to the 6¼% to 6½% yield talk.

The deal was in hot demand during bookbuilding and played to $3 billion of orders, a source said.

Proceeds from the offering will fund the refinancing transactions related to the specialty rental services provider’s merger with Mobile Mini Inc.

Of the two companies, WillScot was the weaker credit, a source said.

WillScot “has never really deleveraged,” the source said. “They just grow their EBITDA to the debt level they take on.”

However, the company was diversified and there continued to be solid demand for new paper.

Mobile Mini’s outstanding senior notes and ABL facility will be repaid in full as a result of the merger, which was a boon to Mobile Mini’s bondholders.

Axalta trades up

Axalta’s 4¾% senior notes due 2027 traded up to a 101-handle during Tuesday’s session.

While there were some lower prints earlier in the session, the notes were marked at 101¼ bid, 101 3/8 offered heading into the market close.

The bonds saw about $52 million in reported volume heading into the market close.

The manufacturer of coatings for light and commercial vehicles is a higher quality industrial business with good management, a source said.

Axalta priced a $500 million issue of the 4¾% notes at par in a Monday drive-by.

The yield printed at the tight end of the 4¾% to 5% yield talk. Initial talk was in the low 5% area.

$2.03 billion Monday inflows

The cash flows of the dedicated high-yield bond funds signal a bright green flashing “risk-on” in the speculative-grade debt capital markets, sources say.

The funds had a whopping $2.03 billion of daily net inflows on Monday, the most recent session for which data was available at press time, according to market source.

High yield ETFs saw $1.12 billion of inflows on the day.

Actively managed high yield funds saw $915 million of inflows on Monday, the source said.

With Tuesday's fund flows numbers and Wednesday's numbers remaining to go into the tally the combined funds are tracking a hefty $3.2 billion of net inflows for the week that will conclude with Wednesday's close, the market source said.

Indexes rise

Indexes continued their upward momentum on Tuesday.

The KDP High Yield Daily index gained 41 basis points to close Tuesday at 65.36. The index was up 11 bps on Monday.

The ICE BofAML US High Yield index gained 73.7 bps with the year-to-date return now negative 4.682%. The index was up 29.4 bps on Monday.

The CDX High Yield 30 index rose another 139 bps to close Tuesday at 100.74. The index jumped 106 bps on Monday.

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