Melco Resorts prices upsized offering, trades up; Hess Midstream active; Teva drops

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 26 – The domestic primary market remained active on Tuesday with one new deal and one add-on pricing.

However, new deal activity is expected to be muted for the remainder of the week with U.S. markets closed on Thursday for the Thanksgiving holiday.

Melco Resorts & Entertainment Ltd. priced a $900 million issue of 10-year senior notes (Ba2/BB) in a deal that was significantly upsized.

In drive-by action, iStar Inc. priced a $100 million add-on to its 4¾% senior notes due Oct. 1, 2024 (Ba3/BB-).

Meanwhile, the secondary space was active on Tuesday with new issues and company-specific news driving trading activity.

Melco Resorts’ newly priced senior notes saw a strong start out of the gate with the notes well above their issue price.

Hess Midstream Partners LP’s 5 1/8% senior notes due 2028 (Ba3/BB+/BB+) were also trading at a premium in the aftermarket.

Enviva Partners, LP and Enviva Partners Finance Corp.’s 6½% senior notes due 2026 (B1/B+/BB-) continued to gain in active trading on Tuesday.

However, Monday’s rebound in Teva Pharmaceutical Industries’ 7 1/8% senior notes due 2025 (Ba2/BB) was short-lived.

The generic drug maker’s capital structure traded off on Tuesday following news of a new criminal investigation.

Big upsize for Melco

With the days winding down ahead of the extended Thanksgiving holiday weekend in the United States, the primary market remained active on Tuesday.

In a deal that was in the market overnight, Melco Resorts & Entertainment priced an upsized $900 million issue of 10-year senior notes (Ba2/BB) at par to yield 5 3/8%.

The issue size increased from $650 million.

The yield printed 25 basis points inside of the 5 5/8% to 5¾% official price talk.

Demand for the deal followed it into the secondary space with the notes well above their issue price in active trading.

The notes were changing hands in the 101 5/8 to 102 context in the late afternoon in active trading, according to a market source.

Elsewhere, in a drive-by, iStar priced a $100 million add-on to its 4¾% senior notes due Oct. 1, 2024 (Ba3/BB-) at 102.00 to yield 4.289%.

The reoffer price came at the rich end of the 101.5 to 102 price talk.

Wednesday is expected to be a quiet session in the primary, as market participants make holiday plans against a backdrop of wintry weather across much of the country.

Some sources told Prospect News that Tuesday would be their last day in the office until the conclusion of the holiday weekend ahead.

Hess trades up

Hess Midstream’s new 5 1/8% senior notes due 2028 were in focus on Tuesday with the notes well above their issue price in active trading.

The 5 1/8% notes were changing hands just north of 101, according to a market source.

With more than $77 million in recorded volume by the late afternoon, the notes were among the most actively traded in the secondary space.

Hess Midstream priced an upsized $550 million issue of the 5 1/8% notes at par on Tuesday.

Pricing came at the tight end of the 5 1/8% to 5¼% yield talk. Initial talk was in the 5¼% area.

The deal was upsized from $500 million.

There was a substantial amount of reverse inquiry involved in the deal, sources said.

Enviva gains

Enviva’s 6½% senior notes due 2026 continued to post gains on Tuesday.

The notes were up another 5/8 point to 104, a market source said.

More than $17 million of the bonds were on the tape by the late afternoon.

The notes have steadily climbed in the secondary space since pricing.

The 6½% notes saw a strong start out of the gate and rose as high as 102 5/8 after breaking for trade.

They were changing hands on a 103 handle on Monday.

Enviva priced an upsized $550 million issue of the 6½% notes at par on Nov. 22.

The deal was heard to be heavily oversubscribed and also saw a substantial amount of reverse inquiry, sources said.

Teva under pressure

After rebounding on Monday, Teva’s recently priced 7 1/8% senior notes due 2025 again dropped below their issue price in active trading during Tuesday’s session.

The 7 1/8% notes sank more than 2 points and stood poised to close the day at 99¾, according to a market source.

The bonds saw more than $43 million in reported volume.

The 7 1/8% notes have largely languished at their issue price since Teva priced the $1 billion tranche at par on Nov. 19.

However, they were making gains on Monday and traded as high as 102 after news broke that the generic drug maker was in negotiations with the U.S. Department of Justice to resolve the DOJ’s criminal probe of the company related to alleged price-fixing.

The notes continued to climb early in Tuesday’s session and traded up to 103, a source said.

However, the rebound in the notes was short-lived with Teva’s capital structure under pressure following news that it was facing a new criminal investigation related to opioids.

Teva’s 6¾% notes due 2028 dropped ¾ point to 96¼ with more than $47 million in reported volume on Tuesday.

The 6% notes due 2024 were down 1 3/8 point to 97¼.

News broke Tuesday afternoon that the U.S. attorney’s office in the Eastern District of New York opened a criminal investigation into the marketing and distribution of opioid medication by pharmaceutical companies.

Six pharmaceutical companies received subpoenas as part of the investigation including junk bond issuer Mallinckrodt plc.

$297 inflows on Monday

The dedicated high-yield bond funds saw net inflows of $297 million on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw sizable inflows of $392 million on the day.

However, asset managers sustained $95 million of outflows on Monday, the source said.

With three of the present week's five sessions in the tally, the combined funds are tracking $144 million of net outflows for the week that will conclude with Wednesday's close, the market source added.

Indexes

Indexes were again on the rise on Tuesday.

The KDP High Yield Daily index rose 8 bps to close Tuesday at 70.73 with the yield now 5.23%. The index added 3 bps on Monday.

The ICE BofAML US High Yield index was again approaching 12% returns on Tuesday. The index rose 15.9 bps with year-to-date returns now 11.929%.

The index gained 19.8 bps on Monday.

The CDX High Yield 30 index gained 18 bps to close Tuesday at 107.63. The index gained 35 bps on Monday.

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