GEO Group, Dye & Durham price junk bonds; Rakuten notes climb; funds lose $259.1 million

By Cristal Cody and Paul A. Harris

Tupelo, Miss., April 4 – Two issuers priced three tranches of new junk bonds on Thursday, raising a combined total of $1.83 billion.

GEO Group executed a $1.275 billion two-part placement, upsized from $1.2 billion.

A $650 million tranche of five-year senior secured notes (B1/BB) priced at par to yield 8 5/8%, in the middle of talk.

A $625 million tranche of eight-year senior unsecured notes (B3/B) priced at par to yield 10¼%, also in the middle of talk.

The deal went very well, according to a trader who spotted the bonds in both tranches up 2¼ points at the Thursday close.

During the time the deal was in the market, proceeds shifted among the two bond tranches and the single term loan tranche (see related story in this issue).

Also Dye & Durham Corp. priced an upsized $555 million issue (from $500 million) of five-year senior secured notes (B1/B) at par to yield 8 5/8%, at the tight end of talk.

The deal, which came into market with $1.2 billion of reverse inquiry, was playing to $2.3 billion of demand on Thursday morning, a trader said.

Meanwhile Herbalife International Inc. and HLF Financing Sarl LLC hiked pricing on a $700 million offering of five-year senior secured notes (Ba2/B+).

The deal is talked with an 11¾% coupon at a discount to yield 12½%.

Early guidance was in the 11% area, traders said.

There were also covenant changes.

Books were scheduled to close mid-afternoon on Thursday, with pricing and allocations expected prior to the close.

However it was ultimately pushed to Friday, according to a trader who spoke well after Thursday’s close.

Prior to the release of official price talk, at mid-morning Thursday, the deal was heard to be playing to $1 billion of demand, sources said.

And Genesee & Wyoming Inc., also on deck for Friday, talked $1 billion of eight-year senior secured notes (Ba3/BB) to yield 6¼% to 6½%, tight to the 6½% to 6¾% initial talk.

‘Market just collapsed’

In the secondary, new junk paper attracted the bulk of attention with new issues at the top of the day’s action, a source said.

The primary buzz in Rakuten Group Inc.’s $2 billion upsized deal on Wednesday spread to the secondary space Thursday with the 9¾% notes due 2029 (BB) climbing over ½ point on more than $130 million of paper traded.

The bonds were trading around 1½ points better than issuance.

Market tone was weak as stocks tanked Thursday and the ‘Fear Factor’ index increased over 14%.

The S&P 500 dropped 1.23%.

The iShares iBoxx High Yield Corporate Bond ETF fell 6 cents, or 0.08%, to $76.89.

“The market was down today,” a source said. “The market just collapsed. It was up and stable and then turned around.”

Overall secondary trading in the junk space seemed quieter, though volume totaled over $3 billion, a market source said.

The dedicated high-yield bond funds sustained $259.1 million of net outflows in the week that concluded with Wednesday’s close, according to a trader who cited information from fund-tracker Refinitiv Lipper.

That weekly outflow comes on the heels of the previous week’s $615.5 million inflow, the source said.

The U.S. junk funds have seen $401 million of net year-to-date outflows, according to the trader.

Rakuten higher

Rakuten’s 9¾% bullet notes due 2029 (BB) shot up over ½ point to 101¼ by the end of the day after being quoted at 101 bid, 101½ offered mid-morning, a source said.

The company sold $2 billion of the notes, upsized from $1.25 billion and heard to attract $11.3 billion of demand, at 99.512 to yield 9 7/8% on Wednesday.

The yield printed at the tight end of yield talk in the 10% area. Initial guidance was in the mid-10% area.

Rakuten is a Tokyo-based technology conglomerate.

Indexes

The KDP High Yield Daily index was unchanged Thursday at 50.14 with the yield now 6.95% after increasing 2 basis points on Wednesday.

The index was down 12 bps on Tuesday and 63 bps on Monday.

The CDX High Yield 30 index dropped 26 bps to 106.55.

The index was up 9 bps on Wednesday and down 26 bps on Tuesday.

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