Warner Music, MGIC, ADT, DaVita price; Windstream on tap; funds add $4 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 6 – The domestic high-yield primary market continued to roll out new issuance at an active clip on Thursday.

In drive-by action, ADT Inc. priced an upsized $1 billion, MGIC Investment Corp. priced an upsized $650 million, Warner Music Group's WMG Acquisition Corp. priced a $550 million issue and DaVita Inc. priced a $1.5 billion offering.

The forward calendar also grew with Windstream Communications marketing a $1.4 billion offering as part of Chapter 11 exit financing.

Meanwhile, the secondary space continued to grind tighter on Thursday with buying pressure again lifting the cash bond market, sources said.

Triumph Group Inc.’s 8 7/8% senior secured first-lien notes due 2024 (B2/B) and Howard Hughes Corp.’s 5 3/8% senior notes due 2028 (Ba3/BB-/BB) continued to gain in high-volume activity.

While volume was light, Harvest Midstream I LP’s 7½% senior notes due 2028 (B1/BB-/BB-) also continued to move up after a strong break.

However, TL Holding Co. LLC’s, doing business as DSLD Homes, small issue of 7½% senior notes due 2026 fell flat in the aftermarket.

Meanwhile, heavy inflows continued throughout the week with plenty of cash to be put to work.

High yield mutual and exchange-traded funds added $4.389 billion through Wednesday’s close, according to Refinitiv Lipper US Fund Flows.

Thursday’s primary

The post-late July earnings blackout surge of issuance in the bond market continued apace on Thursday.

Some of the most familiar names in the high-yield market rolled out deals during the session, most of them drive-bys.

Executions saw pricing being ratcheted down tighter and tighter from initial talk to final print, with two of Thursday's issuers both upsizing their deals and pricing the bonds through official price talk.

In drive-by action, ADT Inc. priced an upsized $1 billion (from $750 million) issue of 3 3/8% seven-year first-lien senior secured bullet notes (Ba3/BB-) 12.5 basis points inside of the tight end of talk.

MGIC Investment Corp. priced an upsized $650 million (from $550 million) issue of 5¼% eight-year senior notes (Ba1/BB+) also 12.5 bps beneath the tight end of talk.

Warner Music Group's WMG Acquisition Corp. priced a $550 million issue of 3% 10.5-year senior secured notes (Ba3/BB) at the tight end of talk.

And, DaVita was in the market with a $1.5 billion drive-by offering of 3¾% 10.5-year senior notes (Ba3/B+) which were talked at 3¾% to 4%, versus early guidance in the low 4% area.

There was also a single addition to the thin active forward calendar.

Windstream Communications began marketing a $1.4 billion offering of eight-year first-lien senior secured notes (B3), as part of its Chapter 11 exit financing. Initial guidance is in the 8¼% area.

Triumph Group in focus

Triumph Group’s 8 7/8% senior notes due 2024 were in focus on Thursday with the notes skyrocketing in active trading.

The 8 7/8% notes rose to a 103-handle in high-volume activity and stood poised to close the day at 103¾, according to a market source.

The notes had more than $56 million in reported volume during Thursday’s session.

The notes carried a hefty coupon for secured paper, a source said.

However, the company serves the embattled aviation industry.

Triumph Group priced an upsized $700 million issue of the 8 7/8% notes at par on Wednesday.

The initial size of the offering was $600 million.

Howard Hughes gains

After a strong break, Howard Hughes’ 5 3/8% senior notes due 2028 continued to rise in active trading on Thursday.

The 5 3/8% notes were changing hands in the 101½ to 102 1/8 context throughout Thursday’s session and were marked at 101¾ bid, 102 offered heading into the close, sources said.

The notes had a strong break on Wednesday and were marked at 101¼ bid, 101¾ offered after freeing for trade.

Howard Hughes priced a $750 million issue of the 5 3/8% notes at par in a Wednesday drive-by.

Pricing came at the tight end of yield talk in the 5½% area.

Harvest on a 103-handle

While volume was light, Harvest Midstream’s 7½% senior notes due 2028 jumped to a 103-handle on Thursday.

The notes were seen changing hands in the 103 to 103 5/8 context.

The 7½% notes skyrocketed out of the gate on Wednesday trading up to 102¾ bid, 103 offered by the market’s close.

The midstream service provider priced a $600 million issue of 7½% notes at par on Wednesday.

Pricing came at the tight end of the 7½% to 7¾% yield talk.

DSLD flat

DSLD’s 7½% senior notes due 2026 fell flat in the aftermarket.

While volume in the small issue was light, the notes were marked at par bid, par ½ offered, a source said.

DSLD priced a $225 million issue of 5.5-year senior notes (B3/B) at par to yield 7½% on Wednesday.

The yield printed at the tight end of yield talk in the 7 5/8% area.

$592 million Wednesday inflows

The dedicated high-yield bond funds had $592 million of daily net inflows on Wednesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $552 million of inflows on the day.

Actively managed high-yield funds saw $40 million of inflows on Wednesday, the source said.

News of Wednesday's daily flows was followed by a report that the combined high-yield funds saw a massive $4.389 billion of net inflows in the week to Wednesday's close, according to the Refinitiv Lipper Fund Flow Report Newsline.

Indexes mixed

The KDP High Yield Daily index shaved off 13 basis points to close Thursday at 67.03 with the yield now 5.56%.

The index rose 12 bps on Wednesday, 1 bp on Tuesday and 7 bps on Monday.

The ICE BofAML US High Yield index moved further into positive territory on Thursday.

The index gained 1.4 bps with the year-to-date return now 0.312%.

The index was up 28.8 bps on Wednesday, 0.3 bps on Tuesday and 21.58 bps on Monday.

The CDX High Yield 30 index gained 17 bps to close Thursday at 104.76.

The index jumped 165 bps on Wednesday, was up 13 bps on Tuesday after shaving off 2 bps on Monday.

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