NGL Energy, Talos price; Rakuten joins calendar; Caesars, Freedom Mortgage, Merlin strong

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 25 – Two issuers raised $3.45 billion in a combined four tranches of junk on Thursday.

Both issuers increased the overall sizes of their offerings.

Executions appeared sharp.

NGL Energy Partners LP made an upsized $2.2 billion two-part placement (from $2.1 billion) of senior secured notes (B2/B+/BB-): a $900 million tranche of five-year notes that priced at par to yield 8 1/8% and a $1.3 billion tranche of seven-year notes that priced at par to yield 8 3/8%.

Both tranches came tight to talk.

Talos Production Inc. priced an upsized $1.25 billion two-part placement (from $1 billion) of senior secured second-priority notes (B3/BB-/B+): a $625 million tranche of five-year notes that priced at par to yield 9%, 25 bps below the tight end of the 9¼% to 9½% talk, and a $625 million tranche of seven-year notes that priced at par to yield 9 3/8%. Talk on the seven-year notes had them pricing 3/8% behind the five-year notes.

Prior to the upsize and release of price talk, there was $6.5 billion of demand across both Talos tranches, according to a bond trader who added that demand was slightly skewed toward the five-year notes.

While Thursday’s action concluded the week’s announced business, one new deal was added to an already sizable $3.7 billion announced calendar of deals set to price during the week ahead.

Rakuten Group, Inc. began marketing a $1 billion offering of non-callable three-year senior notes. Initial guidance has the notes coming at a discount to yield in the 12% area, a trader said.

Meanwhile, it was a strong day in the secondary space on Thursday with the latest GDP print blowing past expectations.

The cash bond market added ¼ point with buyers active in the space as the latest piece of macro data continued to point to a goldilocks scenario of rate cuts with no recession, sources said.

While the broader market was strong, it was new and recent issues where money was being put to work with the trio of deals that cleared the primary the previous session dominating the tape.

Caesars Entertainment, Inc.’s 6½% senior secured notes due 2032 (Ba3/B+) notched strong gains in heavy volume after a solid break.

Freedom Mortgage Holdings LLC’s 9¼% senior notes due 2029 (B2/B/B+) maintained the strong gains made on the break with the notes continuing to trade on a 101-handle.

Merlin Entertainments plc’s 7 3/8% senior secured notes due 2031 also continued to trade with a healthy premium.

Meanwhile, high-yield mutual funds and exchange-traded funds continued to see inflows, albeit at a reduced pace.

Funds added $72.2 million in the week through Wednesday’s close, according to a market source.

Caesars gains

Caesars’ new 6½% senior secured notes due 2032 notched strong gains in heavy volume on Thursday after a solid break the previous session.

The 6½% notes gained ¾ to 1 point to trade in the par ¾ to 101 context heading into the close.

Caesars priced a $1.5 billion offering of the 6½% notes at par in a Wednesday drive-by.

Pricing came tight to talk for a yield in the 6 5/8% area.

Freedom Mortgage strong

Freedom Mortgage’s new 9¼% senior notes due 2029 held on to the strong gains made on the break with the notes continuing to trade on a 101-handle.

The notes were largely unchanged in the day and trading in the 101 to 101½ context heading into the market close, a source said.

The notes offered a chunky yield with Freedom Mortgage a well-known name in the market, the source said.

Freedom Mortgage priced an upsized $500 million, from $450 million, issue of the 9¼% notes in a Wednesday drive-by.

The yield printed at the tight end of the 9¼% to 9½% yield talk.

Merlin at a premium

Merlin Entertainments’ 7 3/8% senior secured notes due 2031 were unchanged on the day with the notes continuing to trade with the strong premium gained on the break.

The 7 3/8% notes were trading in the par ½ to par ¾ context throughout the session, a source said.

Merlin Entertainments priced an upsized $500 million, from $400 million, issue of the 7 3/8% notes on Wednesday.

The yield printed at the tight end of yield talk in the 7½% area.

The deal was heard to be four-times oversubscribed.

Indexes

The KDP High Yield Daily index climbed 12 basis points to close Thursday at 50.66 with the yield now 6.84%.

The index added 5 bps on Wednesday, dipped 4 bps on Tuesday and gained 6 bps on Monday.

The ICE BofAML US High Yield index gained 20.6 bps with the year-to-date return now negative 0.144%.

The index was up 11.1 bps on Wednesday, was down 8.5 bps on Tuesday and gained 29.3 bps on Monday.

The CDX High Yield 30 index gained 31 bps to close Thursday at 105.99.

The index slid 5 bps on Wednesday, 5 bps on Tuesday and 6 bps on Monday.

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