CrowdStrike, Vector price $1.63 billion; Antero moves up; T-Mobile, Outfront, Level 3 flat

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 12 – The primary high-yield market served up $1.63 billion from two deals which were expected.

Vector Group Ltd. sold an upsized $875 million issue and CrowdStrike Holdings, Inc. wrapped its $750 million offering earlier than announced.

Meanwhile, the secondary space was again largely unchanged on the day with the market “in a standstill,” a source said.

New deals continued to dominate the tape.

However, several recent issues were wrapped around their issue prices in active trading, which sources attributed to their tight pricings.

T-Mobile USA, Inc.’s three tranches of senior notes (Ba3/BB/BB+), all which priced with 2-handles, were largely stuck at par in the aftermarket.

Level 3 Financing Inc.’s 3¾% senior notes due 2029 (Ba3/BB) and Outfront Media Capital LLC’s 4¼% senior notes due 2028 also fell flat in active trading.

However, Antero Resources Corp.’s 7 5/8% senior notes due 2028 (B2/B+) were putting in a strong performance with the notes climbing to a 101-handle.

Energy names in general have continued to outperform as investors pour into the energy sector in the hunt for yield – a trend some sources saw as dangerous.

Vector, CrowdStrike

A pair of double-B issuers, both of whom had been in the market overnight, priced deals on Tuesday.

In keeping with a trend in the 2021 new issue market both deals priced tight to talk.

Vector Group priced an upsized $875 million issue (from $850 million) of eight-year senior secured notes (Ba3/BB-) at par to yield 5¾%.

Reverse inquiry was a significant factor in the deal, according to a bond trader who noted that the new Vector Group secured notes traded well on the break, and were 101 bid, 101¼ offered at Tuesday's close.

The reverse inquiry is an indication that in spite of the significant proliferation of environmental, social and governance (ESG) investors in the high-yield bond market there is no problem placing bonds from a cigarette company.

“It isn't as easy as it used to be, but there are still plenty of non-ESG investors who can still own that paper,” the trader remarked.

Elsewhere CrowdStrike Holdings priced a $750 million issue of eight-year senior notes (Ba3/BB) at par to yield 3%.

The notes were trading par ½ bid, par ¾ offered after Tuesday's close, an investor said.

Timing was moved ahead; the deal had initially been announced as Wednesday business.

Calendar

Meantime there was a modest buildup of the active forward calendar.

Home Point Capital Inc. plans to price a $500 million offering of five-year senior notes (B2/B) on Wednesday, with a portion of the proceeds going to fund a dividend. Initial guidance has the notes coming to yield in the low-to-mid 5% area.

And Legends Hospitality Holding Co., LLC started a virtual roadshow for a $360 million offering of five-year senior secured notes with initial guidance in the mid-6% area.

Following a big Monday session, with $5.39 billion of total issuance, Tuesday's pace was slow to moderate, a trader observed.

Noting that the Monday session had been expected to set the pace for a busy week in the primary market, the trader said that Tuesday may just have been a slow day.

However, people active in the junk bond market are certainly interested in developments unfolding in Washington D.C., where Democrats in the U.S. House of Representatives plan to vote Wednesday to impeach President Trump for “incitement of insurrection,” in the wake of last week's storming of the Capitol Building by an angry mob of the president's supporters, the trader said, adding that fast-moving developments in the U.S. government might temporarily slow the pace of the new issue market.

T-Mobile flat

T-Mobile’s three tranches of senior notes fell flat in the aftermarket, which sources attributed to their tight pricing.

The 2 5/8% senior notes due 2029 and 2 7/8% senior notes due 2031 were wrapped around par in active trading with each seeing about $100 million in reported volume.

T-Mobile’s 2¼% senior notes due 2026 were the best performing in the secondary.

The notes brushed up against 101 before dropping back down to trade in the par ¼ to par ½ context heading into the market close.

While the 2¼% notes carried the smallest coupon, the notes also had the shortest duration.

Short-duration notes have been in demand, especially with Treasuries on the rise, a source said.

While the entire offering largely fell flat in the aftermarket, the offering was heavily oversubscribed.

T-Mobile priced an upsized $3 billion, from $2 billion, three-tranche offering on Monday.

The deal included a $1 billion tranche of the 2¼% notes, a $1 billion tranche of the 2 5/8% notes and a $1 billion tranche of the 2 7/8% notes, all of which priced at par.

The 2¼% notes priced tight to talk in the 2 3/8% area; the 2 5/8% notes priced tight to talk in the 2¾% area; and the 2 7/8% notes priced tight to talk in the 3% area.

The deal was heard to be playing to $11 billion of orders.

Flat

Level 3 Financing’s 3¾% senior notes due 2029 and Outfront Media’s 4¼% senior notes due 2028 also fell flat in the aftermarket.

“Everything’s pricing so tight, there’s nowhere for them to go,” a source said.

Level 3’s 3¾% notes were changing hands in the par 1/8 to par ¼ context throughout Tuesday’s session.

There was more than $90 million on the tape during the session.

In addition to the tight pricing, the notes are rate-sensitive, a source said.

Rate-sensitive notes have been taking a hit with Treasuries on the rise.

Level 3 (Lumen Technologies) priced a $900 million issue of the 3¾% notes at par on Monday.

Pricing came at the tight end of yield talk in the 3 7/8% area.

Outfront Media’s 4¼% senior notes due 2028 also saw a lackluster reception in the secondary space.

The 4¼% notes were changing hands in the par to par ½ context throughout the session.

There was more than $84 million in reported volume.

Outfront priced a $500 million issue of the 4¼% notes at par on Monday. Pricing came at the tight end of the 4¼% to 4½% yield talk.

Antero trades up

After a strong break, Antero Resources’ 7 5/8% senior notes due 2028 continued to climb on Tuesday.

The notes were up about ½ point to trade around 101½ during Tuesday’s session, a source said.

There was about $55 million of the bonds on the tape during the session.

The notes, alongside the broader energy sector, continued to outperform.

“Everything’s so tight, the only place to generate alpha is in the energy sector, which is a dangerous proposition,” a source said.

Antero priced an upsized $700 million, from $500 million, issue of the 7 5/8% notes at par on Monday.

Pricing came tighter than the 7¾% to 8% yield talk.

The deal was heavily oversubscribed and was heard to be playing to $4 billion of orders.

Monday fund flows

High-yield ETFs sustained $339 million of outflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds were positive on the day, with $150 million of inflows.

The combined funds are tracking a modest $160 million of net inflows for the week that will conclude with Wednesday's close, the market source said.

Indexes down

Indexes continued to dip lower on Tuesday after launching the week in the red.

The KDP High Yield Daily index fell 9 points to close Tuesday at 69.06 with the yield now 4.29%.

The index shaved off 5 points on Monday.

The ICE BofAML US High Yield index was again brushing up against negative returns.

The index fell 9.7 bps with the year-to-date returns now 0.003%.

The index dropped 13 bps on Monday.

The CDX High Yield 30 index was down 7 bps to close Tuesday at 108.86.

The index was down 40 bps on Monday.

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