Junk calendar balloons; NGL, Talos edge higher; Spirit Airlines gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 29 – Amid heavy news volume in the high-yield, new-issue market on Monday, Nationstar Mortgage Holdings Inc. priced the session’s sole deal, an upsized $1 billion issue of Mr. Cooper 7 1/8% eight-year senior notes (B1/B/BB) that came at 99.251 to yield 7¼%, at the tight end of talk, in a drive-by. It was upsized from $800 million.

Away from that transaction the active forward calendar ballooned to $10.6 billion with the announcement of six other dollar-denominated deals.

Deals announced on Monday included:

• UKG Inc.’s $2.5 billion seven-year senior secured notes, initial guidance low-7% area;

• Fiesta Purchaser, Inc.’s (Shearer’s Foods) $500 million seven-year notes, initial talk 8½% area;

• Jefferson Capital Holdings, LLC’s $400 million five-year senior notes (expected ratings Ba3/BB-), initial talk high-9% area;

• Ineos US Finance LLC’s $500 million five-year senior secured notes (Ba3/BB/BB+) initial talk 7 ¾% to 8%;

• Howden Group’s (B2/B) $1.25 billion seven-year senior secured notes, initial talk mid-7% area, and $500 million eight-year senior unsecured notes, initial talk mid-8% area;

• Kodiak Gas Services, LLC’s $750 million five-year senior notes (B2/B+/BB); and

• STL Holding Co., LLC $250 million five-year senior notes.

Among deals that carried over from last week, Rakuten Group, Inc. upsized its offering of non-callable senior notes due February 2027 (S&P: BB) to $1.75 billion from $1 billion, and tightened to the 12¼% area from the 12½%. The notes are set to price, at a discount, on Tuesday.

As issuers stampeded to the market on Monday, activity in the secondary space was subdued as markets eye the Federal Open Market Committee’s Wednesday announcement.

While flat at the open, the market gained strength as the session progressed with Treasury yields falling across the curve, sources said.

The cash bond market closed up about 1/8 point with returns turning positive for the first time in 2024.

New and recent deals remained in focus in the secondary space with NGL Energy Partners LP’s recently priced senior secured notes (B2/B+/BB-) and Talos Production Inc.’s senior secured second-priority notes (B3/BB-/B+) dominating activity in the secondary space.

Like most deals to price over the past month, NGL’s and Talos’ new notes continued to trade at a strong premium to their issue price with the notes edging higher during Monday’s session.

Outside of new paper, Spirit Airlines Inc.’s 8% senior secured notes due 2025 (Caa2) were active and gaining strength with the company standing by its merger agreement with JetBlue.

Good trade

New and recent issues remained the focus of the secondary space on Monday with the majority of deals to price in January continuing to put in strong aftermarket performances.

NGL Energy’s senior secured notes and Talos Production’s senior secured second-priority notes continued to dominate activity in the secondary space with the notes edging higher.

NGL’s 8 3/8% senior notes due 2032 gained about ¼ point with the notes closing the day in the 101 to 101¼ context, a source said.

There was $45 million in reported volume.

NGL’s 8 1/8% senior notes due 2029 also edged higher by about 1/8 point, closing the day in the par ¾ to 101 context.

There was $35 million in reported volume.

Both tranches priced at par on Jan. 25.

Talos Productions’ 9% senior secured second-priority notes due 2029 strengthened with the notes trading in the 101½ to 101¾ context, a source said.

There was $22 million in reported volume.

The 9 3/8% secured second-priority notes due 2031 notched ¼ point gain with the notes closing the day on a 102-handle.

They were trading in a tight range in the 102¼ to 102½ context throughout the session, a source said.

There was $26 million in reported volume.

The tranches also priced at par on Jan. 25.

Spirit gains

Spirit Airlines’ 8% senior secured notes due 2025 were again attracting buyers on Monday after the company announced its expectation for JetBlue to comply with the merger.

The 8% notes gained 2 to 2½ points in active trade.

They were trading in the 65½ to 66 context heading into the market close, a source said.

There was $16 million in reported volume.

The notes dropped down to 64 last Friday after JetBlue announced the merger agreement with Spirit may be terminated after Jan. 28.

In response, Spirit announced that it does not believe JetBlue has a basis for terminating the merger and will expect JetBlue to abide by its obligations under the merger agreement.

Spirit’s capital structure has been whipsawed by the latest developments in JetBlue’s attempted acquisition of the company.

While the anti-trust verdict that blocked the acquisition pummeled the notes, optimism over a potential appeal and completion of the acquisition has resulted in a burst of buyers.

The 8% notes were trading in the mid- to low 70s in the run up to the anti-trust verdict mid-January.

The notes plunged to the low 50s following the verdict but have since rebounded.

Indexes

The KDP High Yield Daily index inched up 1 bp to close Monday at 50.71 with the yield now 6.81%.

The index gained 23 bps on the week last week.

The ICE BofAML US High Yield index gained 14.9 bps with the year-to-date return now 0.115%.

The index added 63.5 bps on the week last week.

The CDX High Yield 30 index added 14 bps to close Friday at 106.16.

The index added 18 bps on the week last week.

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