Forward calendar balloons; PetSmart in focus, rips in secondary; Endurance Digital improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 1 – While no deals cleared the domestic high-yield primary market on Monday, there was a substantial buildup in the calendar with $2.66 billion of deals being marketed.

Clear Channel Outdoor Holdings, Inc.’s $1 billion offering of seven-year senior notes (Caa2/CCC) was among them with the deal heard to be heavily oversubscribed.

Meanwhile, the secondary space firmed on Monday with the overall space well bid despite the softness the previous week.

PetSmart LLC and PetSmart Finance Corp.’s two tranches of senior notes were in focus in the secondary space with both tranches rocketing above their issue prices.

Acrisure, LLC and Acrisure Finance Inc.’s 4¼% senior secured notes due 2029 (B2/B) continued to trade with a slight premium in the secondary space.

Several recent deals that struggled amid the softness in the aftermarket last week improved on Monday.

After closing out the previous week on a 98-handle, Endure Digital Inc.’s 6% senior notes due 2029 (Caa2/CCC+) improved although the notes remained below their issue price.

Monday’s primary

Monday's weather in the northeastern United States cannot have helped. In any case the Feb. 1 week was the first week of the new year that failed to come busting out of the gates in the high-yield new-issue market.

No deals priced on Monday.

Clear Channel Outdoor Holdings came with a $1 billion offering of seven-year senior notes (Caa2/CCC) earmarked for a Monday or Tuesday execution.

The deal, which is in the market with early guidance in the mid-to-high 8% area, was heard to be playing to around $2.5 billion of orders and will be Tuesday's business.

Also, issuers brought to market a further $2.66 business, all of which is expected to clear the market ahead of Friday's close.

Prior to Monday, Feb. 1, all four of the weeks of 2021 each got underway with sessions that put up impressive numbers, averaging $5 billion of junk issuance per beginning session.

The lowest of them was the first week of the year, beginning Jan. 4, which saw $2.1 billion in three tranches.

The highest was the week beginning Jan. 19, a Tuesday, as the market was closed the previous day because of the holiday commemorating Dr. Martin Luther King, Jr.. That session saw a robust $6.9 billion of issuance in nine tranches.

PetSmart in focus

PetSmart’s newly priced two tranches of senior notes dominated activity in the secondary space with both the secured and unsecured tranches skyrocketing.

PetSmart’s 4¾% senior secured notes due 2028 (B2/B) jumped to a 103-handle. They were marked at 103 bid, 103½ offered heading into the market close, a source said.

There were more than $115 million of the bonds on the tape.

PetSmart’s 7¾% senior notes due 2029 (Caa1/CCC+) jumped to a 106-handle and were marked at 106 bid, 106½ offered heading into the close, a source said.

There was $133 million in reported volume.

PetSmart’s holding company BC Partners had a heavy hand in the allocation of the notes.

“They wanted to make sure the right people were involved and it wasn’t in the hands of flippers,” a source said. “They did a good job too.”

Several real money hedge funds were involved in the name, the source said.

PetSmart priced a $1.2 billion tranche of the 4¾% secured notes and a $1.15 billion tranche of the 7¾% notes at par last Friday.

The 4¾% notes priced tighter than the 5% to 5¼% yield talk and the 7¾% notes priced tighter than talk for a yield in the 8% area.

The offering was PetSmart’s second pass at the market.

The retailer previously tried to price a $2.65 billion two-tranche megadeal in October 2020, but the deal was pulled due to investor pushback.

While the deal helped complete Chewy Inc.’s spinoff from PetSmart, more of Chewy’s capital structure was attributed to the notes in the latest offering, a source said.

In connection with the pricing of the senior notes, PetSmart’s stake in Chewy will be redistributed to its parent company and subsidiaries, thereby completing PetSmart’s divestiture from Chewy.

However, an affiliate of PetSmart’s parent company pledged a number of Chewy’s shares, which had a $4 billion market value on Monday, as collateral for the secured notes.

The affiliate also guaranteed the secured and unsecured notes, according to a company press release.

Acrisure at a premium

Acrisure’s 4¼% senior secured notes due 2029 continued to trade with a slight premium in the aftermarket, although the notes remained on a par handle.

The 4¼% notes were marked at par ¼ bid, par ¾ offered late Monday afternoon, according to a market source.

They were up about 1/8 point from Friday’s close.

However, volume in the name was light on Monday with about $14 million in reported volume heading into the close.

Acrisure priced a $700 million issue of the 4¼% notes at par on Friday.

Endure improves

Endure Digital’s recently priced 6% senior notes due 2029 improved in active trading on Monday although they remained below their issue price.

After closing out the previous week on a 98-handle, the notes were marked at 99¼ bid, 99¾ offered.

There was $23 million in reported volume during Monday’s session.

The notes are a high beta name and have largely moved with the market, a source said.

Endure priced a $685 million issue of the 6% notes at par on Jan. 27.

$546 million Friday inflows

The dedicated high-yield bond funds saw $546 million of net inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $371 million of inflows on the day.

Indexes mixed

Indexes were mixed at the start of the week.

The KDP High Yield Daily index was flat, closing the day at 69.25, flush with last Friday’s close.

However, the yield shaved off 6 bps with the yield now 4.25%.

The index was down 13 points on the week last week.

The ICE BofAML US High Yield index rose 7.3 bps with the year-to-date return now 0.44%.

The index was down a cumulative 7.8 bps on the week last week.

The CDX High Yield 30 index dropped 168 points to close Monday at 108.3.

The index posted a cumulative loss of 66 points on the week last week.

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