Junk bond calendar carries forward; new KBH on par-handle; Cogent flat; Carnival sinks

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 8 – No unexpected deals came into the primary high-yield space on Wednesday and no deals made it off the calendar.

Meanwhile, the secondary space continued to come in on Wednesday as the 10-year Treasury yield again pushed past the 3% threshold as analysts cut their global growth forecasts.

The cash bond market was down ¼ point with the ICE BofAML US High Yield index’s year-to-date returns again approaching negative 9%.

While the market was soft on Wednesday, activity in the secondary space was extremely light.

The ETF buying spree that propelled the market in the final days of May continued to cool although some ETFs remained buyers and were circulating offers-wanted-in-competition lists.

Recent issues dominated the tape although the deals to price during Tuesday’s session saw a lackluster reception in the secondary space.

KB Home’s 7¼% senior notes due 2030 (Ba2/BB) were changing hands with a slight premium in aftermarket activity.

While the deal was heard to be heavily oversubscribed, Cogent Communications Group, Inc.’s 7% senior notes due 2027 (B3/B) dropped below their issue price in intraday activity although they bounced off their lows to close the day largely flat.

Trading activity was thin outside of the new deals.

However, Carnival Corp.’s 10½% senior notes due 2030 (B2/B) sank further below par in active trading after rising to a 102-handle in the ETF-driven late May market surge.

No deals today, maybe tomorrow

A quiet day in the high-yield new issue market saw no new deals priced.

The active forward calendar ended the session with four offerings, all of which are expected to price by mid-June, sources say.

Central Parent Inc. and Central Parent Merger Sub Inc. are expected to price $750 million of seven-year senior secured first-lien notes (B1/B+) on Thursday.

The deal, supporting the buyout of CDK Global Inc. by Brookfield Business Partners, is in the market with initial guidance in the mid-7% area.

Maxar Technologies Inc. was scheduled to wrap up a roadshow on Wednesday for its $500 million offering of five-year senior secured notes (B2/B), in the market with initial guidance in the mid-to-high 7% area.

The remaining two deals are expected to remain in the market over the weekend ahead.

Univision Communications Inc. is shopping a $500 million offering of eight-year senior secured notes (B1/B+) with initial guidance in the high-7% area to 8%.

The deal is expected to price on Monday.

And Iris Holdings Inc. is on the road with a $400 million offering of 6.5-year senior notes (Caa2/CCC+) backing the buyout of Intertape Polymer Group Inc. by Clearlake Capital Group LP.

Initial guidance has the notes coming with a 10% coupon at an issue price in the low 90s with an all-in yield in the high 11% area to the low 12% area. Pricing is expected on Tuesday.

KB Home at a slight premium

From recent issues, KB Home’s 7¼% senior notes due 2030 were holding onto a slight premium in active trading on Wednesday.

The notes traded as high as par 5/8 in intraday activity but came in to trade in the par to par ½ context heading into the market close, according to a market source.

The notes were the most actively traded issue during Wednesday’s session with $33 million in reported volume.

KB Home priced a $350 million issue of the 7¼% notes at par in a Tuesday drive-by.

Pricing came rich to talk for a discounted offer price of 98 to 99 and wide to talk for a yield of 7 1/8% to 7¼%.

Initial guidance had the deal coming with a yield in the high-6% area.

Cogent flat

While the deal was heard to be heavily oversubscribed during bookbuilding, Cogent’s 7% senior notes due 2027 dropped below par in intraday activity although the notes rallied to end the day flat.

Cogent’s 7% notes traded as low as 99 5/8 in intraday activity. However, they bounced off their lows and were changing hands in the 99 7/8 to par 1/8 context heading into the market close.

There was $28 million in reported volume.

Cogent priced a $450 million issue of the 7% notes at par on Tuesday.

The yield printed at the tight end of the 7% to 7¼% yield talk.

The deal was heard to be playing to $1.6 billion of orders.

Carnival sinks

Carnival’s 10½% senior notes due 2030 sank further below par in active trading on Wednesday with the notes giving back the gains made during the market’s late-May surge.

The 10½% notes fell 1½ points to a 98-handle on Wednesday, according to a market source.

They were changing hands at 98½ heading into the market close.

There was $20 million in reported volume.

Carnival’s 10½% notes, which priced at par on May 18, were underwater until the late-May rally propelled them to a 102-handle.

However, the high beta notes have been on a downtrend alongside the broader market over the past few sessions as the ETF buying behind the late May surge cooled.

Fund flows

Actively managed high-yield bond funds saw $228 million of daily cash inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had negative cash flows on the day, sustaining $35 million of outflows on Tuesday, the source said.

Indexes

The KDP High Yield Daily index fell 22 points to close Wednesday at 57.26 with the yield now 6.56%.

The index was down 18 points on Tuesday and 18 points on Monday.

The ICE BofAML US High Yield index fell 19.4 basis points with the year-to-date return now negative 8.842%.

The index was down 32.7 bps on Tuesday and 19.6 bps on Monday.

The CDX High Yield 30 index fell 26 bps to close the day at 100.74.

The index gained 5 bps on Tuesday after falling 16 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.