Seven tranches for seven issuers; Weatherford outperforms in HY; Solenis secureds lag

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 22 – A busy Wednesday in the dollar-denominated high-yield primary market had seven issuers, all with single-tranche deals, price a combined $3.18 billion face amount of junk.

Meanwhile, the secondary space continued to rebound from Monday’s rout with the cash bond market up another 1/8 point on the heels of the Federal Reserve’s latest announcement.

While bond tapering may begin following the Federal Reserve’s November meeting, chair Jerome H. Powell continued to stress patience related to rate hikes.

The continued dovish tone from the Federal Reserve stoked risk sentiment with major equity benchmarks closing the day upwards of 1%.

While the secondary space was strong, trading activity remained light outside of new issues, which were putting in mixed performances.

Weatherford International Ltd.’s 6½% senior secured first-lien notes due 2028 (Ba3/B) outperformed in the secondary space with the notes up to a 102-handle by the market close.

Tempur Sealy International, Inc.’s 3 7/8% senior notes due 2031 were also trading with a large premium in the aftermarket.

However, Solenis LLC’s secured and unsecured tranches were mixed with the lower-coupon secured tranche lagging its issue price while the higher-coupon unsecured tranche traded with a slight premium.

Rocket Mortgage, LLC’s tranches (Ba1/BB+) were also mixed with the lower-coupon shorter-duration notes falling flat in the aftermarket while the longer-duration, higher-coupon notes traded with a premium.

Busy primary

In the seven-issuer Wednesday primary market, executions appeared solid, with two deals pricing through talk, and one at the tight end, while the remaining four came in the middle of talk.

Although three of the seven issuers upsized, deal sizes overall were comparatively modest.

Only one issuer brought an amount greater than $500 million.

Brookfield Property REIT Inc. priced a downsized $750 million issue (from $1 billion) of 4½% 5.5-year senior secured notes (B1/BB+) at par, in the middle of talk.

The offer was originally announced as a Tuesday drive-by, but was subsequently held in the market overnight (see related stories in this issue).

Weatherford outperforms

Weatherford’s 6½% senior secured first-lien notes due 2028 outperformed in the aftermarket with the notes rising to a 102-handle in active trading on Wednesday.

The 6½% notes traded as low as par ½ early in the session. However, the notes were changing hands on a 102-handle heading into the market close, a source said.

They were changing hands in the 102½ to 102¾ context.

There was more than $73 million on the tape.

While Weatherford emerged from bankruptcy in December 2019, the notes looked cheap compared to the market, a source said.

Weatherford priced a $500 million issue of the 6½% notes (Ba3/B) at par on Tuesday.

Pricing came at the tight end of the 6½% to 6¾% yield talk. Initial guidance was in the high 6% to 7% area.

Tempur Sealy gains

Following a strong break, Tempur Sealy’s 3 7/8% senior notes due 2031 continued to gain in the aftermarket.

After closing the previous session wrapped around 101, the 3 7/8% notes were changing hands in the 101 to 101½ context heading into Wednesday’s close.

There was more than $73 million in reported volume.

Tempur Sealy priced an $800 million issue of the 3 7/8% notes at par in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 4% area.

Solenis secureds lag

Solenis’ dollar-denominated secured and unsecured tranches were putting in mixed performances in the secondary space with the secured notes lagging their issue price while the unsecured notes traded with a slight premium.

The 4¼% senior secured notes due 2028 (B2/B-) were changing hands on a 99-handle.

They were changing hands in the 99½ to 99 7/8 context heading into Wednesday’s close, a source said.

There was more than $52 million in reported volume.

The 6¼% senior notes due 2029 (Caa2/CCC+) were changing hands in the par to par 5/8 context with $35 million in reported volume.

With risk-on sentiment strong on Wednesday, the unsecured tranche outperformed their secured counterparts due to their higher coupon, a source said.

Solenis priced an $815 million tranche of the 4¼% notes and a $400 million tranche of the 6¼% notes at par on Tuesday.

The 4¼% notes priced at the tight end of talk for a yield of 4¼% to 4 3/8%, which tightened from earlier talk in the 4½% area.

The 6¼% senior notes priced at the tight end of talk for a yield of 6¼% to 6 3/8%, which tightened from earlier talk in the 6½% area.

The tranches were part of a $2.11 billion equivalent megadeal which also included a €500 million tranche of 3 7/8% senior secured notes due 2028 (B2/B-) and a €265 million tranche of 5 3/8% senior notes due 2029 (Caa2/CCC+) which also priced at par.

Rocket Mortgage mixed

Rocket Mortgage’s tranches also put in mixed performances in the secondary space with the higher-coupon notes outperforming their lower-coupon counterpart.

Rocket Mortgage’s 4% senior notes due 2033 traded up to a 101-handle and were changing hands in the 101½ to 101 5/8 context heading into the close, according to a market source.

There was more than $74 million in reported volume.

Rocket Mortgage’s 2 7/8% senior notes due 2026 fell flat in the aftermarket with the notes changing hands in the par to par 3/8 context throughout Wednesday’s session.

There was more than $41 million in reported volume.

Rocket Mortgage priced a $1.15 billion tranche of the 2 7/8% notes and an $850 million tranche of the 4% notes at par on Tuesday.

The 2 7/8% notes priced at the tight end of yield talk in the 3% area; the 4% senior notes priced in the middle of yield talk in the 4% area.

$267 million Tuesday inflows

The dedicated high-yield bond funds saw $267 million of net daily inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $309 million of inflows on the day.

Actively managed high-yield funds sustained outflows of $42 million on Tuesday, the source said.

Indexes

The KDP High Yield Daily index gained 3 basis points to close Wednesday at 70.34 with the yield now 3.51%. The index slid 8 bps on Tuesday and 9 bps on Monday.

The CDX High Yield 30 index rose 34 bps to close Wednesday at 109.64.

The index gained 10 bps on Tuesday and 40 bps on Monday.

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