ION, Covis on hold; volatile junk market ends day up, week down; athenahealth struggles

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 28 – Although the domestic high-yield market expected an active Friday session in new issues, no deals were priced.

ION Analytics cited volatile market conditions for delaying its downsized $475 million equivalent two-part offering of eight-year senior secured notes (B2/B).

Covis Pharma’s $850 million equivalent two-part offering of five-year senior secured notes (B2/B) was also expected to price but may get pulled, sources said.

However, the forward calendar continued to grow with Prince International Corp. kicking off a $1.256 billion two-part offering of notes.

Meanwhile, the secondary space closed out a volatile week with more volatility.

While the market was heavy for the majority of the session, a late-day surge lifted the space into positive territory with the market ending the day up ¼.

While the market ended Friday strong, it remained negative on the week.

New paper was in focus following Thursday’s deluge of fresh paper. However, the new paper was struggling in the secondary.

Minerva Merger Sub, Inc.’s (athenahealth) 6½% senior notes due 2030 (Caa2/CCC/CCC+) were struggling in the aftermarket with the notes well below par.

Bausch Health Cos. Inc.’s 6 1/8% senior secured notes due 2027 (Ba3/BB/BB) and Embecta Corp.’s 5% senior secured notes due 2030 (Ba3/B+) were volatile alongside the broader market in active trading.

Friday’s primary

Although the market expected an active Friday session in new issues, no deals were priced.

ION Analytics cited volatile market conditions at it opted to delay pricing its downsized approximately $475 million equivalent two-part offering of eight-year senior secured notes (B2/B).

The deal, which was downsized from $850 million, had been slated to price Friday.

Characterizing it as an opportunistic transaction, the company may elect to re-launch it when market conditions are more consecutive, according to an informed source (see related story in this issue).

Meanwhile, the Covis Pharma $850 million equivalent two-part offering of five-year senior secured notes (B2/B), which had also been expected to clear the market during the Jan. 24 week, was heard to be struggling, its fate hinging on management's decision to go forward, according to market sources.

The last news on the deal came earlier in the week, in the form of initial price talk: $475 million of dollar-denominated notes in the 7½% area and $375 million equivalent of euro-denominated notes in the 7% area.

Looking to the week ahead, Prince International is in the market with a $1.256 billion two-part offering of notes that kicked off on Friday.

The deal includes a $500 million tranche of seven-year senior secured notes (B3/B-) with initial guidance in the mid-to-high 5% area, and $756 million of eight-year senior unsecured notes (Caa2/CCC+) with initial guidance in the low-8% area.

A telephone roadshow is set to run through Wednesday.

Away from that deal the primary market is definitely open, according to a debt capital markets banker who spoke in the middle part of Friday afternoon, preparing to leave the office ahead of a big winter storm expected to hit the northeastern United States over the weekend.

Doubters of the new issue market's vitality need only look at the past week's megadeal from athenahealth, the banker said.

The company priced a downsized $2.35 billion issue (from $2.5 billion) issue of 6½% eight-year senior notes (Caa2/CCC/CCC+) at par, in a deal that was heard to be playing to a $4.5 billion order book.

Although high-yield valuations are being reset, higher coupons tend to make junk bond investors more engaged in the new issue market, the banker asserted.

athenahealth struggles

While the notes played to heavy demand during bookbuilding, athenahealth’s new notes were struggling in secondary market activity.

The 6½% notes remained on a 99-handle during Friday’s session. They were marked at 99 bid, 99½ offered early and while they gained strength as the session progressed, they stood poised to close the day below par, sources said.

athenahealth priced a downsized $2.35 billion, from $2.5 billion, issue of the 6½% notes at par on Thursday.

The yield printed in the middle of yield talk in the 6½% area.

The deal was heard to have played to a $4.5 billion order book but saw a weak break and traded down to 99 1/8 bid, 99 3/8 offered.

Volatile

Bausch Health’s 6 1/8% senior secured notes due 2027 and Embecta’s 5% senior secured notes due 2030 were volatile alongside the broader market on Friday.

Bausch’s 6 1/8% senior secured notes due 2027 were flat early in the session but gained as the session progressed.

They were marked at 99¾ bid, par ¼ early with market conditions heavy early in the day.

However, the notes were lifted alongside the broader market as the day got underway, trading as high as 101, sources said.

Bausch Health priced a $1 billion issue of the 6 1/8% notes at par on Thursday.

The yield printed at the tight end of yield talk in the 6¼% area.

The deal was heard to be four-times oversubscribed, a trader said.

Debut issuer Embecta’s 5% senior secured notes due 2030 were also heavy early in the session but gained strength heading into the close.

The notes traded on a 99-handle for the majority of the session. However, they closed the day wrapped around par.

Embecta priced a $500 million issue of the 5% notes on Thursday to support the spinoff of the new diabetes care company from Beckton, Dickinson and Co.

The yield printed in the middle of yield talk in the 5% area.

Outflows continue

High-yield ETFs sustained a whopping $1.58 billion daily outflow of cash on Thursday, the most recent session for which data was available, according to a market source.

Actively managed funds were positive on the day, posting $65 million of inflows on Thursday.

News of Thursday's daily flows follows a Thursday report that the combined funds sustained $2.807 billion of net outflows in the week to the Wednesday, Jan. 26 close, according to Refinitiv Lipper.

It is the third consecutive week that outflows from the high-yield funds exceeded $2 billion, in all totaling $7.2 billion, the most significant since September 2020, a market source said.

The past week also saw the largest outflows from actively managed high-yield funds since May.

Year to date the combined funds have sustained $6.8 billion of net outflows, including $4.2 billion of outflows from the ETFs.

Indexes

The KDP High Yield Daily index sank 30 points to close the day at 63.63 with the yield 4.81%.

The index was down 47 points on Thursday, climbed 13 points on Wednesday, and fell 5 points on Tuesday and 29 points on Monday.

The index saw a cumulative decline of 98 bps on the week.

The CDX High Yield 30 index rose 22 basis points to close the day at 106.63.

The index sank 50 bps on Thursday, 29 bps on Wednesday and 32 bps on Tuesday after rising 19 bps on Monday.

The index posted a cumulative loss of 70 bps on the week.

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