Calendar builds; secondary firms; Bausch, Embecta improve; Athena struggles continue

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 31 – Monday’s final session of January saw zero dollar-denominated new issuance in the high-yield primary market.

But the calendar saw a big $6 billion buildout.

McAfee Corp. scheduled an investor conference call at 11 a.m. ET on Tuesday to pitch a $3.32 billion offering of notes backing the buyout of the company.

The deal features a $1 billion tranche of seven-year senior secured notes with initial guidance in the low-5% area and a $2.32 billion tranche of eight-year senior unsecured notes with initial guidance in the low-7% area.

Worldwide Flight Services Group started a roadshow for €590 million and $400 million of five-year senior secured notes (expected ratings B3/B).

The deal features two tranches of fixed-rate notes: a $400 million tranche with 8% to 8¼% initial guidance and a €340 million tranche with 6¾% to 7% initial guidance.

And Scientific Games Holdings LP began marketing an $880 million offering of eight-year senior notes (Caa2/B/B) with initial guidance in the 7% area.

All are set to price mid-to-late in the present week.

Meanwhile Covis Pharma truncated its struggling offer of Covis Finco Sarl five-year first lien senior secured notes (B2/B) to $350 million equivalent from $850 million equivalent and eliminated a proposed $475 million dollar-denominated tranche.

The downsized $350 million equivalent euro-denominated tranche (from $375 million equivalent) remains in the market with initial guidance in the 7% area and is expected to price during the Jan. 31 week, according to a bond trader.

It was a quiet end to January with last Friday's session and Monday's session both putting up goose eggs.

The first month of 2022 ended up seeing $29.6 billion of issuance – modest in comparison to forecasts of $40 billion-plus, sources said on Monday.

The weekly run rate for the dollar-denominated market through the first month of the year is $7.4 billion, according to Prospect News data.

Look for business to pick up, as January market volatility sidelined a number of deals, a trader said on Monday.

If the capital markets backdrop continues to show the strength and stability that prevailed on Monday (the Nasdaq was up a whopping 3.41% on the day, and the yield of the 10-year Treasury dropped back below 1.8%), February should see one or two busy weeks, the trader said.

Meanwhile, the secondary space launched the week on firm footing with the cash bond market up ¼ point after falling upwards of 1 point the previous week, sources said.

Concern over monetary tightening was overshadowed by optimism surrounding earnings, which continued to come in better than expected.

The 50-bps rate hike in March that market players had speculated as a possibility seemed less likely following statements from some Federal Reserve officials, sources said.

Treasury markets stabilized with the 10-year yield dipping below the 1.8% threshold to close the day at 1.781%.

Several recent deals improved in active trading on Monday.

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+) continued to gain strength with both closing the day at a premium to their issue price.

While Minerva Merger Sub, Inc.’s (athenahealth) 6½% senior notes due 2030 (Caa2/CCC/CCC+) also improved, the notes remained firmly under water.

The LBO deal was the second of the year.

$232 million Friday outflows

The dedicated high-yield bond funds sustained $232 million of net outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $207 million of outflows on the day.

Actively managed high-yield funds sustained $25 million of outflows on Friday, the source said.

At a premium

Bausch Health’s 6 1/8% senior secured notes due 2027 continued to improve in active trading on Monday.

The 6 1/8% notes were changing hands in the par ¼ to par ½ context during Monday’s session.

They closed the previous session wrapped around par.

Bausch priced a $1 billion issue of the 6 1/8% notes at par on Jan. 27.

Embecta’s 5% senior secured notes due 2030 were also on the rise.

The notes also rose about ¼ point to trade in the par ¼ to par ½ context during Monday’s session.

The notes closed the previous session flat after dropping to a 99-handle amid the heaviness in the market.

Embecta priced a $500 million issue of the 5% notes at par on Jan. 27.

athenahealth struggles

While athenahealth’s 6½% senior notes due 2030 were slightly improved in active trading on Monday, the notes remained firmly on a 99-handle.

The 6½% notes also gained about ¼ point to change hands in the 99½ to 99¾ context, a source said.

The notes have struggled since breaking for trade and dropped as low as 98 5/8 during Friday’s session.

The deal priced tight for a triple hook, a source said.

athenahealth priced a downsized $2.35 billion, from $2.5 billion, issue of the 6½% notes at par Jan. 27.

The deal was also an LBO deal with proceeds, together with a $5.9 billion term loan, a $1 billion delayed-draw term loan, $2.36 billion of preferred equity and $6.2 billion of new common equity, used to fund Bain Capital’s and Hellman & Friedman’s buyout of the company.

Indexes

The KDP High Yield Daily index shaved off 4 points to close the day at 63.59 with the yield now 4.83%.

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

The CDX High Yield 30 index rose 20 basis points to close Monday at 106.83.

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

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