Oldcastle at a premium; VICI active on upgrade, new offering; Spirit Aerosystems weaker

By Abigail W. Adams

Portland, April 18 – The domestic high-yield bond primary market remained quiet on Monday on a slow return from the long holiday weekend.

Sources were mixed on what to expect for new issuance in the coming week.

While some high-quality credits were heard to be in the wings with offerings, those deals are largely dependent on Treasuries.

Meanwhile, the secondary space was equally quiet on Monday with the market flat on thin volume.

Oscar AcquisitionCo LLC’s (Oldcastle BuildingEnvelope) 9½% senior notes due 2030 (Caa1/CCC+), the only deal to price the previous week, were trading at a premium to their deeply discounted issue price.

VICI Properties Inc.’s senior notes were active after achieving rising star status following its latest split-rated offering to fund the buyout of MGM Growth Properties.

Spirit AeroSystems, Inc.’s 4.6% senior notes due 2028 (Caa1/CCC+) were weaker in active trading.

Oldcastle at a premium

Oldcastle’s deeply discounted 9½% senior notes due 2030 continued to trade at a premium during Monday’s session.

The notes were marked at 93 7/8 bid, 94¼ offered, a source said.

The securities have been wrapped around 94 since breaking for trade on Thursday.

Oldcastle priced a downsized and restructured $585 million issue of the 9½% notes at 92.19 to yield 11% late Thursday.

The leveraged buyout deal was funding KPS Capital Partners LP’s buyout of the building supplies company from CRH plc.

While the notes were performing well in the secondary, the offering experienced pushback during bookbuilding.

Investors have been wary of leveraged buyout deals, especially from CCC credits.

Oldcastle’s leverage was most likely understated and investors were concerned about a slowdown in building, a source said.

VICI’s upgrade

VICI Properties’ senior notes were active after the company achieved rising star status with S&P Global Ratings and Fitch Ratings upgrading the company to investment grade on the heels of a new offering.

VICI’s 4 1/8% senior notes due 2030 were down about ½ point in active trading.

The notes were changing hands at 94 1/8 heading into the market close.

There was $21 million in reported volume.

VICI’s 4 5/8% senior notes due 2029 were flat in active trading.

The notes were changing hands in the 97 to 97¼ context heading into the market close, a source said.

There was $12 million in reported volume.

The Las Vegas-based real estate investment trust’s outstanding notes were active after S&P and Fitch lifted the company to investment grade following its latest offering.

S&P and Fitch lifted VICI’s issuer credit rating to BBB- from BB due to its pending acquisition of MGM Growth Properties.

The upgrades were a result of confidence in the completion of the acquisition, which will improve the company’s fundamentals, the rating agencies said.

While Moody’s Investors Service maintained a junk rating for VICI, it upgraded the company to Ba1 from Ba3.

VICI announced a five-tranche offering of senior notes on Monday to fund its acquisition of MGM Growth.

Spirit AeroSystems weaker

Spirit AeroSystems’ 4.6% senior notes due 2028 were weaker in active trading on Monday.

The 4.6% notes were down about 1½ points.

They were changing hands in the 89 7/8 to 90¼ context during Monday’s session, according to a market source.

There was $14 million in reported volume.

The notes have been on a steady downtrend since early April with low-quality credits hard hit in the latest rate-induced sell-off.

The notes saw a bounce last week following news Boeing had selected the aerospace company to provide engine parts for its B-52 upgrade program.

However, the notes are now lower than their level prior to the Boeing news.

There may be some selling ahead of earnings, a source said.

The company is expected to report on May 4.

Fund flows

High-yield mutual and exchange-traded funds continued to see outflows on Thursday, the most recent session that data was available.

High-yield mutual funds saw outflows of $484 million and high-yield actively managed funds saw outflows of $130 million on Thursday.

The outflows followed a weekly reported outflow of $4.03 billion, the largest outflow since the week ending Feb. 2, according to a market source.

Year-to-date outflows from the asset class now total $30.9 billion.

Indexes

The ICE BofAML US High Yield index fell 18.8 bps with the year-to-date return now 6.505%.

The index posted a cumulative loss of 26.4 bps on the week the previous week.

The CDX High Yield 30 index was down 15 bps to close Monday at 103.86.

The index posted a cumulative loss of 26 bps on the week last week.

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