Cushman & Wakefield prices; TransDigm flat; Light and Wonder gains; Clear Channel improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 10 – Cushman & Wakefield priced Thursday’s sole junk deal, a downsized $400 million issue of Cushman & Wakefield U.S. Borrower, LLC 8 7/8% eight-year senior secured notes (Ba3/BB) that came at 99.293 to yield 9%.

The yield came tight to downwardly revised yield talk.

Demand for the deal built to $2.6 billion prior to the downsize, after which it fell off somewhat, according to a sellside source who added that the new notes were par ¼ bid, par 5/8 offered after having been lifted earlier to par ¾.

The Cushman & Wakefield deal brought the week’s total issuance to $4.69 billion, making it the biggest week thus far in the 2023 third quarter and in fact the biggest week since that of June 19, which saw $5.18 billion of business clear the market.

Not bad for an August week, a portfolio manager pronounced. The manager then added that the shadow calendar for the remainder of the summer is not particularly big.

As to the active forward calendar, Cushman and Wakefield was the last deal in the market that was expected to price ahead of Friday’s close.

However, there are already two offerings on board to price during the week ahead.

RingCentral Inc. is on the high yield road with a $400 million offering of seven-year senior notes due 2030 (B1/BB/BB). Initial guidance is 8½% to 8¾%, and the deal is set to price Monday.

And Tenneco Inc. is scheduled to run a roadshow through Tuesday for a $1.75 billion offering of 8% senior secured notes due November 2028, a revival of efforts to replace bridge financing backing the buyout of the company by Apollo, which became hung up on dealer balance sheets due to market conditions late last year.

Initial price talk has the Tenneco notes coming deeply discounted, at 85 to 86, resulting in a 12% all-in yield.

Meanwhile, in a Thursday 8-K filing Trinseo plc made reference to an unspecified financing transaction by means of which it seeks to effect a $385 million partial redemption of its 5 3/8% notes due 2025.

Secondary volatile

The secondary space was volatile following the release of the latest Consumer Price Index report.

While markets initially cheered the report with the cash bond market adding ¼ to ½ point, the early exuberance quickly faded with selling setting in and the cash bond market ending the day unchanged.

The headline figure was initially taken as a positive with the 3.2% annual increase coming in below the consensus 3.3% estimate.

However, inflation increased from the 3% print in June.

“It was better than the consensus call, but it’s still moving in the wrong direction,” a source said. “The market overshot it with the early relief rally, but it reversed immediately.”

The recent tear in oil futures, with WTI crude oil now trading firmly above $80 a barrel, is also a foreboding sign for future inflationary data, a source said.

While the market is still anticipating a pause in rate hikes in September, the Fed’s November decision remains in doubt with some anticipating an additional rate hike.

While the broader market braced for the second half of August, which is notoriously a treacherous time for the market, new issues remained in focus with their pricing and aftermarket performance very much credit specific.

Light and Wonder International, Inc.’s 7½% senior notes due 2031 (B3/B+/BB) were trading with a strong premium in the aftermarket despite their tight pricing.

While TransDigm Inc.’s 6 7/8% senior secured notes due 2030 (Ba3/B+) improved after a weak break, they were wrapped around their issue price with the tight pricing leaving them nowhere to go.

In a sign of how credit specific pricing has become, a source pointed to Clear Channel Outdoor Holdings, Inc.’s 9% senior secured notes due 2028 (B1/B), which came more than 200 basis points wider then TransDigm’s new notes despite only one rung difference in their credit rating.

“There is a wide disparity in the market,” a source said. “Favored credits are treated well while companies that are not and need to refinance, well....”

While Clear Channel’s 9% notes saw a lackluster start in the aftermarket, they made nominal gains during Thursday’s session.

Light and Wonder strong

Light and Wonder’s 7½% senior notes due 2031 were putting in a strong performance in the aftermarket with the notes gaining about ¼ point after a strong break.

They were marked at par ¾ bid, 101¼ offered on Thursday and closed the day wrapped around 101.

There was $86 million in reported volume.

While the notes priced tight to the B index, which was yielding about 8.8%, the notes played to strong demand that lifted them in the aftermarket, a source said.

Light and Wonder priced a $550 million issue of the 7½% notes at par in a Wednesday drive-by.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

The deal was heavily oversubscribed and heard to be playing to $2 billion of orders.

TransDigm flat

TransDigm’s 6 7/8% senior secured notes due 2030 improved in heavy volume on Thursday after a weak start in the aftermarket.

The 6 7/8% notes were wrapped around their issue price on Thursday with the notes closing the day in the 99 7/8 to par 1/8 context, a source said.

There was $94 million in reported volume.

The notes saw a weak break and closed the previous session below par.

“They struggled out of the gate, but they’re holding in,” a source said. “It wasn’t a complete disaster.”

TransDigm priced a $1.45 billion issue of the 6 7/8% notes at par in a Wednesday drive-by.

The yield printed at the tight end of the 6 7/8% to 7% yield talk.

The deal was heard to have played to $2.5 billion of demand.

Clear Channel improves

Clear Channel’s 9% senior secured notes due 2028 improved in active trade on Thursday after a lackluster start in the aftermarket.

The 9% notes gained about ¼ point to trade in the par to par ¼ context, a source said.

There was $18 million in reported volume.

The notes have been stuck at par since breaking for trade and closed the previous session at 99 7/8 bid, par 1/8 offered.

While the notes looked optically attractive with the paper secured and the coupon coming wide of the B index, the outdoor advertising company is an iffy credit with spotty performances in the past, a source said.

Indexes

The KDP High Yield Daily index was down 10 bps to close Thursday at 50.39 with the yield now 7.48%.

The index added 3 bps on Wednesday, 5 bps on Tuesday and 2 bps on Monday.

The ICE BofAML US High Yield index was up 15.7 bps with the year-to-date return now 6.839%.

The index was up 19 bps on Wednesday, 5.5 bps on Tuesday and 17.2 bps on Monday.

The CDX High Yield 30 index added 10 bps to close Thursday at 102.63.

The index inched up 2 bps on Wednesday after falling 23 bps on Tuesday and 26 bps on Monday.

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