New junk paper comes from Delek; Builders FirstSource underwater; Sinclair lower

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 28 – Co-issuers Delek Logistics Partners, LP and Delek Logistics Finance Corp. represented the bulk of new dollar-denominated issuance in the junk bond market on Wednesday.

Meanwhile, it was a soft day in the secondary space with the latest GDP print coming in slightly below forecasts.

While weaker than forecast, the 3.2% growth rate was still a strong figure and did not spark major market movement, a source said.

However, the Personal Consumption Expenditure report due out on Thursday could be a high-vol. event if the Federal Reserve’s preferred inflation gauge comes in hotter than expected.

Some recent deals were struggling under the soft market conditions on Wednesday.

Builders FirstSource, Inc.’s 6 3/8% senior notes due 2034 (Ba2/BB-) sank underwater in heavy volume on Wednesday with the notes closing the day on a 99-handle.

Wesco Distribution, Inc.’s two tranches of senior notes (Ba3/BB/BB+) continued to weaken with the notes giving back nominal premiums gained on the break.

Outside of recent issues, Sinclair Broadcast Group, Inc.’s senior notes were off more than 1 point leading into earnings with market expectations for the broadcaster low.

Primary

Issuers placed $850 million of dollar-denominated junk on Wednesday.

Delek Logistics Partners, LP and Delek Logistics Finance Corp. priced an upsized $650 million issue (from $550 million) of 8 5/8% five-year senior notes (B3/BB-/BB-) at par, at the tight end of yield talk, and inside of initial guidance.

Timing was accelerated. When it was announced on Wednesday morning the deal was scheduled to remain in the market until Thursday.

Prior to upsizing and launching at the tight end of talk the deal was playing to $1.7 billion of demand, a trader said.

Elsewhere, in a Nordic execution Altera Shuttle Tankers LLC priced an upsized $200 million issue (from $150 million) of 9% four-year senior unsecured bonds.

The Wednesday euro primary market was as active as its dollar-denominated counterpart, and appeared just as hot.

German travel company TUI AG priced an upsized €500 million issue of 5 7/8% five-year sustainability-linked notes (B1/B+) at 98.93 to yield 6 1/8%, inside talk.

The issue size increased from €400 million, subsequent to undergoing a previous upsize from €300 million.

And French automotive components supplier Forvia (formerly Faurecia) kicked off an €800 million two-part offering of senior notes (Ba2/BB/BB+): five-year notes with initial talk in the low-to-mid 5% area, and seven-year notes with initial talk in the mid-to-high 5% area.

The deal is set to price Thursday.

Builders FirstSource below par

In the secondary market Builders FirstSource’s recently priced 6 3/8% senior notes due 2034 were weaker on a soft day for the market with the notes closing the day on a 99-handle.

The 6 3/8% notes fell ¼ to 3/8 point and were trading in the 99 5/8 to 99 7/8 context heading into the close, a source said.

There was $23 million in reported volume.

The large upsize and tight pricing of the notes left them little room for movement in the secondary space, sources said.

Builders FirstSource priced an upsized $1 billion, from $600 million, issue of the 6 3/8% notes at par in a Monday drive-by.

Wesco gives back

Wesco’s two tranches of senior notes gave back nominal premiums gained in the secondary space with the notes closing Wednesday wrapped around par.

Wesco’s 6 3/8% senior notes due 2029 and the 6 5/8% senior notes due 2032 continued to trade in the same context.

They were both off about 1/8 point to trade in the par to par 1/8 context heading into the market close.

The notes have traded in a tight range of par to par 3/8 since breaking for trade on Monday, sources said.

Wesco priced a $900 million tranche of the 6 3/8% notes and an $850 million tranche of the 6 5/8% notes at par in a Monday drive-by.

Sinclair down

Sinclair’s senior notes underwent selling pressure on the eve of earnings with market expectations for the broadcaster low.

Sinclair’s 4 1/8% senior secured notes due 2030 (B2/BB-) and 5½% senior notes due 2030 (Caa1/B-) both fell in active trade.

The 4 1/8% senior secured notes were down 1½ points to close the day wrapped around 71 with the yield about 10 1/8%, a source said.

There was $14 million in reported volume.

The 5½% senior notes were off about 1 point to trade at 70 in the late afternoon with the yield about 12 7/8%, a source said.

There was $12 million in reported volume.

The notes were lower leading into Sinclair’s earnings which were reported after the close of equity markets.

Earnings results were not pretty, as expected, with EBITDA decreasing 41% year over year, a source said.

Indexes

The KDP High Yield Daily index inched up 1 basis point to close Wednesday at 50.39 with the yield now 7%.

The index was down 4 bps on Tuesday and 12 bps on Monday.

The CDX High Yield 30 index was down 19 bps to close Wednesday at 106.19.

The index was up 16 bps on Tuesday and down 14 bps on Monday.

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