Rakuten adds to junk bonds; W&T on deck; Venture Global at a premium; Transocean active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 11 – An add-on bond offering from Rakuten Group, Inc. priced in junkland on Wednesday, and moved off the calendar.

Meanwhile, the secondary space resumed its upward momentum with the cash bond market adding another 3/8 to ½ point on the eve of the release of December’s consumer price index report.

The report is widely expected to come in below expectations with volatility in store if the report surprises, sources said.

New paper continued to jumpstart secondary trading activity with the paper performing well alongside the broader market.

Venture Global Calcasieu Pass, LLC’s 6¼% senior secured notes due 2030 (B2/BB+) were trading at a healthy premium to their issue price although the notes were unable to break above a par-handle.

Transocean Titan Financing Ltd.’s 8 3/8% amortizing senior secured notes due 2028 (B2/B-) continued to move in heavy volume although with little change in price.

Tenet Healthcare Corp.’s 6 1/8% senior notes due 2028 continued to add in substantial volume with the notes on a strong uptrend since the start of January.

Junk bond primary

By various measures the appetite for risk, particularly among high-yield bond investors, has increased in the new year, market sources say.

The BofA Merrill Lynch US High Yield Master II Total Return Index, which returned negative-11.22% in 2022, is up 2.9% since the beginning of the year, a bond trader said.

The yield to worst of that index is 63 basis points tighter since January 1.

The spread is 45 bps tighter.

This trader has seen his sectors improve 3 3/8 points since the beginning of 2023.

Risk appetite, as reflected in tight, oversubscribed executions in the primary market, has improved as well.

Tokyo-based Rakuten Group, Inc., returning to the market on Wednesday with an upsized tap of a 10¼% short-duration unsecured issue that it priced in late November, realized over 23 bps of interest savings over the course of nine weeks, or closer to seven weeks, factoring the holidays.

The online retailer, a competitor of Amazon, priced a $450 million (upsized from $200 million) add-on to its 10¼% senior notes due Nov. 30, 2024 (BB) at 97.5 to yield 11.767%, on Wednesday.

The original $500 million issue priced at 96.968 to yield 12% on Nov. 22.

And looking to Thursday, what figures to be just the second junk bond deal to feature a triple-C rating on either side of the split since the end of the first half of 2022 is set to price.

W&T Offshore Inc. talked its $275 million offering of three-year second-lien senior secured notes (Caa1/B-) to yield 11¾% to 12% on Wednesday.

Official talk comes tight to guidance in the 12% area.

The only other deal to feature a triple-C rating since the end of the 2022 first half was Jones DesLauriers Insurance Management Inc. which priced $300 million 10½% senior notes due December 2030 (Caa2/CCC/CCC+) on December 8.

As the first half of the old year was drawing to a close, on June 15, Iris Holdings Inc., issuing $400 million of 10% senior notes due 2028 (Caa2/CCC+) backing Clearlake Capital's acquisition of Intertape Polymer Group, sent the market an unambiguous signal that risk appetite had been severely diminished as it priced those notes at 82 to yield 14.361%.

Venture Global in focus

Venture Global’s 6¼% senior secured notes due 2030 dominated activity in the secondary space on Wednesday.

While the notes were trading at a healthy premium to their issue price, they were unable to break above their par-handle.

The 6¼% notes traded as low as par ¼ at the open but continued to climb as the session progressed.

They were changing hands in the par 5/8 to par 7/8 context heading into the market close.

There was $115 million in reported volume with the issue the most actively traded of Wednesday’s session.

Venture Global priced a $1 billion issue of the 6¼% notes at par in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 6 3/8% area.

The deal was heard to be as much as 5x oversubscribed.

Transocean active

Transocean’s 8 3/8% amortizing senior secured notes due 2028 remained active in the secondary space but with little movement in price.

The notes continued to trade in the 101¾ to 102¼ context, a level reached shortly after pricing.

There was $33 million in reported volume.

In a heavily oversubscribed offering, Transocean priced a $525 million issue of the 8 3/8% notes at par.

Tenet adds

Tenet Healthcare’s 6 1/8% senior notes due 2028 continued their strong uptrend on Wednesday with the notes adding another 1 point in heavy volume.

The 6 1/8% notes traded up to a 93-handle on Wednesday.

They were changing hands in the 93 to 93½ context heading into the market close with the yield about 7 5/8%.

The notes have climbed 3 points over the past week.

Fund flows

The dedicated high-yield bond funds had $388 million of daily cash inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $243 million of inflows on the day.

Actively managed high-yield funds saw $145 million of inflows on Tuesday, the source said.

The combined funds are tracking $2.3 billion of net inflows for the week that was set to conclude at Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index rose 20 points to close Wednesday at 53.2 with the yield 6.92%.

The index shaved off 5 points on Tuesday after gaining 31 points on Monday.

The ICE BofAML US High Yield index gained 43.7 bps with the year-to-date return now 3.341%.

The index was down 3.8 bps on Tuesday after gaining 66.4 bps on Monday.

The CDX High Yield 30 index gained 63 bps to close Wednesday at 102.51.

The index was down 2 bps on Tuesday and 6 bps on Monday.

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