Ritchie Bros, IAA fall as merger approval questioned; Atlas Air lifted

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 6 – No issues priced in the dollar-denominated high-yield primary market on Monday.

With the J.P. Morgan Global High-yield & Leveraged Finance Conference underway in Miami, new issue business is expected later in the week, sources said.

As the March 6 week got underway there was news in the euro-denominated primary market.

Meanwhile, the secondary space was either side of unchanged in muted volume with the market pausing after gaining strength the latter part of last week.

The market opened strong with the gains expected to continue but softened as selling pressure took hold of equities midway through the session, a source said.

Recent issues and topical news were the drivers of activity in the space with the two catalysts converging around Ritchie Bros. Auctioneers Inc.’s recently priced tranches.

Ritchie Bros. 6¾% senior secured notes due 2028 (Ba2/BB+) and the 7¾% senior notes due 2031 (B1/BB-) sank in heavy volume after proxy advisors recommended Richie shareholders reject its acquisition of IAA Inc.

The news also sank IAA SpinCo.’s 5½% notes due 2027 (B2/B) more than 3 points.

Rand Parent, LLC’s 8½% first-lien senior secured notes due 2030 (Ba1/BB/BB+), backing the buyout of Atlas Air, were lifted in active trade with the notes breaking above a 96-handle.

Ritchie/IAA acquisition questioned

Ritchie’s recently priced senior notes and IAA’s 5½% notes due 2027 were under pressure in heavy volume as doubts about the completion of Richie’s acquisition of IAA surfaced.

Ritchie’s 6¾% senior secured notes due 2028 (Ba2/BB+) and the 7¾% senior notes due 2031 (B1/BB-) were dragged down 1 point after proxy advisers recommended Ritchie shareholders vote against the acquisition.

The 6¾% senior secured notes due 2028 fell ½ point on the news.

They were changing hands in the par 3/8 to par 5/8 context heading into the market close, a source said.

They closed last Friday wrapped around 101.

The 7¾% senior notes due 2031 sank 1 point.

The notes opened Monday in the 101¾ to 102 context.

However, they sank to the par ¾ to 101 context by market close, a source said.

The tranche was the most actively traded issue in the secondary space with $22 million in reported volume.

Richie Bros. priced a $550 million tranche of the 6¾% notes and an $800 million tranche of the 7¾% notes at par on March 1.

Proceeds, along with proceeds from its term loan A and cash, were to be used to fund the cash portion of Richie’s $7 billion acquisition of IAA and to refinance IAA’s debt.

The proceeds are currently held in escrow and the notes will be “torn up and paid back at par,” if the acquisition is not consummated, a source said.

Doubts about the acquisition drove IAA’s 5½% notes due 2027 down more than 3 points.

IAA’s 5½% notes fell to 98 in heavy volume.

There was $13 million on the tape during Monday’s session.

The 5½% notes were changing hands in the par ¾ to 101 context heading into Monday’s session.

IAA’s 5½% notes were subject to a full redemption on March 20 at a redemption price of 102.75 on the condition that the merger is completed prior to the redemption date.

However, the completion of the merger is in doubt after two proxy advisory firms recommended shareholders reject the acquisition.

The shareholder vote is on March 14.

Atlas Air lifted

Atlas Air’s 8½% first-lien senior secured notes due 2030 broke their strong downtrend on Monday with the notes lifted 1 point to break above a 96-handle.

The notes closed Monday wrapped around 97 with the yield falling to 9%, a source said.

There was $13 million in reported volume.

The notes have been on a downtrend since shortly after pricing at par on Feb. 9.

They sank to a 96-handle in mid-February.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $769 million of inflows on the day.

Actively managed high-yield funds sustained $540 million of outflows on Friday, the source said.

The combined funds are tracking $644 million of net outflows for the week that will conclude with Wednesday's close.

During the first two months of 2023 the combined funds sustained $11.7 billion of net outflows, the market source said, adding that compares to much larger outflows of $20.4 billion during the first two months of 2022.

Indexes

The KDP High Yield Daily index gained 19 points to close Monday at 51.4 with the yield now 7.34%.

The index posted a cumulative decline of 60 points on the week last week.

The ICE BofAML US High Yield index rose 33 basis points with the year-to-date return now 3.217%.

The index posted a cumulative gain of 84.3 bps on the week last week

The CDX High Yield 30 index gained 7 bps to close Monday at 102.66.

The index posted a cumulative gain of 125 bps on the week.

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