EquiptmentShare.com awaited; junk bond calendar looks ahead; Tenet holds

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 3 – The high-yield bond primary market put a goose egg on Wednesday, although one deal had been expected to price.

A new issue from EquipmentShare.com Inc. was reported as delayed, even as the new issuer calendar added some names.

Meanwhile, the moment the market had been waiting for – the Federal Open Market Committee rate-hike announcement and address by chair Jerome Powell – failed to provide the clarity the market had hoped for.

The secondary space was strong heading into the rate-hike announcement and Powell’s subsequent press conference.

“Some ETFs and Algo-driven funds were putting out OWICs before the Fed,” a source said. “Then they changed to BWICs.”

While the Fed delivered the 25 basis points rate hike campaign widely expected and signaled an end to its monetary tightening campaign, Powell’s assurance about the stability of the banking sector and the low probability of a recession did little to assuage investors.

Powell’s warnings about the disastrous consequences if a resolution to the debt-ceiling debate in Congress is not resolved in a timely manner also sent jitters through the market.

However, while the secondary space was unable to hold on to its early-day gains, the market closed the day largely flat with indecision still high.

While ETFs turned to sellers into the close, real money accounts were adding to their positions in certain credits.

New paper continued to dominate the tape with Tenet Healthcare Corp.’s 6¾% senior secured first-lien notes due 2031 (B1/BB-/BB-) in focus.

The notes were able to hold on to the nominal gains made on the break, although they were largely unchanged during Wednesday’s session.

The new issue sparked activity in Tenet’s 6 1/8% senior notes due 2028 (B3/B-) although with little movement in price.

Meanwhile, concerns about the stability of the banking sector remained strong on Wednesday as Western Alliance Bancorporation’s capital structure continued to fall with the bank’s 3% senior notes due 2031 (Ba1) falling another 3 points after an 8-point drop the previous session.

Elsewhere, Six Flags Entertainment Corp.’s 7¼% senior notes due 2031 (B3/B) stabilized on Wednesday after heavy selling in the name dragged it to a fresh low the previous session.

EquipmentShare.com

The management of prospective debut issuer EquipmentShare.com Inc. has seen the price of its debt refinancing bond gap higher since the beginning of the week.

The word, late Tuesday, was that the finish line was nearly in sight, albeit at a higher rate, along with some covenant concessions.

On Wednesday morning news surfaced that the company downsized its offering of five-year second-lien senior secured notes (B1/B-) to $600 million from $750 million, while guidance went higher.

The deal was talked with a 9% coupon at OID 97.074 to 98.036 to yield 9½% to 9¾%, well wide of early guidance in the mid-to-high 8% area.

However, there was no mention of covenant changes.

The deal was set to price later Wednesday.

Late in the day, however, the market heard that EquipmentShare.com will be Thursday business.

And pricing has moved even further north, a sellside source said, perhaps furiously further, with the price now expected to move above 10%.

Calendar

Meanwhile the active new issue calendar grew on Wednesday.

Copeland, the climate technologies business in which Blackstone is acquiring a majority stake from Emerson Electric Co., plans to place approximately $2.8 billion equivalent of senior secured notes due Dec. 15, 2030 (Ba3/BB-/BB-) on Thursday.

The deal, in the market via special purpose issuer Emerald Debt Merger Sub LLC, features dollar-denominated and euro-denominated tranches: $2.25 billion, initial price talk in the high-6% area, and $500 million equivalent of euro-denominated notes, initial price talk in the mid-6% area.

The buzz in the market holds that the Copeland deal is the subject of a truly massive amount of reverse inquiry, far exceeding the size of the notes offer.

Also on Wednesday Aventiv Technologies LLC unveiled its $400 million offering of four-year first-lien senior secured notes (B3/B), which it expects to price before the end of the week.

Tenet holds nominal gains

Tenet’s new 6¾% senior secured first-lien notes due 2031 held on to the nominal gains made on the break, although the notes were flat during Wednesday’s session.

The 6¾% notes were trading in a tight range between par ¼ and par ½ in heavy volume, a source said.

There was $112 million on the tape.

In a heavily oversubscribed offering, Tenet priced a $1.35 billion issue of the 6¾% notes at par in a Tuesday drive-by.

Pricing came at the wide end of the 6½% to 6¾% yield talk.

Tenet’s refinancing deal sparked activity in its 6 1/8% senior notes due 2028.

While the notes were active, there was little movement in price with the notes continuing to trade on a 96-handle.

The notes were trading in the 96 to 96½ context heading into the market close with the yield about 7%, a source said.

There was $33 million in reported volume.

Western Alliance lower

In a sign that the turmoil in the banking sector is far from over, Western Alliance’s 3% senior notes due 2031 continued their downfall on Wednesday despite Powell’s assurance of the soundness of the banking sector.

The 3% notes fell another 3 points to close the day at 65 with the yield now 18¼%, a source said.

There was $19 million in reported volume.

The notes sank 8 points on Tuesday with the regional bank eyed as one of the weakest links in the sector.

Six Flags stabilizes

Six Flags’ recently priced 7¼% senior notes due 2031 stabilized on Wednesday after heavy selling in the name dragged it to a fresh low the previous session.

The 7¼% notes were largely unchanged on Wednesday with the notes continuing to trade in the 96½ to 97 context.

There was $38 million in reported volume.

The notes have struggled since hitting the secondary space with Tuesday marking their lowest level since the $800 million issue priced at 99.248 to yield 7 3/8% on April 26.

Fund flows

High-yield ETFs sustained $270 million of daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds were positive on the day, posting $15 million of inflows on Tuesday, the source said.

The combined funds are tracking $134 million of net outflows for the week that was set to conclude with Wednesday’s close, according to the market source.

Should weekly outflows be reported by fund-tracker Refinitiv Lipper on Thursday afternoon, such outflows would represent the high-yield bond asset class’s first negative flow numbers since late March, the source added.

Indexes

The KDP High Yield Daily index fell 72 points to close Wednesday at 50.91 with the yield 7.2%.

The index was down 24 points on Tuesday and 11 points on Monday.

The ICE BofAML US High Yield index rose 11.1 bps with the year-to-date return now 4.411%.

The index was down 27.7 bps on Tuesday and 10.6 bps on Monday.

The CDX High Yield 30 index fell 32 bps to close Wednesday at 100.09.

The index was down 61 bps on Tuesday and 36 bps on Monday.

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