Junk: Heartland Dental prices; EquipmentShare at a premium; Copeland struggles; QVC pops

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 5 – The domestic high-yield primary market capped the end to an active week with one deal clearing the market.

Heartland Dental, LLC and co-issuer Heartland Dental Finance Corp. priced an upsized $535 million issue of five-year senior secured notes (B2/B).

Two deals remain on the forward calendar – Calderys Financing, LLC’s $550 million offering of five-year senior secured notes (B2) and Aventiv Technologies LLC’s $400 million offering of four-year first-lien senior secured notes (B3/B) – with pricing expected in the week ahead.

Meanwhile, it was a strong end to a volatile week in the secondary space with buyers returning to the market en masse.

“Today everything is rallying,” a source said.

The cash bond market climbed ¼ to 3/8 point on Friday, paring its losses on the week.

The market was propelled higher following the April U.S. non-farm payrolls report, which came in much hotter than expected but not hot enough to warrant continued aggression from the Fed, a source said.

The report also helped alleviate recession concerns that contributed to the risk-off sentiment in the market the past few sessions.

New paper remained in focus although the deals to clear the primary market on Thursday were following different trajectories.

While EquipmentShare.com Inc.’s 9% second-lien senior secured notes due 2028 (B3/B-) struggled during bookbuilding, the notes traded with a strong premium in the aftermarket with the cheapness of the deal hard to ignore.

However, Copeland’s 6 5/8% senior secured notes due 2030 (Ba3/BB-/BB-), which were heard to have played to strong demand during bookbuilding, were struggling in the aftermarket with the notes dipping below par.

Tenet Healthcare Corp.’s 6¾% senior secured first-lien notes due 2031 (B1/BB-/BB-) recouped their losses from the previous session to return to their previous level.

Outside of new paper, QVC Inc. was in focus with entire curve jumping 5 to 7 point after its parent company posted better-than-expected earnings.

Heartland prices

On an otherwise quiet spring Friday – Cinco de Mayo – Heartland Dental priced an upsized $535 million issue (from $500 million) of senior secured notes (B2/B) at par to yield 10½%, in the middle of talk.

Late Friday afternoon the notes were trading at par bid, par 3/8 offered, a trader said.

The notes mature on April 30, 2028, but are subject to springing maturity provisions.

At Friday’s close an active dollar-denominated new issue calendar was in place for the week ahead.

Calderys Financing is on the road with a $550 million offering of five-year senior secured notes (B2), in the market with early guidance in the high-10% to 11% area.

The roadshow runs through Tuesday.

And Aventiv Technologies is shopping a $400 million offering of four-year first-lien senior secured notes (B3/B).

EquipmentShare.com at a premium

EquipmentShare.com’s 9% second-lien senior secured notes were putting in a strong performance in the aftermarket despite struggling during bookbuilding.

The 9% notes climbed nearly 1 point above their discounted issue price.

They traded up to a 95-handle and were marked at 95¼ bid, 95¾ offered heading into the market close.

The yield was 10¼%.

While there were still concerns about the business, which caused the deal to drag in the primary market, the hefty yield drove the notes higher in the secondary.

“That’s hard to stay away from,” a source said.

EquipmentShare.com priced a downsized $640 million, from $750 million, issue of the 9% notes at 94.26 to yield 10½% on Thursday.

The issue price came more than 2.81 points beyond the cheap end of the 97.074 to 98.036 price talk.

The 10½% yield came 75 basis points beyond the wide end of the 9½% to 9¾% yield talk.

Copeland struggles

Copeland’s 6 5/8% senior secured notes due 2030 were struggling in the aftermarket despite reported strong demand for the notes during bookbuilding.

The 6 5/8% notes traded as low as 99 5/8. However, the majority of trades were in the 99 7/8 to par context, a source said.

The deal priced on the screws with holders looking to get out at issue price, a source said.

Copeland priced a $2.275 billion tranche of the 6 5/8% notes at par on Thursday as part of a two-tranche, dual-currency offering.

The 6 5/8% notes priced at the tight end of talk for a yield in the 6¾% area.

The deal also included a €455 million tranche of senior secured notes due Dec. 15, 2030 that priced at par to yield 6 3/8%.

Tenet recoups losses

Tenet’s recently priced 6¾% senior secured first-lien notes due 2031 recouped their losses from the previous session with the notes regaining their previous level.

The 6¾% notes added ½ point on Friday to once again trade in the par ¼ to par ½ context, a source said.

The notes, which priced at par on Tuesday, have largely traded at that modest premium level since breaking for trade.

However, they were dragged down to par under Thursday’s heavy market conditions.

QVC pops

QVC’s senior notes were the largest gainers of Friday’s session with the notes popping 5 to 7 points after parent company Qurate Retail, Inc. posted better-than-expected results.

QVC’s soon-to-mature 4.85% senior secured notes due April 1, 2024 (B2/B-) jumped 6 points with the notes trading in the 92¾ to 93¼ context heading into the market close.

The yield was about 13½%.

QVC’s 4.45% senior secured notes due 2025 (B2/B-/B+) jumped 7 points to close the day at 79½ with the yield falling to 18½%.

The 4¾% senior secured notes due 2027 jumped 6 points to close the day at 54 bid, 55 offered with the yield about 23¾%.

Expectations were low heading into Qurate’s earnings report with the market anticipating the company to breach the covenants on its debt.

QVC has been an ugly credit and has had “a rough ride throughout the year,” a source said.

While market players had priced in the worst heading into earnings, they came out significantly better than expected with the company also addressing its plan for its 2024 maturities, the source said.

Fund flows

High-yield ETFs sustained $1.346 billion of daily cash outflows on Thursday, according to a trader who added that it was the third-largest daily outflow of the year from the junk ETFs.

Also on Thursday, fund tracker Refinitiv Lipper reported that the dedicated high-yield bond funds sustained $1.58 billion of net outflows in the week to the Wednesday, May 3 close.

Those outflows follow four consecutive weekly net inflows that totaled $7.7 billion, a market source said.

The dedicated junk bond funds have now seen $9.9 billion of net outflows for 2023 to date, according to the market source.

Indexes

The KDP High Yield Daily index gained 12 points to close Friday at 50.79 with the yield 7.26%.

The index fell 24 points on Thursday, 72 points on Wednesday, 24 points on Tuesday and 11 points on Monday.

The index posted a cumulative decline of 119 points on the week.

The ICE BofAML US High Yield index rose 33.34 bps with the year-to-date return now 4.267%.

The index fell 47.8 bps on Thursday, rose 11.1 bps on Wednesday and was down 27.7 bps on Tuesday and 10.6 bps on Monday.

The index posted a cumulative decline of 41.66 bps on the week.

The CDX High Yield 30 index gained 63 bps to close Friday at 100.3.

The index was down 42 bps on Thursday, 32 bps on Wednesday, 61 bps on Tuesday and 36 bps on Monday.

The index posted a cumulative decline of 108 bps on the week.

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