Copeland add-on prices; Husky, Shearer’s Foods add to gains; funds add $2.39 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 1 – On the heels of the torrid pace set during the first three sessions of the week, high-yield primary market news flow moderated substantially on Thursday.

Copeland, the climate technologies business in which Blackstone acquired a majority stake from Emerson Electric Co. last year, completed an upsized $700 million equivalent two-part placement (from $500 million equivalent) of senior secured notes due Dec. 15, 2030 (Ba3/BB-/BB+).

The deal came in two add-on tranches to EMRLD Borrower LP and Emerald Co-Issuer Inc. notes that were issued last May in support of the Blackstone deal.

An upsized $500 million tap (from $450 million) of the dollar-denominated 6 5/8% notes priced at 100.75, with a 6.486% yield to maturity. That was at the rich end of the 100.5 to 100.75 price talk but toward the cheap end of the 100.5 to 101 initial guidance.

A €230 million tap (about $250 million equivalent) of the euro-denominated 6 3/8% notes priced at 104.25, with a 5.618% yield to maturity, at the rich end of the 104 to 104.25 price talk.

In the wake of that action there was $1.75 billion of new issue business left to price Friday.

Allied Universal plans to price a $500 million offering of Allied Universal Holdco LLC senior secured notes due February 2031 (B3/B), in the market with initial talk in the low-8% area.

Meanwhile Howden Group wrapped up its roadshow on Thursday, setting price talk in its $1.25 billion two-part offering.

The deal includes a $750 million tranche of Howden UK Refinance plc/Howden US Refinance LLC seven-year senior secured notes (B2/B) talked to yield in the 7 3/8% area, tight to initial guidance in the mid-7% area.

It also features a $500 million tranche of Howden UK Refinance 2 plc/Howden US Refinance LLC eight-year senior unsecured notes (Caa1/CCC+) talked to yield in the 8 3/8% area, tight to initial guidance in the mid-8% area.

Howden is also set to price ahead of the coming weekend.

Market eyes May, June for cut

Meanwhile, the secondary space shook off the heaviness of the previous session with the cash bond market adding ¼ point as markets continue to digest the Fed’s Wednesday announcement, a source said.

While chair Jerome Powell struck a slightly hawkish tone and squashed hopes for a March rate cut, Fed officials are still projecting up to three cuts in 2024.

With March now off the table, market players are eyeing May and June as the potential start of the rate-cut campaign, a source said.

While the macro remains a guiding force for the future direction of the market, the secondary space has been strong and sources do not expect that to change.

While returns one month into the year have been largely flat, quality companies are offering paper with historically high yields and investors are jumping in, a source said.

New issues remain where money is being put to work in the market with the majority of new paper playing to strong demand and shooting higher in the secondary space.

Husky Injection Molding Systems Ltd./Titan Co Borrower, LLC’s 9% senior secured notes due 2029 (B3/B-) and Fiesta Purchaser, Inc.’s 7 7/8% senior secured notes due 2031 (expected ratings B3/B) supporting the buyout of Shearer’s Foods were no exception.

The notes continued to add after a strong break the previous session.

However, Ineos Group’s two tranches of senior secured notes (Ba3/BB/BB+) bucked the trend with strong market conditions failing to lift the notes.

Both the dollar- and euro-denominated tranches closed the day underwater.

Meanwhile, money continued to enter the market with high-yield mutual funds and exchange-traded funds seeing inflows of $2.39 billion in the week through Wednesday’s close, a source said.

The high-yield market has now seen five consecutive weeks of inflows.

Making gains

Husky’s 9% senior secured notes due 2029 and Shearer’s Foods’ 7 7/8% senior secured notes due 2031 continued to add to the strong gains made on the break.

Husky’s 9% senior notes due 2029 edged up 1/8 to ¼ point.

They shot as high as 101 7/8 during the session but settled into the 101 to 101 3/8 context heading into the market close, a source said.

There was $126 million in reported volume.

Husky priced a $1 billion issue of the 9% notes at par on Wednesday.

The yield printed 25 basis points tighter than the tight end of the 9¼% to 9½% yield talk.

Shearer’s Foods’ 7 7/8% senior secured notes due 2031 were also pushing higher after a strong break.

The 7 7/8% notes were up another ¼ to 3/8 point.

They were trading in the 101¼ to 101½ context heading into the market close.

There was $42 million in reported volume.

Fiesta Purchaser priced a $500 million issue of the 7 7/8% notes at par on Wednesday in support of the buyout of Shearer’s Foods.

The yield printed 12.5 basis points inside of yield talk in the 8 1/8% area.

Ineos struggles

While the majority of deals to price in January have played to strong demand and put in solid performances in the secondary space, Ineos’ two tranches of senior notes were an outlier.

Ineos US Finance LLC’s 7½% senior secured notes due 2029 and Ineos Finance plc’s euro-denominated 6 3/8% senior secured notes due 2029 both struggled in the aftermarket and closed the day below par.

The 7½% senior secured notes traded as high as par 1/8 in intraday activity.

However, the real market for the notes was in the 99½ to par context with the notes set to close the day at 99¾, sources said.

The 6 3/8% notes were marked at 99¼ bid, 99¾ offered, a source said.

While Ineos’ dollar-denominated tranche priced cheap compared to the BB index, the offering was not well received, sources said.

Ineos priced a $725 million tranche of the 7½% notes and an €850 million tranche of the 6 3/8% notes at par on Wednesday.

The 7½% notes priced at the tight end of the 7½% to 7¾% yield talk; the 6 3/8% notes priced at the tight end of yield talk in the 6½% area.

Indexes

The KDP High Yield Daily index gained 10 bps to close the day at 50.74 with the yield 6.74%.

The index was unchanged on Wednesday, shed 7 bps on Tuesday and inched up 1 bp on Monday.

The ICE BofAML US High Yield index added 25.3 bps with the year-to-date return now 0.272%.

The index was off 6.9 bps on Wednesday, fell 2.8 bps on Tuesday and gained 14.9 bps on Monday.

The CDX High Yield 30 index added 27 bps to close Thursday at 105.81.

The index was down 45 bps on Wednesday and 17 bps on Tuesday after adding 14 bps on Monday.

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