Primary sells $4.35 billion; TriNet flat; Carnival gains; Diamond Sports under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Feb. 24 – A sizable slate of drive-by business materialized on Wednesday: half a dozen issuers with single-tranche, junk-rated, dollar-denominated tranches priced a total face amount of $4.35 billion.

Meanwhile, it was another volatile day in the secondary space with the market weak at the open but largely unchanged by market close.

As market players awaited the slew of deals in the pipeline, recent deals and topical news were the drivers of trading activity.

While nominally improved in intraday activity, TriNet Group, Inc.’s recently priced 3½% senior notes due 2029 (Ba3/BB) were again flat heading into the market close.

Post Holdings Inc.’s 5% senior notes due 2026 were active with the notes trading up on news they would be taken out with proceeds from the company’s new offering.

Carnival Corp.’s 5¾% senior notes due 2027 (B2/B+) continued their upward momentum with the notes reaching a 102-handle on Wednesday.

Diamond Sports Group LLC and Diamond Sports Finance Co.’s secured and unsecured notes were active with both trading off on news that a new debt exchange might be in the works.

A burst of deals

Wednesday's burst of issuance took place as rates, which have been gapping upward since the beginning of the year, underwent yet another substantial move, traders noted.

Ten-year government paper hit an intraday high above 1.4%, then settled out at 1.386% at the close, a trader said. The 10-year yield's intraday Tuesday tight was below 1.35%, the source added.

The big issuers of the day included Post Holdings, Inc. which priced a $1.8 billion issue of 4½% 10.5-year senior notes (B2/B+) at par, at the tight end talk, in a deal heard to be playing to as much as $3 billion of orders, at one point.

The only issuer to do an upsize on Wednesday was DaVita Inc. which priced a $1 billion add-on to its 4 5/8% senior notes due June 1, 2030 (from $750 million), at the rich end of talk, and heard to be playing to $2.4 billion of orders.

There was also a buildup of the active calendar, all of it business expected to clear ahead of the coming weekend.

Conspicuous among Wednesday's roadshow announcements, Ardagh announced $2.65 billion equivalent of green bonds in four tranches to be pitched on a Thursday investor call, and expected to price Friday (see related stories in this issue).

TriNet flat

While TriNet’s 3½% senior notes due 2029 were nominally improved in intraday activity, the notes were again flat heading into the market close.

TriNet’s 3½% senior notes traded as high as par ½. However, they dropped back down to par 1/8 heading into the market close, a source said.

The notes were also stuck in the par to par 1/8 context after breaking for trade on Tuesday.

TriNet priced a $500 million issue of the 3½% notes on Tuesday.

The yield printed at the wide end of talk in the 3 3/8% area. Initial guidance was in the mid-to-high 3% area.

Post gains

Post Holdings’ 5% senior notes due 2026 were active and posting gains following news the notes would be taken out with proceeds from the new offering.

The 5% notes gained ¾ point and were changing hands just shy of 104½ heading into the close, a source said.

There was more than $24 million of the notes on the tape.

The notes were active and posting gains with proceeds from the company’s $1.8 billion drive-by to be used to redeem the notes.

Carnival rebound continues

Carnival’s 5¾% senior notes due 2027 continued their upward momentum on Wednesday with the notes trading up to a 102-handle.

The 5¾% notes traded as high as 102 3/8 during Wednesday’s session and were changing hands in the 102 to 102¼ context heading into the market close, according to a market source.

There was more than $42 million in reported volume.

The notes struggled their initial days in the market and traded as low as 99¼ as hedge funds with short positions drove the notes down, sources said.

However, the notes broke par on Feb. 19 and have steadily climbed since.

They jumped to a 101-handle on Monday on news the company was planning a $1 billion secondary offering.

Carnival announced on Wednesday that it had completed the sale of 40,450,619 shares with a maximum offering price of $25.10, according to a 424B5 filing with the Securities and Exchange Commission.

Diamond Sports under pressure

Diamond Sports’ secured and unsecured notes were under pressure on Wednesday after parent company Sinclair Broadcast Group Inc. announced earnings and said the company was exploring a new debt exchange.

The 5 3/8% senior secured notes due 2026 sank as much as 5 points following the news before paring their losses to close the day down 1½ points at 75½, sources said.

The 6 5/8% senior notes due 2027 dropped as much as 4 points before also paring their losses to close the day down about 2 points at 54.

Both tranches were active with $28 million and $32 million in reported volume respectively.

Following disappointing earnings, the company announced a new debt exchange for the notes was in the works.

A debt exchange for the 6 5/8% attempted in June 2020 was the subject of controversy with a group of holders bitterly opposed to the transaction.

Sinclair attempted to exchange the 6 5/8% notes for new 12¾% secured notes due 2026 to reduce its debt load.

Holders argued at the time they would be forced to take steep losses on the currently undervalued notes in the exchange.

Only $66 million, or 3.62% of the outstanding amount of the 6 5/8% notes were tendered in the exchange, Prospect News reported.

The notes were trading in the mid-60s heading into the exchange offer, according to Trace data.

Big Tuesday outflows

The dedicated high-yield bond funds sustained a whopping $1.4 billion of net daily outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs took the brunt, sustaining $1.09 billion of outflows on the day.

Actively managed funds saw $310 million of outflows on Tuesday, the source said.

Indexes

The KDP High Yield Daily index slid 2 points to close Wednesday at 69.76 with the yield now 3.87%.

The index was down 8 points on Tuesday and 2 points on Monday.

The ICE BofAML US High Yield index rose 1.2 bps with the year-to-date return now 1.196%.

The index was down 6.6 bps on Tuesday and 8.7 bps on Monday.

The CDX High Yield 30 index gained 28 bps to close Wednesday at 109.14. The index was up 26 bps on Tuesday after dropping 40 bps on Monday.

© 2015 Prospect News.
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