Junk calendar eyed; First Quantum jumps on acquisition interest; funds add $615 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 15 – Sails luffed in the high-yield primary market on Thursday, with new issue activity expected to remain muted ahead of the Juneteenth three-day holiday weekend set to commence following Friday’s close, sources said.

A pair of dollar-denominated deals are expected to price on the heels of the holiday weekend recess.

Windsor Holdings III, LLC is on the high-yield road with a $1.8 billion offering of seven-year senior secured notes (B2//BB+) backing the buyout of Univar Solutions Inc. by Apollo.

The deal comes with initial talk in the 8½% area, having arrived in the market with $1 billion of reverse inquiry behind it, according to a sellside source.

Also HighPeak Energy Inc. is shopping a $575 million offering of five-year senior notes (B3/B+/B+). Initial talk is 11½% to 12%, including a discount.

The dollar-denominated primary market sleep-walked through the past week with just two deals pricing: $570 million of 7½% senior secured notes due July 2030 (Ba3/BB/BB+) from Fortrea Holdings Inc. and $325 million of 9¾% senior notes due July 2028 (Caa1/B-) from Calumet Specialty Products Partners, LP and Calumet Finance Corp. Both issues priced at par on Monday.

That lean deal volume surprises a New York bond trader, who asserted that there is a decent shadow calendar in place and building.

The primary market could get busy in the week ahead, the trader said.

Meantime the lights should flicker up on Friday in the even sleepier euro-denominated new issue market.

Sweden’s Assemblin is expected to complete its €480 million sale of Apollo Swedish Bidco AB six-year senior secured floating-rate notes (B2/B/B) ahead of the Friday close in London. It comes with initial spread talk of Euribor plus 500 basis points and initial price talk of 96 to 97.

Buyers emerge in secondary

Meanwhile, a soft open turned into a green day for the secondary space as buyers emerged and lifted the market mid-way through the session.

The cash bond market added 1/8 to ¼ point by Thursday’s close as the market continued to digest the latest announcement from the Fed.

Federal Reserve chair Jerome Powell struck a much more hawkish tone than anticipated on Wednesday, with Fed officials signaling further rate increases in the second half of the year.

However, the market did not seem to believe the projection, sources said.

There remained a great deal of caution in the market with players slow to make moves.

“People have indecision fatigue,” a source said.

And while there remained concern about another leg down for credit given the rally in the market in the first half of the year, buyers remained active in select credits, the source said.

With activity surrounding recent issuance drying up, topical news was the driver of activity in the space on Thursday.

First Quantum Minerals Ltd.’s senior notes (/B+) jumped following news the mining company had attracted takeover interest.

Carnival Corp.’s senior notes were active although little changed after the company’s capital structure logged strong gains over the past month.

Meanwhile, inflows continued with high-yield mutual funds and exchange-traded funds adding $615 million in the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flow report.

First Quantum up on offer

First Quantum’s senior notes logged strong gains on Thursday following news the company had attracted takeover interest.

The notes added 1½ to 3 points with trading volumes nearly three times the average, a source said.

First Quantum’s 8 5/8% senior notes due 2031 were the most active in the debt stack.

The notes jumped 3 points to trade in the 102½ to 103 context heading into the market close, according to a market source.

The yield was just north of 7 7/8%.

There was $21 million in reported volume.

First Quantum’s 6 7/8 senior notes due 2027 gained 2¾ point to close the day at 98¾.

The yield was 7¼%.

There was $6 million in reported volume.

First Quantum’s 6 7/8% senior notes due 2026 gained about 1¾ points to close the day at 99½ with the yield now 7%.

There was $6 million in reported volume.

The company’s capital structure was lifted following news that it had rejected an informal takeover attempt from Barrick Gold Corp.

First Quantum gained with the company now an active takeover target, a source said.

Barrick’s interest also reflected a bullish outlook for copper.

Carnival active

Carnival’s senior notes were active but largely unchanged on Thursday after the company’s capital structure surged over the past month.

Carnival’s 5¾% senior notes due 2027 (B3/B) continued to trade on a 90-handle.

The notes stood poised to close the day at 90¼ with the yield about 8.9%.

There was $21 million in reported volume.

Carnival’s 10 3/8% senior priority notes due 2028 (B2/B+) continued to trade on a 109-handle.

The notes closed the day at 109 1/8 with the yield 7½%.

There was $13 million in reported volume.

The notes have been on an uptrend since mid-March with the uptrend turning into a steep vertical ascent since mid-May.

Carnival’s 5¾% senior notes have gained about 5 points and the 10 3/8% notes have gained about 2 points in the past month.

The strong gains came from a bullish outlook for the industry with Carnival stock undergoing a series of upgrades in the past week.

Indexes

The KDP High Yield Daily index gained 13 points to close Thursday at 50.80 with the yield 7.24%.

The index shaved off 1 point on Wednesday after adding 3 points on Tuesday and 3 points on Monday.

The ICE BofAML US High Yield index rose 22.8 basis points with the year-to-date return now 5.377%.

The index shaved off 2.2 bps on Wednesday, rose 21.9 bps on Tuesday and 3.5 bps on Monday.

The CDX High Yield 30 index gained 4 bps to close Thursday at 102.36.

The index fell 15 bps on Wednesday, gained 10 bps on Tuesday and fell 7 bps on Monday.

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