Junk: Acushnet prices; Sitio Royalties holds; Transocean flat; Hanesbrands pressured

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 27 – One junk bond issuer, Acushnet Holdings Corp., used the Wednesday U.S. dollar market to bring a new offering.

Meanwhile, it was another heavy day in the secondary space as heavy selling hit Treasuries and lifted yields to new 52-week highs.

The market launched the day strong with cash bonds up about 1/8 point and Treasuries flat, a source said.

However, selling set in midsession as the market continues to grapple with the potential for an additional rate hike before the year comes to an end and a higher-for-longer rate environment.

The cash bond market shed early gains and closed the day down ¼ to 3/8 point with the CDX index off ¾ point, a source said.

While the broader market remained heavy on Wednesday, new and recent issues continued to put in notable performances.

Sitio Royalties Corp.’s 7 7/8% senior notes due 2028 (B3/B/BB-) held on to the premium gained on the break despite a heavy day for the market.

Transocean Aquila Ltd.’s 8% senior secured first-lien notes due 2028 (B2/B) fell flat in the aftermarket with the notes continuing to trade in a tight range around their issue price in heavy volume.

Outside of recent issues, Hanesbrands, Inc.’s 9% senior notes due 2031 (B1/B+) hit a new all-time low in active trade as the company explores strategic options for one of its businesses.

Primary

Acushnet Holdings Corp. was Wednesday’s sole issuer in the dollar-denominated junk primary market.

The well-oversubscribed deal came inside of talk, on an accelerated timeline.

The Massachusetts-based supplier of golfing products priced a $350 million issue of five-year senior notes (Ba3/BB) at par to yield 7 3/8%.

It was heard to be playing to $1.75 billion of demand across 100 accounts at midmorning on Wednesday, a trader said.

A pair of dollar deals are on deck for Thursday.

Australia-based mining services company Mineral Resources Ltd. has been in roadshow mode for an $850 million offering of five-year senior notes (Ba3/BB). The general corporate purposes/capex deal has been pitched with initial guidance in the 9% area. As of Thursday morning, there was $712 million in the book, with that amount of demand spread across 59 accounts, a trader said.

Also AmeriTex Pipe & Products plans to price a $530 million offering of AmeriTex Holdco Intermediate LLC five-year senior secured notes (B2/B) on Thursday. The deal is in the market with initial talk in the high-9% to 10% area.

Reverse inquiry at or near deal size attended the launch of the Texas concrete pipe supplier’s deal, earlier in the week, but about $200 million of it was wide to the guidance, a trader said.

Sitio holds premium

Sitio Royalties’ 7 7/8% senior notes due 2028 held on to the premium gained on the break despite a heavy day for the market.

The 7 7/8% notes were largely unchanged on the day and continued to trade in the par ¼ to par ½ context in heavy volume, a source said.

There was $55 million on the tape heading into the market close.

Sitio Royalties priced an upsized $600 million, from $500 million, issue of the 7 7/8% notes at par in a Tuesday drive-by.

The yield printed at the tight end of the 7 7/8% to 8% yield talk.

While the notes priced tight, they played to strong demand with the deal oversubscribed and reverse inquiry accounting for nearly the entire original $500 million deal size, sources said.

Transocean flat

Transocean’s 8% senior secured first-lien notes due 2028 fell flat in the aftermarket with the notes continuing to trade in a tight range around their issue price.

The notes traded in a range of 99 7/8 to par 3/8 on Wednesday and closed the day wrapped around par, a source said.

There was $40 million in reported volume.

Transocean Aquila priced an upsized $325 million, from $300 million, issue of the 8% notes at par in a Tuesday drive-by.

The yield printed at the tight end of the 8% to 8¼% yield talk.

Hanesbrands new low

Hanesbrands’ 9% senior notes due 2031 hit a new all-time low in active trade on Wednesday as the company explores the sale of a business unit as its revenues decline and leverage rises.

The notes dropped almost 2 points under the selling pressure to end the day on a 95-handle.

They were trading in the 95 to 95½ context heading into the market close with the yield rising to 9 7/8%, a source said.

There was $13 million in reported volume.

Hanesbrands’ stock also sank 5.8% to close Wednesday at $3.57.

Hanesbrands’ 9% notes have been on a steady downtrend since reporting second-quarter results in early August.

The downtrend was exacerbated in late August after S&P Global Ratings downgraded the company’s unsecured debt to B+ from BB-.

S&P cited an elevated leverage of 5x for a longer period than previously forecast and decreased revenue in large part due to challenges in activewear as causes for the downgrade, Prospect News reported.

Hanesbrands announced last week that it was exploring a potential sale or other strategic options for its global Champion business.

$1 billion Tuesday outflows

The high-yield ETFs sustained a whopping $1 billion 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 had $21 million of outflows on the day.

The combined funds are tracking $1.9 billion of net outflows for the week that was set to conclude with Wednesday’s close, which would be the asset class’s biggest weekly outflow since May, according to the market source.

Indexes

The KDP High Yield Daily index gained 6 basis points to close Wednesday at 49.57 with the yield 7.87%.

The index was down 20 basis points on Tuesday and 12 bps on Monday.

The ICE BofAML US High Yield index was down 16.7 bps with the year-to-date return now 5.691%.

The CDX High Yield 30 index dropped 70 bps to close Wednesday at 100.92.

The index was down 36 bps on Tuesday and 7 bps on Monday.

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