Post Holdings, NOVA drive-by; Stena, Ardonagh on deck; Allied struggles; Catalent surges on takeover

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 5 – An active Monday session in the dollar-denominated high-yield primary market saw two drive-by issuers price a combined total of $1.65 billion of junk.

Post Holdings, Inc. priced an upsized $1 billion issue (from $875 million) of eight-year senior secured notes (Ba1/BB) and NOVA Chemicals Corp. priced a $650 million issue of six-year senior notes (Ba3/B+).

The active new-issue calendar also grew with Stena International SA and Ardonagh Group announcing new offerings.

Talk also surfaced on Crash Champions LLC’s $650 million offering of five-year senior secured notes (B3/B-) with pricing expected on Tuesday.

Meanwhile, it was a soft start to the week in the secondary space on Monday with Treasury yields again shooting higher as markets digested Federal Reserve chair Jerome Powell’s “60 Minutes” interview.

Powell continued to stress patience and caution before engaging in rate cuts, which further dashed market hopes for imminent rate cuts.

“He’s basically telling the market that it’s wrong,” a source said. The market had been pricing in up to six rate cuts in 2024.

The 10-year Treasury yield continued to zoom above the 4% threshold, a barrier it broke below as Treasuries rallied last Wednesday around the Fed announcement.

The cash bond market fell ¼ point with year-to-date returns sinking back into negative territory.

New issues and topical news were the drivers of activity in the space on Monday with the trend of strong aftermarket performances from new deals showing signs of waning.

Allied Universal Holdco LLC’s 7 7/8% senior secured notes due 2031 (B3/B) struggled in the aftermarket and closed the day underwater.

Howden Group’s (B2/B) secured and unsecured notes were coming in from the heights reached on the break on Monday; however, they maintained a healthy premium in active trade.

While the broader market was heavy on Monday, Catalent Pharma Solutions, Inc.’s senior notes (B3/B) skyrocketed after Novo Nordisk’s parent company announced its $16.5 billion acquisition of the company.

Monday drive-bys

An active Monday session in the dollar-denominated high-yield primary market saw two drive-by issuers place a combined total of $1.65 billion of junk.

Executions appeared to be a mixed bag.

Post Holdings priced an upsized $1 billion issue (from $875 million) of eight-year senior secured notes (Ba1/BB) at par to yield 6¼%, at the tight end talk.

The notes were trading well at par ¾ bid, 101 1/8 offered, late Monday afternoon, according to a trader who added that the deal was heard to have played to $4 billion of demand.

Meanwhile, NOVA Chemicals priced a $650 million issue of six-year senior notes (Ba3/B+) at par to yield 9%, at the wide end of the 8¾% to 9% talk.

There were a lot of limit orders at 9%, according to a trader who saw the new bonds trading at 99¾ bid, par 1/8 offered, late Monday afternoon.

Some investors expected the bonds to trade well if they priced at the wide end of talk, but that does not appear to be the case, the trader said.

Active calendar

Away from Monday’s executions the active new-issue calendar grew.

Stena International plans to price a $400 million offering of seven-year senior secured notes (Ba2/BB+) on Tuesday. Initial talk is in the 7½% to 7¾% area.

Elsewhere UK-based insurance broker Ardonagh Group began a roadshow for approximately $2.04 billion equivalent of notes in three tranches.

Ardonagh Finco Ltd. is offering seven-year senior secured notes in tranches sized $500 million and €500 million.

Ardonagh Group Finance Ltd. is offering a single $1 billion tranche of eight-year senior unsecured notes.

Initial talk on the dollar-denominated tranches has the seven-year secured notes coming to yield in the 8% area, and the eight-year unsecured notes coming to yield in the 9% area.

Among deals that carried over from last week, Crash Champions talked its $650 million offering of Crash Financing Inc. five-year senior secured notes (B3/B-) to yield in the 9% area.

Books are scheduled to close at noon ET Tuesday.

Official talk comes inside of early guidance in the low-to-mid 9% area.

The deal was heard to be playing to $1.9 billion of demand late Monday morning, a trader said.

Allied struggles

Allied’s new 7 7/8% senior secured notes due 2031 sank underwater in heavy volume on Monday after a flat break the previous session.

The 7 7/8% notes were off ½ point under Monday’s heavy market conditions.

They opened the day below par and continued to sink as the session progressed.

The notes closed the day in the 99¼ to 99¾ context, a source said.

There was $75 million in reported volume.

The notes were wrapped around par after breaking for trade last Friday.

The notes were trading lower alongside the broader market with the large upsize contributing to their weakness, sources said.

Allied Universal priced an upsized $1 billion, from $500 million, issue of the 7 7/8% notes at par on Friday.

The yield priced in the middle of talk in the 7 7/8% area.

Howden comes in

Howden’s 7¼% senior secured notes due 2031 (B2/B) and 8 1/8% senior notes due 2032 (Caa1/CCC+) were coming down from the heights reached on the break in active trade on Monday.

However, both tranches maintained a healthy premium to their issue price.

The 7¼% senior secured notes due 2031 were outperforming their unsecured counterparts.

The notes were off about ½ point to trade in the par 3/8 to par 5/8 context, a source said.

There was $56 million in reported volume.

Howden’s 8 1/8% senior notes due 2032 fell about 5/8 point with the notes closing the day in the par 1/8 to par 3/8 context.

There was $40 million in reported volume.

Both tranches traded as high as 101 on the break, a source said.

Howden priced an upsized $1 billion, from $750 million, tranche of Howden UK Refinance plc/Howden US Refinance LLC 7¼% senior secured notes at par.

The yield printed at the tight end of yield talk in the 7 3/8% area.

The deal also included $500 million tranche of Howden UK Refinance 2 plc/Howden US Refinance LLC 8 1/8% senior notes that also priced at par.

The yield printed tighter than talk in the 8 3/8% area.

Catalent’s acquisition

While the broader market was heavy on Monday, Catalent’s senior notes soared after Novo announced its $16.5 billion acquisition of the company.

Catalent’s 3½% senior notes due 2030 jumped almost 10 points to a 97-handle, a source said.

They were trading in the 97 to 97½ context in heavy volume, a source said.

There was $37 million on the tape.

The biopharma’s 3 1/8% notes due 2029 jumped 9 points to also trade on a 97-handle.

The notes were also marked in the 97 to 97½ context heading into the market close.

There was $24 million in reported volume.

The 5% senior notes due 2027 climbed 2 points to close the day wrapped around 99½.

There was $23 million in reported volume.

Catalent’s senior notes saw outsized gains after Novo Holdings announced it would acquire the company in an all-cash transaction with an enterprise value of $16.5 billion.

The deal is expected to close by the end of 2024.

Fund flows

Actively managed high-yield funds saw $109 million of daily cash inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $22 million of outflows on Friday, the source said.

Indexes

The KDP High Yield Daily index was down 24 bps to close Monday at 50.35 with the yield now 6.94%.

The index fell 11 bps on the week last week.

The ICE BofAML US High Yield index fell 33.6 bps with the year-to-date return now negative 0.321%.

The index gained 4.8 bps on the week last week.

The CDX High Yield 30 index was down 22 bps to close Monday at 105.72.

The index was down 8 bps on the week last week

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