Vital Energy prices add-on; calendar grows; Shelf Drilling lower

By Abigail W. Adams

Portland, Me., April 1 – The domestic high-yield primary market saw only one deal price during Monday’s session.

However, activity is expected to ramp up with three deals joining the active forward calendar and the shadow calendar continuing to build.

In drive-by action, Vital Energy Inc. priced an upsized $200 million add-on to its 7 7/8% senior notes due April 15, 2032 (B2/B).

	The calendar continued to grow with Rakuten Group Inc.’s $1.25 billion offering of five-year bullet notes, Dye & Durham Corp.’s	$500 million offering of five-year senior secured notes and Herbalife International Inc.	and	HLF Financing Sarl LLC’s $700 million offering of five-year senior secured notes (Ba2/B+)	slated to price before the end of the week.
	The shadow calendar also grew with GEO Group, Inc.	and	GEO Corrections Holdings Inc.	telegraphing their intention to sell new secured and unsecured debt to refinance term loans and outstanding senior notes.
	Endo, Inc.	also telegraphed its intention to offer $1.25 billion in secured debt as part of its bankruptcy exit financing.
	Meanwhile, it was a quiet day in the secondary space with the market launching the first day of the second quarter on soft footing.
	The cash bond market was off ¼ to 3/8 point although trading volume was light with the market laser-focused on new issuance.
	Vital Energy’s 7	7/8% senior notes due 2032 were active, quickly jumping above their add-on price to return to their previous trading level.
	Outside of recent issues, Shelf Drilling Holdings Ltd.’s 9	5/8% senior secured notes due 2029 (B3/B-/B)	saw some selling pressure on Monday after the company announced it had received suspension notices from a customer in the Middle East for four of its rigs.
Vital Energy adds-on
	Vital Energy	priced an upsized $200 million, from $100 million, add-on to its 7	7/8% senior notes due April 15, 2032 (B2/B) at 100.75 to yield 7.69% in a Monday drive-by, according to a market source.
	Pricing came at the rich end of talk for a reoffer price of 100.5 to 100.75.
	Early guidance was for a reoffer price in the 100.5 area.
	The deal came to market with $165 million in reverse inquiry and was playing to $400 million of demand early Monday.
	The notes priced about 1 point below the 7	7/8% notes’ previous trading level, which they quickly recovered after breaking for trade, sources said.
	The 7	7/8% notes were trading in the 101	3/8 to 101	5/8 context heading into the market close.
The calendar
	There was a healthy buildup in the active forward calendar on Monday with the shadow calendar also filling in.
	Rakuten Group plans to price $1.25 billion in five-year bullet notes during the April 1 week with early guidance for a yield in the mid-10% area, according to a market source.
	Dye & Durham announced its long awaited $500 million of five-year senior secured notes with early guidance for a yield in the low 9% area.
	The offering was telegraphed to the market in late March.
	It is expected to price in during the April 1 week.
	Herbalife is also on deck with a $700 million offering of five-year senior secured notes.
	Early guidance is for a yield in the 11% area with pricing expected on Wednesday.
	The deal is also believed to have come into the market with a healthy amount of reverse inquiry.
	Meanwhile, the shadow calendar also grew with GEO Graph telegraphing its intention to offer new secured and unsecured debt as part of a refinancing package.
	Endo also announced plans to offer $1.25 billion in secured debt as part of its bankruptcy exit financing, with the company hoping to exit bankruptcy by late April.
	The specialty pharmaceutical company filed for Chapter 11 bankruptcy in August 2022, largely due to opioid-related litigation.
Shelf Drilling under pressure
	Shelf Drilling’s 9	5/8% senior secured notes due 2029 were under pressure on Monday after the oil driller announced a customer in the Middle East has ordered the suspension of four of its rigs.
	The 9	5/8% notes dropped about 2 points in active trade.
	They were trading at 94	7/8 with a yield of 11	1/8% heading into the market close, a source said.
	There was $22 million in reported volume.
	The rig suspension is expected to impact the company’s previous guidance, which will be updated for the first-quarter earnings report, the company said in a news release.
Indexes
	The KDP High Yield Daily index was down 63 basis points to close Monday at 50.24 with the yield now 6.9%.
	The ICE BofAML US High Yield index was down 26 bps with the year-to-date return now 1.246%.
	The CDX High Yield 30 index closed Monday at 106.98.

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