Rent-A-Center outperforms; Victra, Full House Resorts, Danaos soar; deals ready for Monday

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Feb. 5 – It was a quiet day in the high-yield primary market with Great Western Petroleum, LLC revised over the day, but final details unavailable at press time.

Even though it was a calm end to the week, there is already announced expected business in the week ahead.

Meanwhile, the secondary space rounded out a strong week on firm footing.

The overall space was well-bid with buyers flocking back to risk assets on the heels of positive earnings reports and the anticipated federal stimulus package, sources said.

Credit spreads tightened with CCC credits the outperformers, according to a BofA Global Research Report.

New paper continued to dominate the tape with the deals to price during Thursday’s session soaring.

Rent-A-Center, Inc.’s 6 3/8% senior notes due 2029 (B2/B) jumped to a 104-handle in active trading.

While the issues were small, Danaos Corp.’s 8½% senior notes due 2028 (Caa1/B) and Full House Resorts, Inc.’s 8½% senior notes due 2028 (Caa1/B-) were active with both more than 2 points above their issue prices.

The issues were part of a growing trend of CCC-credits that are tapping the high-yield market with the risk-on sentiment strong among investors.

LSF9 Atlantis Holdings, LLC and Victra Finance Corp.’s (Victra) 7¾% senior notes due 2026 (B2/B/B+) were also more than 2 points above their issue price.

Great Western

Great Western Petroleum had the stage to itself on Friday.

The deal, which had been expected to clear ahead of the weekend, underwent a change in size, and structure, and saw a big upward revision in price talk.

The company now intends to price a principal amount of $311,875,000 of senior secured second-lien notes, down from $350 million.

Of the revised amount $235 million of the notes are being offered to investors, while $75 million are being issued in connection with an exchange of all of the company’s senior notes due 2025.

The tenor decreased to four years from five years.

New talk specifies a 12% coupon (up from 11¼%) at an unchanged issue price of 97.5, to yield 12.734%, (up from 11.93%).

The deal is essentially an amend-and-extend trade, according to market sources who noted on Friday that the Colorado energy company's existing bonds are trading at distressed levels (in the 60s).

Operationally, Great Western Petroleum is heard to lately be on firmer footing, a trader said on Friday.

Although books on the revised deal were scheduled to close just ahead of Friday's market close, no deal terms were available at press time.

Week ahead

In the week ahead, Northern Oil and Gas, Inc., and Spanish Broadcasting System Inc. are in the market with announced deals.

American Tire Distributors and Macy's Inc. are expected to announce offerings (Macy's was expected during the past week, but may yet materialize in the week ahead, a source said).

Northern Oil and Gas is already playing to an $800 million book, a trader said on Friday. The $500 million offering of seven-year senior notes was scheduled to kick off on a Friday investor call, and is expected to price early in the week ahead.

And a landmark transaction is set to unfold in the sterling-denominated market when the buyout deal for U.K.-based supermarket operator Asda hits the block: £2.75 billion of bonds in two tranches, the biggest all-sterling deal in the history of the market, sources say (see related stories in this issue).

Risk-on

The secondary space erased the weakness from the previous week with credit spreads tightening as inflows returned to the space.

The overall market was well-bid with buyers outnumbering sellers by a large portion.

Credit spreads tightened 17 basis points to 368 bps with CCC-credits the outperformers, according to a BofA Global Research Report.

CCC spreads tightened 43 bps in the week through Wednesday’s close.

CCC-credits returned to the primary market in full force in 2021 with new issue volume from CCC-credits hitting an all-time record of $4.4 billion a week twice in January, according to the report.

New issuance from CCC credits have exceeded $3.5 billion a week only 10 times in the history of the market – three of which occurred in January.

Rent-A-Center outperforms

Rent-A-Center’s newly priced 6 3/8% senior notes due 2029 outperformed in the secondary space with the notes jumping to a 104-handle.

The 6 3/8% notes traded as high as 104¾ during Friday’s session and were changing hands in the 104 to 104 1/8 context heading into the market close.

The notes were among the most actively traded during Friday’s session with $78 million on the tape.

In a heavily oversubscribed offering, Rent-A-Center priced a $450 million issue of the 6 3/8% notes at par on Thursday.

Pricing came tighter than the 6½% to 6¾% yield talk.

The deal played to $2.1 billion of demand across 100 accounts, a source said.

Small issues, big gains

While Danaos’ 8½% senior notes due 2028 and Full House Resorts’ 8½% senior notes due 2028 were small issues, the notes were active with both posting large gains.

Danaos’ 8½% senior notes were marked at 102 bid, 102 3/8 offered on Friday. They notes were “busy” with $13 million in reported volume, a source said.

Danaos priced a $300 million issue of the 8½% notes at par on Thursday.

Pricing came tighter than talk for a yield in the 8¾% area.

Full House Resorts’ 8½% notes due 2028 traded in a range of 102¼ to 103½ throughout Friday’s session.

They were changing hands in a 102 5/8 to 103½ context heading into the market close.

There was more than $23 million on the tape.

Full House Resorts priced an upsized $310 million, from $300 million issue, of the 8¼% notes at par on Thursday.

Pricing came tighter than talk for a yield in the 8½% area.

Victra gains

Victra’s 7¾% senior notes due 2026 were also posting large gains in active trading.

The 7¾% notes were changing hands in the 102 5/8 to 103 1/8 context throughout the session.

There was more than $34 million in reported volume heading into the market close.

Victra priced an upsized $660 million, from $635 million, issue of the 7¾% notes at par on Thursday.

Pricing came on top of revised yield talk with earlier talk for a yield of 7¾% to 8%.

$100 million Thursday inflows

The dedicated high-yield bond funds had $100 million of daily net inflows on Thursday, according to a market source.

High-yield ETFs saw $160 million of inflows on the day.

However actively managed high-yield funds were negative on Thursday, sustaining $60 million of outflows on the day, the source said.

News of Thursday's daily flows follows a Thursday afternoon report that the combined funds saw $1.337 billion of net inflows in the week to the Wednesday, Feb. 3, close, according to the Refinitiv Lipper Fund Flow Report Newsline.

That weekly inflow was the largest since mid-November, according to the market source who added that six of the past seven weekly flows were negative.

Indexes gain

Indexes rounded out a strong week with gains.

The KDP High Yield Daily index gained 9 points to close Friday at 69.68.

The index was up 18 points on Thursday, 10 points on Wednesday, 6 points on Tuesday and was flat on Monday.

The index posted a cumulative gain of 43 points on the week.

The ICE BofAML US High Yield index crossed the 1% threshold on Friday. The index added 14.1 bps with year-to-date return now 1.087%.

The index gained 13.9 bps on Thursday, 20.3 bps on Wednesday, 16.4 bps on Tuesday and 7.3 bps on Monday.

The index posted a cumulative gain of 57.9 bps on the week.

The CDX High Yield 30 index gained 14 points to close Friday at 109.49.

The index rose 37 points on Thursday, 20 points on Wednesday and 48 points on Tuesday after dropping 168 points on Monday.

The index posted a cumulative loss of 49 points on the week.

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