Junk issuers raise $2.7 billion; Compass, Owens & Minor at a premium; Tenneco lags

By Paul A. Harris and Abigail W. Adams

Portland, Ore., March 4 – Four high-yield issuers priced a combined five tranche of notes on Thursday, raising $2.7 billion.

As issuers rushed to price deals, volatility again rocked the secondary space with the 10-Treasury yield rising past 1.5% and risk assets plummeting following Federal Reserve Chair Jerome Powell’s comments in an interview with the Wall Street Journal.

Sectors of the market were off ¼ to ½ point, a source said.

However, several recent issues were outperforming the broader market as the pricing of new paper began to cheapen.

“It’s where people are finding their yield,” a source said.

Owens & Minor, Inc.’s 4½% senior notes due 2029 (B2/B-/BB-) and Compass Group Diversified Holdings LLC’s 5¼% senior notes due 2029 (B1/B+) were both trading with healthy premiums in the aftermarket although they faded into the close.

However, Tenneco Inc.’s 5 1/8% senior notes due 2029 (Ba3/B-/BB-) were lagging their issue price in active trading.

Solid executions

In the junk primary on Thursday executions, notwithstanding continued turbulence in equities, remained solid, with one tranche pricing inside of talk, three at the tight ends and one in the middle of talk.

Investors piled into a drive-by deal from Cinemark USA, Inc., an indication of confidence that the badly mauled motion picture exhibition sector may enjoy a sunnier summer in 2021 than was the case in the Covid-ridden summer of 2020, a trader said.

Cinemark priced a $405 million issue of 5 7/8% five-year senior notes (Caa1/B/B) at par, 12.5 bps through the 6% to 6¼% talk, and deep inside of initial guidance in the mid-to-high 6% area.

The deal was heard to be 5½-times oversubscribed, a trader said.

And, in a deal which ran a brief roadshow, Twilio Inc. priced $1 billion of senior notes (Ba3/BB) in two tranches: $500 million 3 5/8% eight-year notes and $500 million 3 7/8% 10-year notes, both of which came at par, at the tight ends of talk.

As of midmorning Thursday Twilio was playing to a big book, according to a bond trader who said that the market heard orders across both tranches totaled more than $5 billion (see related stories in this issue).

Owens & Minor at a premium

Owens & Minor’s 4½% senior notes due 2029 were putting in a solid performance in the secondary space although they faded into the close.

The notes were changing hands on a 101-handle early in the session.

However, they dipped into the close as the sell-off in risk assets accelerated following Powell’s comments.

The notes were marked at par ¾ bid, 101 offered heading into the close, according to a market source.

There was about $52 million in reported volume.

The health care logistics company priced a $500 million issue of the 4½% notes at par on Wednesday.

The yield printed at the tight end of the 4½% to 4¾% yield talk.

Compass Group in demand

Compass Group’s 5¼% senior notes due 2029 were in demand in the secondary space with the notes hitting a 102-handle early in the session.

They also faded amid the sell-off in the broader market and were changing hands in the 101 5/8 to 102 1/8 context heading into the close, a source said.

The investment and holding company priced an upsized $1 billion, from $750 million, issue of the 5¼% notes at par on Wednesday.

The yield printed at the tight end of the 5¼% to 5½% yield talk.

Tenneco lags

Tenneco’s 5 1/8% senior notes due 2029 were lagging their issue price in the secondary space.

The notes were marked at 99¾ bid, par offered during Thursday’s session, a source said.

Tenneco priced an $800 million issue of the 5 1/8% notes at par on Wednesday.

The yield printed in the middle of the 5% to 5¼% yield talk.

Indexes down

Indexes were down on Thursday.

The KDP High Yield Daily index dropped 3 points to close the day at 69.49 with the yield now 3.98%.

The index was flat on Wednesday, gained 2 points on Tuesday and 11 points on Monday.

The ICE BofAML US High Yield index sank further below the 1% threshold on Thursday. The index was down 17.6 bps with the year-to-date return now 0.768%.

The index was down 8.8 bps on Wednesday, 9.8 bps on Tuesday and 26.3 bps on Monday.

The CDX High Yield 30 index dropped 43 bps to close Thursday at 108.15.

The index was down 27 bps on Wednesday and 18 bps on Tuesday after gaining 82 bps on Monday.

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