Primary prices $2.82 billion from four issuers; NCR in focus; energy under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Ore., March 23 – Tuesday primary issuance was strong with $2.82 billion of new paper entering the market, and tightly executed.

Meanwhile, the secondary space was largely unchanged on Tuesday with credit markets holding even as equities slid in the wake of Treasury Secretary Janet Yellen’s and Federal Reserve Chair Jerome Powell’s testimony to Congress.

New paper continued to dominate the tape.

NCR Corp.’s 5 1/8% senior notes due 2029 (B3/B+) were in focus with the notes trading with a healthy premium to their issue price.

While the notes were still strong, Neiman Marcus Group Inc.’s 7 1/8% senior secured first-lien notes due 2026 (Caa2/existing CCC+) gave back some of their gains from Monday’s session.

While the overall market was unchanged, the energy sector underperformed as several names in the space traded off as WTI crude oil futures dropped well below the $60 threshold.

Occidental Petroleum Corp.’s capital structure was down 1½ to 2½ points on the move in crude oil.

Tuesday primary

Four issuers, each bringing a single tranche of junk bonds raised $2.82 billion in Tuesday's new issue market.

As stock prices slipped and select commodities got smoked (the WTI barrel price dropped 6.8%!), high-yield executions remained notably tight.

Two of the session's issuers, Lions Gate Entertainment Corp. ($1 billion 5½% eight-senior senior notes, B3/CCC+) and Liberty Communications of Puerto Rico LLC ($820 million 5 1/8% 8.25-year senior secured notes B1/B+) placed their bonds inside of talk.

Meanwhile there was a buildup of the active forward calendar (see related stories in this issue).

NCR in focus

NCR’s 5 1/8% senior notes due 2029 were in focus on Tuesday with the notes trading with a healthy premium to the issue price.

The 5 1/8% notes traded to a low of par 3/8 during the session. However, they gained momentum as the session progressed.

The notes were changing hands in the par ¾ to 101¼ context heading into the close.

There was more than $97 million in reported volume during Tuesday’s session.

NCR priced an upsized $1.1 billion, from $1 billion, issue of the 5 1/8% notes at par on Monday.

Pricing came at the tight end of talk for a yield of 5 1/8% to 5¼%; initial talk was for a yield in the low 5% area.

Neiman Marcus comes in

Neiman Marcus’ 7 1/8% senior secured first-lien notes due 2026 were giving back some of their gains from the previous session.

The 7 1/8% notes were down about ½ point.

They closed Tuesday at 101½ bid, a source said.

The notes remained active with about $27 million in reported volume.

The notes closed the previous session at 102 bid, 102½ offered.

Neiman Marcus Group priced an upsized $1.1 billion, from $1 billion, issue of the 7 1/8% notes at par last Friday.

Energy under pressure

The energy sector was under pressure on Tuesday as WTI crude oil futures sank well below the $60 threshold.

Several names in the energy sector were trading off alongside the commodity.

Occidental Petroleum’s capital structure was down 1½ to 2½ points.

The 6 5/8% senior notes due 2030 were down 2¼ points to close the day at 109¼, according to a market source.

The 4.2% senior notes due 2048 were down about 2 points to close the day at 77 7/8.

The 6 1/8% notes due 2031 were down 1½ points to 107½.

Oil slid on concerns over demand as several European countries extend lockdown measures due to rising Covid-19 and variant cases.

$351 million Monday outflows

The dedicated high-yield bond funds sustained $351 million of net outflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $226 million of outflows on the day.

Actively managed high-yield funds sustained $125 million of outflows on Monday, the source said.

The combined funds are tracking $855 million of net outflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes mixed

Indexes were mixed on Tuesday.

The KDP High Yield Daily index rose 12 points to close the day at 69.03 with the yield now 4.23%.

The index rose 5 points on Monday.

The ICE BofAML US High Yield index continued to gain on Tuesday.

The index added 13.2 bps with the year-to-date return now 0.393%.

The index gained 30.2 bps on Monday.

The CDX High Yield 30 index fell 31 bps to close Tuesday at 108.41.

The index gained 17 bps on Monday.

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