Primary prices $2.35 billion; Pilgrim’s Pride flat; Carvana at a premium; WeWork skyrockets

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 26 – The domestic high-yield primary market saw an active end to the week with three issuers pricing a cumulative $2.35 billion.

Only one deal remains on the forward calendar heading into the March 29 week.

Ingram Micro is shopping $2 billion of eight-year senior secured notes (B1/BB) on a roadshow scheduled to run through Wednesday.

However, the week ahead is expected to be busy with dealers rushing to pack in deals before the first quarter draws to a close.

Meanwhile, the secondary space closed the week on firm footing.

High-yield spreads tightened 14 basis points to 351 bps over the past week, according to a BofA Global Research report.

While the overall market was firm, Pilgrim's Pride Corp.’s 4¼% sustainability-linked senior notes due 2031 (B1/BB+/BB+) and Interior Logic Group’s 6 1/8% senior notes due 2029 (Caa1/CCC+) fell flat in the aftermarket.

However, Carvana Co.’s 5½% senior notes due 2027 (CCC+) and Dycom Industries, Inc.’s 4½% senior notes due 2029 (Ba3/BB) were trading with solid premiums.

Outside of recent issues, WeWork Cos. Inc.’s 7 7/8% senior notes due 2025 skyrocketed on news the office-sharing space company’s previous plans to go public may come to fruition through a SPAC.

Friday’s primary

The primary market remained active on Friday.

Among the session's deals, Burford Capital Global Finance LLC priced an upsized $400 million issue (from $350 million) of seven-year senior notes (Ba2/BB-) at par to yield 6¼%.

The yield printed 12.5 basis points inside of yield talk in the 6½% area. Initial guidance was in the high 6% area.

Prior to launching upsized and inside of talk the deal was heard to be four-times oversubscribed, a trader said.

Recently, deals rated as BB- by S&P have come with 4%- and 5%-handles.

Burford Capital came with a little more price owing to the fact that it's not the best-known issuer in the market, and it wasn't the world's biggest deal, the trader said.

Also, investors are possibly becoming slightly more rate sensitive, the source added.

Week ahead

The week ahead gets underway with just one dollar-denominated offering on the active calendar.

Ingram Micro is shopping $2 billion of eight-year senior secured notes on a roadshow scheduled to run through Wednesday.

In Europe, Barclays issued a save-the-date for a Monday investor call ahead of a possible deal from the transportation sector.

In any case, the early part of the week ahead should be busy because dealers will be jockeying for league table position as the massive month of March draws to a close, a trader said.

Flat

While the secondary space closed out the week on firm footing, several recent deals were wrapped around their issue prices in active trading.

Pilgrim’s Pride’s 4¼% senior notes due 2031 were largely wrapped around their discounted issue price.

The notes were changing hands in the 99 to 99¼ context in the midafternoon, according to a market source.

Pilgrim's Pride priced a $1 billion issue of the 4¼% notes at 98.994 to yield 4 3/8% in a Thursday drive-by.

The yield printed in the middle of yield talk in the 4 3/8% area.

Interior Logic’s 6 1/8% senior notes due 2029 also fell flat in the aftermarket.

The notes were wrapped around par midday.

Interior Logic priced a $300 million issue of the 6 1/8% notes at par on Thursday.

The yield printed in the middle of the 6% to 6¼% yield talk.

At a premium

While Pilgrim’s Pride’s and Interior Logic’s new paper fell flat, Carvana’s 5½% senior notes due 2027 and Dycom’s 4½% senior notes due 2029 were trading with solid premiums.

Carvana’s 5½% senior notes due 2027 outperformed with the notes trading up to a 101-handle.

They were seen at 101 1/8 bid in the midafternoon, according to a market source.

Carvana priced an upsized $600 million, from $500 million, issue of the 5½% note at par on Thursday.

The yield printed at the tight end of the 5½% to 5¾% yield talk.

Dycom Industries’ 4½% senior notes due 2029 continued to trade in the par ½ to 101 context on Friday, a level reached shortly after breaking for trade.

Dycom priced an upsized $500 million, from $400 million, issue of the 4½% notes at par on Thursday.

The yield came at the tight end of yield talk in the 4 5/8% area.

WeWork skyrockets

WeWork’s 7 7/8% notes due 2025 catapulted back into focus on Friday with the notes gaining more than 7 points in high-volume activity on news of the company’s planned merger with a SPAC.

The 7 7/8% notes rose more than 7¾ points to close the day at par 1/8, according to a market source.

There was more than $59 million in reported volume.

Friday was the first time the notes topped par in almost two years.

The notes zoomed higher on news the company would merge with BowX Acquisition, a special-purpose acquisition company, to bring the company public.

The merger values WeWork at $9 billion including debt, the Wall Street Journal reported.

WeWork’s 7 7/8% notes have struggled since the company’s failed IPO in 2019, which led to the ouster of former chief executive officer Adam Neumann.

The 7 7/8% notes were changing hands in the low 70s at the start of the year, according to Trace data.

Thursday outflows

The dedicated high-yield bond funds sustained modest net daily outflows of $60 million on Thursday, according to a market source.

High-yield ETFs sustained a substantial $120 million of outflows on the day.

Actively managed high yield funds were positive on Thursday, seeing $60 million of inflows on the day.

News of Thursday's daily flows trailed a Thursday report that the combined funds sustained $1.38 billion of net outflows in the week to the Wednesday, March 24 close.

With 12 weeks of 2021 weekly fund flows now in the book, six have been outflows in excess of $1 billion, the source said.

Year to date the dedicated junk funds have seen $10.3 billion of net outflows, after seeing a total of $44.9 billion of net inflows during the entire preceding year of 2020, according to the market source.

Indexes mixed

Indexes closed Friday mixed although all posted cumulative gains on the week.

The KDP High Yield Daily index slid 2 points to close Friday at $69.085. However, the yield of 4.21% was flush with Thursday’s close.

The index was down 2 points on Thursday, after climbing 9 points on Wednesday, 12 points on Tuesday and 5 points on Monday.

The index posted a cumulative gain of 22 points on the week.

The CDX High Yield 30 index rose 41 bps to close Friday at 108.91.

The index gained 13 bps on Thursday, was down 4 bps on Wednesday and 31 bps on Tuesday after gaining 17 bps on Monday.

The index posted a cumulative gain of 36 bps on the week.

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