United Airlines downsizes; Altice, Patrick on par-handles; CrownRock outperforms

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 14 – The primary market released $5.55 billion of junk paper into the market on Wednesday, with the great majority of it coming from United Airlines’ downsized $4 billion of new notes.

Meanwhile, it was another sideways day in the secondary space as attention turned from macro events to earnings.

New paper continued to dominate the tape.

Altice France SA’s newly priced 5 1/8% senior secured notes due 2028 (B2/B) and Patrick Industries, Inc.’s 4¾% senior notes due 2029 were trading at premiums to their issue prices, although both remained on a par-handle.

While coming in from the heights reached after breaking for trade, CrownRock LP and CrownRock Finance Inc.’s 5% senior notes due 2029 (B2/BB-) continued to put in a strong performance in the aftermarket.

United and more

Four issuers priced a total of $5.55 billion of junk across five dollar-denominated tranches on Thursday.

Executions were solid or better.

The session's megadeal came from United Airlines which priced a downsized $4 billion of senior secured bullet notes (Ba1/BB-/BB) in a pair of tranches sized at $2 billion, apiece: 4 3/8% five-year notes and 4 5/8% eight-year notes.

Both tranches came 25 basis points through talk, and deep inside of initial guidance.

In spite of the tight pricing both tranches traded sharply higher, according to a bond trader.

The 4 3/8% notes due 2026 traded to 102½ bid, 103 offered. The 4 5/8% notes due 2029 traded to an eye-popping 104 bid, 104½ offered, the trader said.

The deal was heard to have played to a whopping $26 billion of demand across both tranches, the trader said.

The overall bond transaction decreased from $5.5 billion, with $1.5 billion shifted to the term loan.

Although the upsized $5 billion term loan came with a 375 bps spread to Libor atop a 0.75% Libor floor at 99.5, and thus was priced relatively comparable to the bonds, the loan has a more issuer-friendly prepayment provision versus the bonds, and so will likely save the company some money down the road, according to a sell-side source who was watching the transaction closely.

The size of the airline's refinancing transaction, including the two tranches of notes and the loan, remained unchanged at $9 billion (see related stories in this issue).

Par-handle

While Altice France’s 5 1/8% senior secured notes due 2028 and Patrick Industries’ 4¾% senior notes due 2029 were trading at premiums to their issue prices in high-volume activity, both issues closed the day on par-handles.

Altice’s new 5 1/8% senior secured notes due 2028 were in focus with the notes poised to close the day at par 5/8, a source said.

There was more than $78 million in reported volume.

Altice France priced a $2.5 billion tranche of the 5 1/8% notes at par as part of a dual-currency offering.

The 5 1/8% notes priced in the middle of the 5% to 5¼% yield talk.

Patrick Industries’ 4¾% senior notes due 2029 stood poised to close the day at par ¼, according to a market source.

While the issue was small, the notes were active with about $60 million in reported volume heading into the close.

The building manufacturer priced a $350 million issue of the 4¾% notes at par on Tuesday.

The yield printed at the tight end of the 4¾% to 4 7/8% yield talk.

CrownRock outperforms

The demand seen during bookbuilding for CrownRock’s 5% senior notes due 2029 followed them into the secondary space with the notes trading at a large premium to their issue price.

While the notes were coming in from the heights reached after breaking for trade, they continued to outperform several other recent issues.

The 5% notes stood poised to close Wednesday at 101¾, according to a market source. They closed the previous session at 102¼.

CrownRock priced a $400 million issue of the 5% notes at par in a Tuesday drive-by.

Pricing came tighter than talk for a yield in the 5¼% area.

The deal was heard to be three-times oversubscribed.

$535 million Tuesday inflows

The dedicated high-yield bond funds had $535 million of net inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $390 million of inflows on the day.

Actively managed high-yield funds saw $145 million of inflows on Tuesday, the source said.

Indexes up

Indexes eked out minor gains on Wednesday.

The KDP High Yield Daily index rose 1 point to close the day at 69.52. The index shaved off 3 points on Tuesday and was down 6 points on Monday.

The ICE BofAML US High Yield index was up 10.4 bps with the year-to-date return now 1.585%.

The index was down 8.4 bps on Tuesday and 6.3 bps on Monday.

The CDX High Yield 30 index inched up 3 bps to close Wednesday at 109.62. The index rose 7 bps on Tuesday and was down 12 bps on Monday.

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