High yield: MidCap, Primo Water price; Morgan Auto on 102-handle; United active

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 21 – The domestic high-yield primary market saw two deals price during Wednesday’s session.

MidCap Financial LLC priced an upsized $875 million issue of seven-year senior notes and Primo Water priced a $750 million issue of eight-year senior notes.

While only two deals priced on Wednesday, the next two sessions promise to be active with the $5.72 billion on the forward calendar expected to price before the week draws to a close.

Meanwhile, the tone in the secondary space improved on Wednesday after a soft start to the week.

While several recent deals fell flat in the aftermarket, Morgan Automotive Group’s 4 7/8% senior notes due 2029 (B2/BB-) traded up to a 102-handle.

Charter Communications, Inc.’s new 4½% senior notes due 2033 (B1/BB) were mildly improved on Wednesday although the notes remained on a par-handle.

While the notes remained off their highs, United Airlines’ recently priced tranches of senior secured bullet notes (Ba1/BB-/BB) improved on Wednesday after trading off following its first-quarter earnings report.

Wednesday’s primary

The high yield primary market took a bit of a breather on Wednesday.

Amid light news flow – and light volumes in the secondary market – just two deals priced.

At the conclusion of its roadshow MidCap Financial priced an upsized $875 million issue (from $825 million) of 6½% seven-year senior notes (Ba3/B+/BB) at par, at the tight end of talk.

The deal was heard to be playing to $2.4 billion of orders including $600 million of reverse inquiry, a trader said.

In drive-by action, Primo Water priced a $750 million issue of eight-year 4 3/8% senior notes (B1/B) at par, on top of talk.

Wednesday's action left a hefty $5.72 billion deal calendar expected to clear ahead of the coming weekend (see related stories in this issue).

Morgan on a 102-handle

Morgan Automotive’s 4 7/8% senior notes due 2029 were putting in a strong performance in the aftermarket with the notes continuing to trade on a 102-handle.

The notes were marked at 102 bid, 102¼ offered heading into Wednesday’s close– a level reached shortly after breaking for trade, a source said.

In a massively oversubscribed offering, Morgan priced an upsized $700 million, from $650 million, issue of the 4 7/8% notes at par on Tuesday.

The yield printed at the tight end of the 4 7/8% to 5 1/8% yield talk.

The deal was heard to have played to $3.9 billion in demand, a source said.

Charter improves

Charter’s new 4½% senior notes due 2033 improved alongside the broader market on Wednesday.

However, the notes remained on a par-handle.

They were marked at par ¼ bid, par ½ offered Wednesday afternoon. “They’re doing okay now,” a source said.

The notes were trading in a tight range of par to par 1/8 the previous session.

The tight pricing and long duration of the notes were pointed to as reasons for their lackluster performance in the aftermarket.

Charter priced $1 billion of the 4½% notes at par on Monday.

United Airlines active

United Airlines’ recently priced tranches of senior secured bullet notes improved on Wednesday after trading off the previous session following the airline’s first-quarter earnings report.

The 4 5/8% notes due 2029 traded back up to a 103-handle on Wednesday.

They were changing hands in the 103 to 103¼ context heading into the market close.

The notes closed the previous session at 102½.

The 4 3/8% notes due 2026 were changing hands in the 102 5/8 to 102 7/8 context heading into Wednesday’s close.

The notes traded down to 102¼ the previous session.

United Airlines’ notes were improved after trading off following an earnings miss on Tuesday.

While the airline’s recently priced tranches were improved on Wednesday, they were still down from the heights reached after breaking for trade on April 14.

The 4 5/8% notes were on a 104-handle and the 4 3/8% notes on a 103-handle the previous week.

$598 million Tuesday outflows

The cash flows of the dedicated high-yield bond funds remained negative on Tuesday, with the dedicated funds sustaining $598 million of net outflows on the day, according to a market source.

It follows the more substantial $1.57 billion of net outflows reported for Monday.

The breakdown of Tuesday's flows had the actively managed high-yield funds sustaining $505 million of outflows on the day.

High-yield ETFs saw $93 million of outflows on Tuesday, the market source said.

Indexes mixed

Indexes were mixed on Wednesday.

The KDP High Yield Daily index was down 8 points to close the day at 69.47 with the yield 3.91%.

The index was down 10 points on Tuesday after gaining 2 points on Monday.

The ICE BofAML US High Yield index gained 0.6 bps with the year-to-date return now 1.64%.

The index dropped 17.4 bps on Tuesday and 5.6 bps on Monday.

The CDX High Yield 30 index gained 10 bps to close Wednesday at 109.5. The index dropped 29 bps on Tuesday and 25 bps on Monday.

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