Lumen, Precision Drilling in junk primary; Switch, Cinemark, GFL up; Indigo, Southwestern gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 2 – Two deals cleared the domestic high-yield primary market on Wednesday.

Lumen Technologies priced $1 billion eight-year senior notes and Precision Drilling priced $400 million eight-year senior notes at a discount.

CareTrust REIT, Inc.’s offering of seven-year bullet notes remains the sole deal on the forward calendar with pricing expected on Thursday.

Meanwhile, the secondary space was quiet yet firm on Wednesday, a source said.

While recent issues dominated the tape, it was the energy sector that outperformed as crude oil futures continued their upward momentum.

Cinemark USA Inc.’s recently priced 5¼% senior notes due 2028 (Caa1/B/B), Switch Ltd.’s 4 1/8% senior notes due 2029 (B1/BB), and GFL Environmental Inc. 4¾% senior notes due 2029 (B3/B-) were all trading at solid premiums to their issue price in high-volume activity.

Crude oil futures continued to climb on Wednesday with several exploration and production companies bid up in kind. However, it was natural gas companies that were the major gainers during the session.

Southwestern Energy Co.’s 8 3/8% senior notes due 2028 (Ba3/BB-) and Indigo Natural Resources LLC’s 5 3/8% senior notes due 2029 rose 2 points after Southwestern announced it would acquire Indigo in a $2.7 billion transaction.

Wednesday’s primary

In a light Wednesday news flow two issuers, each coming with a single tranche, raised $1.4 billion.

In a drive-by, Lumen Technologies priced $1 billion of 5 3/8% eight-year senior notes (B2/BB-/BB) at par, in the middle of yield talk in the 5 3/8% area, and slightly wide to initial guidance in the low 5% area.

The deal was heard to be playing to around $1.2 billion of demand around noon ET on Wednesday, a trader said.

Meanwhile, at the end of a brief roadshow, Precision Drilling priced $400 million of 6 7/8% senior notes due Jan. 15, 2029 (B3/B/B+) at 99.253 to yield 7%, inside of talk.

Wednesday's activity left one offering on the active forward calendar.

CareTrust REIT is expected to price a $400 million seven-year bullet (Ba2/BB+/BB+) on Thursday. The unsecured deal is in the market with initial guidance in the low 4% area.

At a premium

The deals to clear the primary market on Tuesday were putting in solid performances in the aftermarket.

Cinemark’s 5¼% senior notes due 2028 traded as high as 101 during Wednesday’s session.

However, they came in from their highs and were changing hands in the par 3/8 to par 5/8 context heading into the market close, a source said.

The notes were in focus with more than $80 million in reported volume.

Cinemark priced a $765 million issue of the 5¼% notes at par on Tuesday.

The yield printed in the middle of yield talk in the 5¼% area.

Switch’s 4 1/8% senior notes due 2029 were changing hands in the par ½ to par ¾ context in active trading.

There was about $40 million on the tape during Wednesday’s session.

Switch priced an upsized $500 million, from $430 million, issue of the 4 1/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 4¼% area.

GFL’s 4¾% senior notes due 2029 were changing hands in the par 7/8 to 101 1/8 context heading into Wednesday’s close.

There was more than $61 million in reported volume.

GFL priced an upsized $750 million, from $600 million, issue of the 4¾% notes at par on Tuesday.

The yield printed at the tight end of the 4¾% to 5% yield talk.

The acquisition

While the energy sector was strong across the board on Wednesday as crude oil futures continued their upward momentum, natural gas companies were the major winners of the session.

Southwestern’s 8 3/8% notes and Indigo’s 5 3/8% senior notes due 2029 rose more than 2 points after Southwestern announced it would acquire Indigo in a $2.7 billion transaction.

Southwestern’s 8 3/8% senior notes traded up to 112½ following the news with the yield on the notes now 4 3/8%, according to a market source.

Indigo’s 5 3/8% senior notes also rose more than 2 points to close the day at 103½.

The notes were active with more than $30 million in reported volume.

Southwestern announced it would acquire Indigo in a deal valued at $2.7 billion, which includes a $400 million cash payment, $1.6 billion in Southwestern stock and the assumption of the $700 million outstanding of Indigo’s 5 3/8% senior notes, according to a company news release.

The transaction is expected to close in the fourth quarter.

Tuesday fund flows

The daily cash flows for the dedicated high-yield bond funds were comparatively moderate on Tuesday, the most recent session for which data was available at press time, according to a market source

High-yield ETFs had $87 million of inflows on the day.

Actively managed high yield funds sustained $35 million of outflows on Tuesday, the source said.

For the actively managed funds it was the 13th consecutive daily outflow, but the lightest outflow in that series, according to a Prospect News analysis of the data.

Indexes gain

Indexes were on the rise on Wednesday after a mixed start to the week.

The KDP High Yield Daily index rose 5 points to close the day at 69.62 with the yield now 3.86%.

The index was up 4 points on Tuesday.

The ICE BofAML US High Yield index rose 14.3 bps with the year-to-date return now 2.514%.

The index was up 9.7 bps on Tuesday.

The CDX High Yield 30 index gained 5 bps to close Wednesday at 109.84.

The index was up 10 bps on Tuesday.

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