Junk primary sells $1.65 billion; MicroStrategy weakens; CVR, SunCoke on a 101-handle

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 9 – Wednesday's session in the new issue market generated a steady flow of news.

Three issuers came with drive-by deals, pricing a combined total of $1.65 billion in three tranches.

All three deals upsized.

Executions were solid or better, with one deal coming inside of talk, while the other two priced at the tight ends of talk.

Meanwhile, the secondary space remained largely flat on Wednesday ahead of the highly anticipated Consumer Price Index report on Thursday, which will provide clues about the Federal Reserve’s next steps.

New paper continued to dominate the tape.

After a strong break, MicroStrategy Inc.’s 6 1/8% senior secured notes due 2028 (B1/B-) gave back all of their gains and stood poised to close the day at par.

However, SunCoke Energy, Inc.’s 4 7/8% senior secured notes due 2029 (B1/BB) and CVR Partners, LP/CVR Nitrogen Finance Corp.’s 6 1/8% senior secured notes due 2028 (B2/B) remained strong with both issues closing the day on a 101-handle.

MicroStrategy weakens

MicroStrategy’s 6 1/8% senior secured notes due 2028 were under pressure on Wednesday with the notes giving back all of their early gains.

After closing out the previous session at 101½ bid, 101¾ offered, the 6 1/8% notes dropped down to par, a source said.

They were changing hands in the 99 7/8 to par context heading into the market close.

The offering was a “hedge fund special,” a source said, and the notes seemed to be heavily shorted.

Proceeds from the offering were to be used to purchase Bitcoin.

The narrative surrounding the high-yield bonds is ‘you get all of the downside of Bitcoin with none of the upside,’ a source quipped.

While the business intelligence company does have a core business that generates revenue, the company’s chief executive officer and board of directors seem to be turning the company into a leveraged cryptocurrency fund, the source said.

MicroStrategy priced an upsized $500 million, from $400 million, issue of the 6 1/8% notes at par on Tuesday.

The yield printed at the tight end of the 6 1/8% to 6¼% yield talk.

The offering was the third time MicroStrategy has tapped capital markets in recent months to raise funds to purchase Bitcoin.

MicroStrategy priced a $650 million issue of 0.75% convertible notes due 2025 in December 2020 and a $1.05 billion issue of 0% convertible bonds due 2027 in February 2021 with proceeds from both offerings used to purchase Bitcoin.

101-handle

While new paper from MicroStrategy was under pressure on Wednesday, several other recent deals continued to perform well.

SunCoke’s 4 7/8% senior notes due 2029 traded up to a 101-handle and were marked at 101 bid, 101¼ offered heading into the market close.

The manufacturer of coke for the steel and power industries priced a $500 million issue of the 4 7/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 5% area.

CVR Partners’ 6 1/8% senior notes due 2028 also traded up to a 101-handle.

The notes were marked at 101½ bid, 101¾ offered heading into the market close.

The nitrogen fertilizer manufacturer priced a $550 million issue of the 6 1/8% notes at par on Tuesday.

The yield printed tighter than the 6¼% to 6½% yield talk.

$109 million Tuesday inflows

The dedicated high-yield bond funds saw $109 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 saw $84 million of inflows on the day.

Actively managed high-yield funds saw $25 million of inflows on Tuesday, the source said.

Indexes gain

Indexes were on the rise on Wednesday.

The KDP High Yield Daily index rose 9 points to close the day at 69.89 with the yield now 3.75%.

The index was up 7 points on Tuesday and 6 points on Monday.

The ICE BofAML US High Yield index gained 16.9 basis points with the year-to-date return now 2.997%.

The index was up 13.9 bps on Tuesday and 7.2 bps on Monday.

The CDX High Yield 30 index rose 4 bps to close Wednesday at 109.89.

The index shaved off 2 bps on Tuesday and 1 bp on Monday.

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