Four issuers sell junk; Fed Day uneventful; Apollo lags; Royal Caribbean, OneMain flat

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 16 – The high-yield primary market put up another $3.09 billion in five junk-rated, dollar-denominated tranches from four issuers on Wednesday.

New paper from ICON plc (Indigo Merger Sub, Inc.) and Madison IAQ, LLC accounted for the lion’s share of deal volume.

Meanwhile, the closely watched press conference following the Federal Reserve Open Market Committee Meeting yielded few surprises with the secondary space largely unchanged on Wednesday.

Market players were hoping for a jolt of volatility, either to the upside or downside, following the meeting.

However, Federal Reserve chair Jerome H. Powell “struck the right chord, because nothing happened,” a source said.

Gartner, Inc.’s 3 5/8% senior notes due 2029 (Ba3/BB+) followed the broader market trend and gave back some of their gains heading into the close, although they continued to trade at a nominal premium to their issue price.

OneMain Finance Corp.’s 3½% senior notes due 2027 (expected ratings Ba3/BB-/Kroll: BB+), Royal Caribbean Cruises Ltd.’s 4¼% senior notes due 2026 (B2/B), and APi Group DE, Inc.’s 4 1/8% senior notes due 2029 (B1/B) remained range-bound around their issue price throughout the session.

However, Apollo Commercial Real Estate Finance, Inc.’s 4 5/8% senior secured notes due 2029 (Ba2/B+) were struggling in the aftermarket with the notes closing the day below par.

Wednesday’s primary

The high-yield primary market put up another $3.09 billion in five junk-rated, dollar-denominated tranches from four issuers on Wednesday.

Only one out of Wednesday's quartet of issuers came with a drive-by.

Sharp executions were the rule, as all five tranches priced at the tight ends of talk.

ICON priced a $500 million issue of 2 7/8% five-year senior secured notes (Ba1/BB+) at par, in a deal that was heard to have been multiple-times oversubscribed.

Madison IAQ priced two tranches of junk: $700 million amount of 4 1/8% seven-year senior secured notes (B1/B) and $1.035 billion of 5 7/8% eight-year senior unsecured notes (Caa1/CCC+).

Both came at par.

The 5 7/8% unsecured notes broke to a premium in the secondary market, according to a trader who had them at par ½ bid, 101 offered, late Wednesday.

However, the 4 1/8% secured notes were wrapped around the issue price at 99¾ bid, par ¼ offered, suggesting that investors were valuing yield above security, the trader said (see related stories in this issue).

Flat

Several of the deals to clear the primary market on Tuesday fell flat in the aftermarket.

Royal Caribbean’s 4¼% senior notes due 2026 were priced to perfection with the notes seeing little movement in the secondary space.

The 4¼% notes have been range-bound between par to par 1/8 since breaking for trade.

The latest deal from the cruise line operator was opportunistic. “They’re continuing to borrow while the market’s available to them,” a source said.

While Royal Caribbean continues to pile on debt, the latest offering caused little movement in its capital structure with the pricing in line with its outstanding issues, the source said.

Royal Caribbean priced a $650 million issue of the 4¼% notes at par on Tuesday.

The yield printed in the middle of yield talk in the 4¼% area.

OneMain’s 3½% senior notes due 2027 was among the most actively traded issues in the secondary space.

However, the notes saw little movement in terms of price.

The 3½% notes stood poised to close the day at 99 7/8 bid, par ¼ offered, a source said.

There was more than $93 million in reported volume.

OneMain priced an upsized $750 million, from $500 million, issue of the 3½% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 3 5/8% area.

APi Group’s 4 1/8% senior notes due 2029 also fell flat in the aftermarket with the notes closing the day at par, according to a market source.

There was about $70 million in reported volume.

APi priced an upsized $350 million, from $300 million, issue of the 4 1/8% notes at par on Tuesday.

The yield printed tighter than the 4¼% to 4½% yield talk.

Gartner weakens

Gartner’s 3 5/8% senior notes due 2029 were losing steam heading into the market close although they continued to trade at a premium to their issue price.

The 3 5/8% notes shaved off about ¼ point following the Federal Reserve Open Market Committee’s press conference.

The notes were marked at par ¼ bid, par 5/8 offered in the late afternoon after trading in the par ½ to par 7/8 range for the majority of the session.

The notes gave back some of their premium as the broader market “leaked” heading into the close.

While there was not a dramatic movement following the press conference, which yielded few surprises, lower-coupon, longer-duration bonds were weaker as 10-year Treasury yields inched up, sources said.

Gartner priced a $600 million issue of the 3 5/8% notes at par on Tuesday.

Pricing came at the tight end of yield talk in the 3¾% area.

Apollo lags

Apollo’s 4 5/8% senior secured notes due 2029 were struggling in the aftermarket with the notes closing the day below par.

The 4 5/8% notes traded down to 99½ heading into the market close, according to a source.

There were $70 million of the bonds on the tape.

Apollo priced an upsized $500 million, from $400 million, issue of the 4 5/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 4¾% area.

Big Tuesday outflows

High-yield ETFs sustained $1.15 billion of daily outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Those outflows accelerated as Wednesday's Federal Open Market Committee (FOMC) meeting drew closer, the source added.

On Wednesday, a bond trader reported seeing an unusually high number of bids-wanted-in-competition (BWICs), most of them from ETFs, suggesting that the ETFs are likely to report another big daily outflow of cash for Wednesday.

However, another trader was seeing BWICs and offers-wanted-in-competition (OWICs) in approximately equal amounts, on Wednesday, but added that the BWICs accelerated after the FOMC meeting.

Meanwhile the actively managed high-yield funds were flat to slightly negative on Tuesday, sustaining $5 million of outflows on the day, the market source said.

Indexes down

Indexes closed Wednesday with nominal losses.

The KDP High Yield Daily index shaved off 1 point to close the day at 70.07 with the yield 3.76%.

The index inched up 3 points on Tuesday and 5 points on Monday.

The ICE BofAML US High Yield index shaved off 3.6 basis points with the year-to-date return now 3.135%.

The index gained 2.2 bps on Tuesday and 3.9 bps on Monday.

The CDX High Yield 30 index dropped 21 bps to close Wednesday at 109.92. The index shaved off 3 bps on Tuesday and 9 bps on Monday.

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