Four companies tap junk market; Ford gains; Freedom Mortgage, VMED at a premium; Callon up

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 23 – Underwriters representing four issuers shepherded new dollar-denominated paper through a busy Wednesday session in the junk bond market with generally solid executions.

Meanwhile, it was another sideways day in the secondary space with new and recent issues continuing to dominate the tape.

Ford Motor Credit Co. LLC’s 3 5/8% senior notes due 2031 (Ba2/BB+/BB+) were on the rise in active trading on Wednesday.

Freedom Mortgage Corp.’s 6 5/8% senior notes due 2027 (B2/B/B+) and VMED O2 UK Financing I plc’s 4¾% senior notes due 2031 (Ba3/BB-/BB+) were also putting in strong performances in the aftermarket.

Callon Petroleum Co.’s 8% senior notes due 2028 (Caa2/CCC+) remained active with the notes improving alongside crude oil futures.

Wednesday

Four issuers priced single-tranche dollar-denominated deals during the busy Wednesday session in the high-yield new issue market.

Executions, though ultimately mixed, tended to be razor sharp.

Two deals came inside of talk (Leeward Renewable Energy actually priced its $375 million issue of 4¼% eight-year senior green notes 25 basis points inside of talk), and one priced at the tight end of talk.

The session's biggest deal, the ITT Holdings LLC $1.22 billion issue of 6½% eight-year senior notes (B1/B), priced at the wide end of talk, and wide to the initial guidance (see related stories in this issue).

Ford gains

Ford Motor Credit’s 3 5/8% senior notes due 2031 were gaining momentum in active trading on Wednesday.

The notes were up about 3/8 point to change hands in the par 5/8 to par 7/8 context throughout the session, according to a market source.

There was more than $28 million in reported volume.

The notes closed the previous session at par ¼ bid, par ½ offered.

Ford Motor priced a $1 billion issue of the 3 5/8% notes in a Tuesday drive-by.

The yield printed on top of yield talk. The deal played to $2.1 billion in demand.

At a premium

The other deals to clear the market on Tuesday were putting in solid performances in the secondary space.

Freedom Mortgage’s 6 5/8% senior notes due 2027 continued to trade in the par ½ to par ¾ context on Wednesday – a level reached shortly after breaking for trade.

The notes were active with $21 million in reported volume.

In an offering that was 2x oversubscribed, Freedom Mortgage priced a $650 million issue of the 6 5/8% notes at par.

The yield printed at the tight end of yield talk in the 6¾% area.

VMED’s 4¾% senior notes due 2031 was also strong in the secondary space.

The 4¾% notes were changing hands in the par ¾ to 101¼ context heading into the market close. There was about $20 million in reported volume.

VMED, an organization formed through the merger of Liberty Global’s Virgin Media and Telefonica SA’s 02 UK businesses, priced an $850 million tranche of the 4¾% notes at par on Tuesday.

Pricing came at the wide end of the 4 5/8% to 4¾% price talk.

The deal also included a £675 million tranche priced at par to yield 4½%.

Callon improves

Callon’s 8% senior notes due 2028 improved on Wednesday after trading off slightly the previous session.

The 8% notes were changing hands in the par ¾ to 101 context heading into the market close, according to a market source.

The notes remained active with more than $42 million in reported volume.

Wednesday’s level was the strongest for the notes since they broke for trade.

The 8% notes were marked at par 3/8 bid, par ¾ offered after breaking for trade on Monday.

They slipped to trade in the par ¼ to par ½ context on Tuesday, which was a weak day for the energy sector as crude oil futures retreated from their recent heights.

However, WTI crude oil futures reversed course on Wednesday and traded as high as $74.25 before settling at $73.08, an increase of 23 cents or 0.32%.

Crude oil futures were on the rise following the release of inventory data that showed stockpiles were at their lowest level since March 2020.

$89 million Tuesday outflows

The dedicated high-yield bond funds saw $89 million of net outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $109 million of outflows on the day.

However actively managed high-yield funds were positive on the day, with $20 million of inflows on Tuesday, the source said.

Indexes

Indexes posted nominal gains on Wednesday.

The KDP High Yield Daily index inched up 3 points to close Wednesday at 69.93, with the yield now 3.8%. The index was flat on Tuesday and down 2 points on Monday.

The ICE BofAML US High Yield index gained 8 basis points with the year-to-date return now 3.212%.

The index gained 3.5 bps on Tuesday and 10.3 bps on Monday.

The CDX High Yield 30 index edged up 1 bp to close Wednesday at 110.10. The index rose 16 bps on Tuesday and 30 bps on Monday.

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