Three junk deals in primary; ITT outperforms; Leeward, Carrols at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 24 – The new issue market continued to crank on Thursday.

Three issuers priced four tranches of junk totaling $2.7 billion, while Centene Corp., an ultra-familiar name on the high-yield bondscape, completed a $1.8 billion split-rated deal (see related stories in this issue).

Meanwhile, it was a strong day in the secondary space with the cash bond market up 1/8 to ¼ point, sources said.

The Nasdaq Composite and S&P 500 index notched new records during Thursday’s session, the 10-year Treasury yield held steady to close the day at 1.493%, WTI crude oil futures continued to gain settling at $73.30, an increase of $0.22 or 0.30%, and the Biden administration came closer to securing bipartisan support for a $1 trillion infrastructure spending package.

There was a strong backdrop to the market.

New paper continued to dominate the tape with the deals to price during Wednesday’s session putting in strong performances.

ITT Holdings LLC’s 6½% senior notes due 2029 (B1/B) outperformed several recent deals with the notes almost 2 points above their issue price.

Leeward Renewable Energy Operations, LLC’s 4¼% green senior notes due 2028 (//BB-) were also putting in a strong performance with the demand seen during bookbuilding following the notes into the secondary space.

Carrols Restaurant Group, Inc.’s 5 7/8% senior notes due 2029 (Caa1/CCC) were also trading at a premium to their issue price although the notes remained on a par handle.

Meanwhile, fund flows reversed course and were positive on the week through Wednesday’s close.

High-yield mutual and exchange-traded funds added $189 million, according to the Refinitiv Lipper Fund Flow report.

While nominal in terms of dollar-amount, the inflow reverses a months-long trend of outflows.

ITT outperforms

ITT Holdings’ 6½% senior notes due 2029 outperformed several recent deals in the aftermarket to trade almost 2 points above their issue price.

The 6½% notes were marked at 101¾ bid, 102 offered and were changing hands at 101 7/8 heading into the market close, a source said.

There was more than $76 million in reported volume.

The notes carried a chunky coupon for the market, a source said.

The manufacturer of component parts for several different industries priced $1.22 billion of the 6½% notes at par on Wednesday.

The yield printed at the wide of the 6¼% to 6½% yield talk.

Leeward in demand

Leeward Renewable’s 4¼% senior notes were also putting in a strong performance in the aftermarket with the demand for the notes seen during bookbuilding following them into the secondary space.

The notes were marked at par 7/8 bid, 101 1/8 offered, a source said.

There was more than $62 million in reported volume.

Leeward priced a $375 million issue of the 4¼% notes at par on Wednesday.

The yield printed 25 basis points tighter than the 4½% to 4¾% yield talk.

Carrols at a premium

Carrols’ 5 7/8% senior notes due 2029 were trading with a decent premium to their issue price.

However, the notes remained on a par handle.

The 5 7/8% notes were marked at par 3/8 bid, par ½ offered heading into the market close.

There was more than $57 million in reported volume, despite the small size of the issue.

Carrols priced a $300 million issue of the 5 7/8% notes at par on Wednesday.

The yield printed 12.5 basis points tighter than the 6% to 6¼% yield talk.

Solid Wednesday inflows

The dedicated high-yield bond funds had net inflows of $888 million on Wednesday, the latest session for which data was available at press time, according to a market source.

High-yield ETFs saw $978 million of inflows on the day.

However, actively managed high-yield funds were negative on Wednesday, sustaining $90 million of outflows on the day, the source said.

Meanwhile, the combined funds saw their first positive weekly cash flows since late April, as they posted $189 million of net inflows for the week to Wednesday's close, according to a Thursday report from the Refinitiv Lipper Fund Flow Report Newsline.

Indexes

Indexes continued their upward momentum on Thursday.

The KDP High Yield Daily index inched up 1 point to close the day at 69.94 with the yield now 3.79%.

The index was up 3 points on Wednesday, was flat on Tuesday and was down 2 points on Monday.

The ICE BofAML US High Yield index gained 11.1 bps with the year-to-date return now 3.323 bps.

The index was up 8 bps on Wednesday, 3.5 bps on Tuesday and 10.3 bps on Monday.

The CDX High Yield 30 index gained 15 bps to close Thursday at 110.25. The index gained 1 bp on Wednesday, 16 bps on Tuesday and 30 bps on Monday.

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