AmWINS, MoneyGram price high-yield bonds; Laredo under pressure; FirstStudent flat

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 14 – Amid a steady stream of primary market news on Wednesday two dollar-denominated issuers raised $1.21 billion in single-tranche deals that had been shopped by means of investor roadshows.

Meanwhile, the secondary space was again soft on Wednesday as Federal Reserve Chair Jerome Powell testified before Congress and reaffirmed his stance that inflation was transitory.

While soft, the market was quiet with no major price movements in the space.

Equity markets seemed to be driving valuations in junkbondland, a source said.

While some sources are expecting a pullback with the market at all-time tights, with equity markets as elevated as they are, other sources did not see immediate cause for concern.

“As long as equity markets stay this elevated, high-yield shouldn’t have much to worry about given the huge equity cushion (margin of safety),” a source said.

New issues were once again the major driver of trading activity in the space.

First Student Bidco Inc.’s 4% senior secured notes due 2029 (Ba3/B+/BB+) fell flat in the aftermarket with the notes priced to perfection.

However, Laredo Petroleum, Inc.’s 7¾% senior notes due 2029 (B3/B) continued to trend lower after a weak break with the notes closing the day 2 points below par.

Wednesday

In the Wednesday session, in a deal that was heard to be playing to $2.7 billion of demand while pricing discussions were in the mid-5% area earlier in the week, AmWINS Group, Inc. ended up crossing the finish line with a four-handle yield, pricing its downsized $790 million issue (from $890 million) of 4 7/8% senior notes due 2029 (B3/B-) at par, at the tight end of final talk in the 5% area.

MoneyGram International, Inc., meanwhile, priced its $415 million issue of 5 3/8% senior secured notes due 2026 (B2/B+) 12.5 basis point inside of talk.

In the wake of Wednesday's action there was still a formidable calendar of dollar deals left to price ahead of the coming weekend.

Healthcare Royalty, Inc., on deck for Thursday, talked its $750 million offering of eight-year unsecured notes (B2) to yield in the 4 5/8% area, tight to initial guidance in the high 4% area (see related stories in this issue).

First Student flat

First Student’s 4% senior secured notes due 2029 fell flat in the aftermarket with the notes hovering around their issue price.

The 4% notes were marked at par bid, par ¼ offered heading into Wednesday’s close, a source said.

The deal was “jammed” with a huge order book, a source said.

With the deal playing to solid demand and pricing tight, there was little room for movement in the secondary space.

First Student priced an $800 million issue of the 4% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 4 1/8% area.

Laredo under pressure

Laredo’s 7¾% notes due 2029 were under pressure in the secondary space with the notes continuing to trend lower after a weak break.

The 7¾% notes dropped about 1 3/8 points to close Wednesday at 98, a source said.

The notes immediately traded below par after breaking for trade on Tuesday, closing the previous session at 99 3/8 bid, 99 5/8 offered.

The oil and gas company is a tough name and operates in an area in the Permian basin in West Texas that is not favored, a source said.

Laredo priced a $400 million issue of the 7¾% notes at par on Tuesday.

The yield printed in the middle of yield talk in the 7¾% area.

$551 million Tuesday outflows

The dedicated high-yield bond funds saw $551 million of net daily outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $556 million of outflows on the day.

Actively managed high-yield funds were flat to slightly positive on Tuesday, posting $5 million of inflows on the day, the source said.

Indexes mixed

The KDP High Yield Daily index shaved off 3 points to close the day at 70.31 with the yield now 3.64%. The index closed Tuesday unchanged and was down 1 point on Monday.

The ICE BofAML US High Yield index dropped 3 basis points to close Wednesday at 4.07%. The index dropped 3.6 bps on Tuesday after gaining 11.9 bps on Monday.

The CDX High Yield 30 index rose 5 bps to close Wednesday at 109.86.

The index dropped 19 bps on Tuesday and 5 bps on Monday.

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