DirecTV, McLaren announce roadshows; Laredo notes hit; ADT, CURO dip; BWICs active

By Cristal Cody and Paul A. Harris

Tupelo, Miss., July 19 – Investor concerns that the spreading Delta variant of the Covid-19 virus might disrupt global economic recovery sent stocks plummeting and generated some selling in high-yield bonds on Monday, sources said.

Although no deals priced, dealers braved the storm by making a pair of roadshow announcements.

DirecTV Entertainment Holdings LLC started a roadshow for a $3.1 billion offering of six-year senior secured notes (BB/BBB-), in the market with early guidance of 6% to 6½%.

British carmaker McLaren Automotive began a roadshow for a $620 million offering of five-year senior secured notes (Caa1/CCC+/B), with initial guidance in the low 8% area.

In the secondary, energy bonds sank along with oil on reports of production cuts ending and stocks faltering on rising Covid-19 variant cases.

Laredo Petroleum, Inc.’s new 7¾% senior notes due July 2029 (B3/B) priced in the previous week traded down about 8 points to 9 points from at 91 bid, 92 offered, an informed source said.

“That one got smoked,” the source said. “It sold off. The last print was 92.”

The notes were seen late afternoon down 4¼ points at 92¼ bid on over $23 million of trading supply, another source said.

The company sold $400 million of the bonds on Tuesday at par.

Crude oil prices sank more than 6% early in the session following OPEC’s announcement on Sunday that it will steadily end production cuts by September 2022.

West Texas intermediate crude oil benchmark futures for August deliveries settled the day down $5.39 at $66.42, while September deliveries tumbled $5.21 to settle at $66.35.

North Sea Brent crude oil futures for September deliveries dropped $4.97 to settle Monday at $68.62.

Roadshows announced

DirecTV Entertainment Holdings LLC started a roadshow for a $3.1 billion offering of six-year senior secured notes (BB/BBB-), in the market with early guidance of 6% to 6½%.

And British carmaker McLaren Automotive began a roadshow for a $620 million offering of five-year senior secured notes (Caa1/CCC+/B), with initial guidance in the low 8% area.

One megadeal was already on the road.

McGraw-Hill Education, Inc./MAV Acquisition Corp. is marketing a $2.03 billion two-part high-yield notes offering backing the acquisition of McGraw-Hill Education by Platinum Equity Partners.

It includes $1.15 billion of seven-year senior secured notes (B2/B-) with initial guidance in the low 5% area and $875 million of eight-year senior unsecured notes (Caa2/CCC) with initial guidance in the low 7% area. The roadshow was scheduled to wrap up on Monday.

Early in the session a trader suggested that Monday's selloff might push McGraw-Hill pricing higher.

Later in the day, however, a portfolio manager said that no pricing updates on McGraw-Hill materialized during the Monday maelstrom in the capital markets.

This investor, communicating on background with Prospect News, claimed to be more focused on the deal's issuer-friendly covenant package, than on the price.

$408 million Friday inflows

The dedicated high-yield bond funds saw $408 million of daily net inflows on Friday, according to a market source.

High-yield ETFs saw $218 million of inflows on the day.

Actively managed high-yield funds saw $190 million of inflows on Friday, the source said.

ADT, CURO off

Other new issues were modestly softer Monday with high-yield energy names among the day’s weakest performers, sources noted.

ADT Inc.'s new 4 1/8% senior secured notes due August 2029 (Ba3/BB-) traded ½ point weaker than issuance going out at 99½ bid.

The issue was quoted mid-morning down 3/8 point at 99¾ bid.

ADT sold $1 billion of the notes on Thursday at par.

“We’ll see how the rest of the week shapes up,” one source said. “The market definitely felt like it was orderly – not a panic sell-off – but massive amounts of BWICs.”

CURO Group Holdings Corp.’s new 7½% senior secured notes due August 2028 (B3/B-) were among the most active issues Monday with volume totaling more than $32 million, a source said.

The notes fell ¾ point by late afternoon to 100½ bid.

CURO sold $750 million of the notes on Friday at par.

Indexes decline

The KDP High Yield Daily index slipped to 69.89 with the yield 3.81% after dropping 2 points to close Friday at 70.22 with the yield 3.67%.

The index dropped a cumulative 13 points over the prior week.

The CDX High Yield 30 index was down at 108.98 Monday after ending Friday off 17 basis points at 109.51.

The index was down 54 bps for the previous week.

The ICE BofAML US High Yield index posted a year-to-date return of 3.385% on Monday after dropping below the 4% threshold to 3.972% on Thursday.

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