Pilgrim’s Pride prices; Howmet Aerospace flat; Southwestern, MultiPlan weaken in junkland

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 19 – The domestic high-yield primary market saw one deal clear the market on Thursday with one more expected for Friday.

Pilgrim's Pride Corp. priced an upsized $900 million issue of split-rated 10.5-year senior notes (B1/BB+/BBB-).

The new paper was trading with a slight premium after breaking for trade.

Sylvamo Corp. remains on the forward calendar with a downsized offering of eight-year senior notes (B1/BB), which is expected to price on Friday.

Meanwhile, the secondary space was again weak on Thursday.

While the market rallied as the session progressed, it was down as much as ¼ point at the close as investors continued to digest the Federal Reserve minute notes that indicated bond tapering may begin sooner than anticipated.

However, late August illiquidity remained an issue with trading activity light despite lower prices, sources said.

Market players were either on vacation or sitting on the sidelines.

“The market’s still not doing anything,” a source said. “It’s been brutal.”

All eyes will be on the Federal Reserve in the coming week as the market awaits an official announcement regarding the bond tapering timeline.

While market players continue to wait on a catalyst to help determine the future tone of the market, new paper continued to dominate the tape.

Howmet Aerospace Inc.’s 3% senior notes due 2029 (Ba2/BB+/BBB-) were in focus with the notes hovering around par.

Southwestern Energy Co.’s 5 3/8% senior notes due 2030 (Ba3/BB-/BB) were softer on Thursday with the notes giving back much of their premium on a soft day for the market and, in particular, energy credits.

MultiPlan Corp.’s 5½% senior secured notes due 2028 (Ba3/B+) also gave back much of their gains in active trading.

Thursday’s primary

Pilgrim's Pride priced Thursday's sole deal, an upsized $900 million issue (from $750 million) of 3½% senior notes due March 2032 (B1/BB+/BBB-) that came at par in a drive-by, in the middle of talk.

The deal was heard to be two-times oversubscribed at the close of books.

The new paper was marked at par bid, par ½ offered after breaking for trade.

Meanwhile, Sylvamo became a price-taker as it downsized its offering of eight-year senior notes (B1/BB) to $450 million from $500 million, and talked the notes to yield 6¾% to 7%, well wide of early guidance in the high 5% area, sources said.

There were also covenant changes.

Books close Friday (see related stories in this issue).

Sylvamo is the only deal on the active forward calendar.

The market is expected to be generally quiet ahead of the extended Labor Day holiday weekend, which gets underway following the Friday, Sept. 3 close.

However, the primary market is poised for a big September, with some sources looking for as much as $60 billion of high-yield issuance to clear in the runup to October.

The high-volume activity is expected to occur after the conclusion of Labor Day weekend with the starting line Tuesday, Sept. 7.

Elsewhere, with respect to recent cash flows, high-yield ETFs reported $59 million of outflows on Wednesday, a trader said.

Howmet hovers

Howmet Aerospace’s 3% senior notes due 2029 were in focus on an otherwise quiet day in the secondary space.

The notes were trading on either side of par throughout Thursday’s session.

They were marked at 99¾ bid, par ¼ offered with some trading into the bid, a source said.

Howmet Aerospace priced a $700 million issue of the 3% notes at par on Wednesday.

The yield printed at the tight end of the 3% to 3 1/8% yield talk.

Southwestern weakens

Southwestern Energy’s 5 3/8% senior notes due 2030 were soft on Thursday with the notes giving back much of their premium.

The 5 3/8% notes were changing hands in the par to par ¼ context throughout the session.

The notes traded as high as par ¾ during Wednesday’s session.

While the notes maintained a premium over the past few sessions despite pressure on the energy sector, they began to crack on Thursday.

Energy credits continued to struggle on Thursday with crude oil futures hitting their lowest level since May on concern over slowing growth.

WTI crude oil futures settled at $63.69, a decrease of $1.77 or 2.7%.

MultiPlan down

MultiPlan’s 5½% senior secured notes due 2028 were also weaker in active trading on Thursday.

The 5½% notes were changing hands in the par to par ¼ context during Thursday’s session.

The notes traded as high as 101 on Wednesday.

Indexes

The KDP High Yield Daily index fell 6 basis points to close Thursday at 69.75 with the yield now 3.83%.

The index was down 1 bp on Wednesday, 1 bp on Tuesday and 1 bp on Monday.

The ICE BofAML US High Yield index fell 17.8% with the year-to-date return now 3.569%. The index was up 4 bps on Wednesday after shaving off 2.4 bps on Tuesday and 0.8 bps on Monday.

The CDX High Yield 30 index dropped 10 bps to close Thursday at 108.85.

The index was down 12 bps on Wednesday, 30 bps on Tuesday and 12 bps on Monday.

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