Drive-bys mark first big HY September session; Papa John’s up; funds add $710 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 9 – A big Thursday in the high-yield primary market saw the first drive-by deals of September.

The session brought $3.03 billion of reawakened primary business.

Meanwhile, the secondary space was again largely unchanged despite the continued decline in equities with volume outside of new issues light.

Papa John’s International Inc.’s 3 7/8% senior notes due 2029 (B1/BB) were in focus with the notes trading well above their issue price despite a weak day for the market.

While market players were focused on the new deals in the pipeline, there remained some carry-over trades from previous sessions.

Wolverine Escrow’s junk bonds (Wesco Aircraft Holdings Inc.) continued their decline on Thursday with the notes now down almost 10 points on the week.

Meanwhile, high-yield mutual and exchange-traded funds saw another sizeable inflow following last week when funds saw their first billion-dollar-plus inflow since June.

High-yield mutual and exchange traded funds saw $710 million enter the space in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow Report Newsline.

The previous week, funds had $1.05 billion enter the space.

Thursday primary

Five issuers priced seven dollar-denominated tranches of junk, raising a combined total of $3.03 billion.

Four of the five issuers came at the drive-through window.

Two of the five issuers upsized their deals.

All signs point to demand for speculative-grade debt that continues to be robust.

All seven of Thursday's tranches priced on the tight ends of talk.

And demand across all seven tranches was in the multiple billions of dollars (see related stories in this issue).

Papa John’s trades up

Papa John’s newly priced 3 7/8% senior notes due 2029 were in focus on Thursday with the notes performing well despite a soft day for the market.

The 3 7/8% notes were marked at par ½ bid, 101 offered early in the session, according to a market source.

They closed the day at 101.

There was more than $74 million in reported volume.

The pizza-maker broke the new issue drought in the primary market and priced a $400 million issue of the 3 7/8% notes at par on Wednesday.

Initial guidance was in the low 4% area.

Wesco sells-off some more

Wolverine Escrow’s junk bonds (Wesco Aircraft Holdings Inc.) continued their decline on Thursday.

The company’s 8½% senior notes due 2024 dropped another 1½ points to close the day at 85½, according to a market source.

There was about $9 million in reported volume.

The 9% senior notes due 2026 were also off another 1½ points to close the day at 84¾. There was about $20 million in reported volume.

Both tranches have dropped more than 10 points since last week when the company, now known as Incora, reported disappointing earnings and announced the chief financial officer was resigning.

Consecutive daily outflows

High-yield ETFs sustained outflows of $519 million on Wednesday, the most recent session for which data was available at press time, according to a market source.

That, combined with the $459 million of daily outflows which the ETFs sustained on Tuesday, brought the two-day outflow total to a sizable $978 million.

For Wednesday, the actively managed high-yield funds saw $75 million of outflows.

News of those daily flows was followed by a Thursday report that the combined funds saw $710 million of net inflows in the week to Wednesday's close, according to information posted on the Internet by the Refinitiv Lipper Fund Flow Report Newsline, as reported above.

Indexes

The KDP High Yield Daily index gained 1 basis point to close Thursday at 70.4 with the yield now 3.52%. The index was up 1 bp on Wednesday and 1 bp on Tuesday.

The CDX High Yield 30 index shaved off 6 bps to close the day at 109.74.

The index gained 12 bps on Wednesday after shaving off 16 bps on Tuesday.

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