Medline deal leads $9.95 billion Thursday HY primary; LSB, New Enterprise on 101-handle

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 30 – Although high-yield primary market activity in September fell short of expectations, it went out with a bang on Thursday as eight issuers priced $9.95 billion in nine tranches.

The lion's share of it came from Medline Industries which priced a downsized $7 billion two-tranche offering.

Meanwhile, the secondary space was largely unchanged on Thursday as accounts closed the books on the third quarter.

While rising Treasury yields continued to pressure rate-sensitive names, new deals remained in demand with the majority continuing to perform well in the aftermarket.

LSB Industries, Inc.’s 6¼% senior notes due 2028 (B3/B-) and New Enterprise Stone & Lime Co., Inc.’s 5¼% senior secured notes due 2028 (B2/B+) were putting in strong performances with both issues on a 101-handle as investors sought out the higher-yielding notes.

However, Foot Locker, Inc.’s 4% senior notes due 2029 (Ba2/BB+) fell largely flat in the aftermarket, which was attributed to their tight pricing.

While the market was soft, inflows continued with high-yield mutual and exchange-traded funds seeing $196 million enter the space in the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flow Report Newsline.

Thursday’s primary

Although September in the high-yield primary market fell short of the pre-Labor Day hype, it had a grand finale on Thursday as eight issuers priced a total of nine tranches for a whopping $9.95 billion of issuance.

The lion's share of it came from Medline Industries which priced a downsized $7 billion amount of notes (from $7.7 billion) in two tranches.

There were drive-by deals from Ziply Fiber, which upsized its 4¾% secured deal to $350 million from $275 million, bringing it tight to talk, and from ConvaTec.

The session also saw a massive deal calendar all but clear (see related stories in this issue).

101-handle

While there continued to be some weakness in the secondary space, the majority of new and recent issues continued to perform well, especially the deals that priced with higher coupons.

LSB Industries’ 6¼% senior notes due 2028 and New Enterprise’s 5¼% senior secured notes due 2028 were changing hands on a 101-handle.

LSB’s 6¼% notes were changing hands in the 101 1/8 to 101 7/8 context heading into the market close.

There was $33 million in reported volume.

LSB priced a $500 million issue of the 6¼% notes at par on Wednesday.

The yield printed at the tight end of yield talk in the 6 3/8% area.

New Enterprise’s 5¼% senior notes due 2028 were changing hands in the 101 to 101½ context heading into the market close.

New Enterprise priced a $585 million tranche of the 5¼% notes at par on Wednesday.

Pricing came in the middle of yield talk in the 5¼% area.

The deal also included a $67 million add-on to the company’s 9¾% senior notes due 2028, which priced at 108.5 to yield 7.13%.

Flat-footed

While the deal was heard to have played to massive demand, Foot Locker’s 4% senior notes due 2029 fell flat in the aftermarket.

While the notes traded as high as par 7/8 during Thursday’s session, they came in towards the market close.

The notes were changing hands in the par to par 1/8 context, a source said.

There was $74 million in reported volume.

Foot Locker priced a $400 million issue of the 4% notes at par on Wednesday.

The yield printed at the tight end of the 4% to 4¼% yield talk.

The deal was heard to have played to more than $2.9 billion of demand from 194 accounts.

Indexes

The KDP High Yield Daily index fell 3 basis points to close the day at 69.96 with the yield now 3.68%. The index gained 5 bps on Wednesday, sank 26 bps on Tuesday and was down 8 bps on Monday.

The CDX High Yield 30 index dropped 23 bps to close the day at 109.19.

The index gained 4 bps on Wednesday, fell 32 bps on Tuesday and gained 3 bps on Monday.

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