Morning Commentary: Upsized GEO on deck; new Brandywine 8 7/8% notes trade above 102

By Paul A. Harris

Portland, Ore., April 4 – The high-yield bond market opened 1/8 of a point higher on Thursday, traders said.

With the S&P 500 stock index up 0.69% at midmorning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.19%, or 15 cents, at $77.10.

New issue watchers were parsing a $3.5 billion active calendar of dollar-denominated deals.

GEO Group, Inc. upsized its new two-part deal to $1.3 billion from $1.2 billion, and set price talk for both tranches on Thursday morning.

It includes a $700 million tranche of five-year senior secured notes (B1/BB) talked to yield in the 8 5/8% area, tight to initial guidance.

It also includes an upsized $600 million tranche (from $500 million) of seven-year senior unsecured notes (B3/B) talked to yield in the 10¼% area, in line with initial guidance.

Demand across both tranches was twice deal-size when news of price talk and the upsize surfaced, a trader said.

Books were set to close at midday Thursday.

GEO is one of four deals on the active new issue calendar expected to price ahead of Friday’s close.

Herbalife International Inc. and HLF Financing Sarl LLC hiked pricing on a $700 million offering of five-year senior secured notes (Ba2/B+), talking the deal with an 11¾% coupon at a discount to yield 12½%, well wide of early yield guidance in the 11% area.

Books close at 2 p.m. ET, with pricing and allocations expected thereafter.

Prior to the release of official price talk, at midmorning, Herbalife’s deal was heard to be playing to $1 billion of demand, a trader said.

Elsewhere Toronto-based provider of cloud-based legal practice management software Dye & Durham Corp. is marketing $500 million of five-year senior secured notes (B1), also expected to price Thursday, a trader said.

Pending official price talk, initial guidance is in the low 9% area.

And Genesee & Wyoming Inc. is marketing $1 billion of eight-year senior secured notes (Ba3/BB), in the market with initial price talk of 6½% to 6¾%.

Meantime, a pair of well-received Wednesday issues were the focus of secondary market activity on Thursday morning, a trader said.

The Brandywine Operating Partnership, LP 8 7/8% senior notes due April 12, 2029 (Ba1/BB+) were active at 102¼ bid, 102¾ offered.

The upsized $400 million deal (from $300 million) priced Wednesday at 99.505 to yield 9%.

And the Rakuten Group Inc. 9¾% senior bullet notes due April 2029 (S&P: BB) were 101 bid, 101½ offered at midmorning, also active, the trader said.

The upsized $2 billion issue (from $1.25 billion) priced at 99.512 to yield 9 7/8% on Wednesday, heard to be playing to a whopping $11.3 billion of demand at close-of-books.

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