Primary sells $2.58 billion; Occidental flat; Ford lags; funds add $1.54 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 13 – While the domestic high-yield primary market did not top $5 billion on Thursday, it continued to roll out new deals at an active clip with five issuers pricing a cumulative $2.575 billion.

New deal activity on Thursday was led by Veritas US Inc. and Veritas Bermuda Ltd., which priced an upsized $1 billion offering.

At Home Holding III Inc., ANGI Homeservices Inc., QVC, Inc., and PRA Group, Inc. also cleared the market.

LogMeIn, Inc. is the sole deal that remains on the forward calendar with pricing expected on Friday.

Meanwhile, the secondary space continued to show signs of weakness on Thursday with the market soft.

New paper continuing to dominate trading activity.

However, the performance of several recent deals was mixed.

Occidental Petroleum Corp.’s three-tranche megadeal (Ba2/BB+/BB) became the latest new issue to fall flat in the aftermarket.

Ford Motor Credit Co. LLC’s two tranches from its recently priced megadeal (Ba2/BB+/BB+) were lagging their issue prices in high-volume activity.

However, Black Knight InfoServ, LLC’s 3 5/8% senior notes due 2028 (Ba3/B+), FirstCash, Inc.’s 4 5/8% senior notes due 2028 (Ba1/BB), and Booz Allen Hamilton Inc.’s 3 7/8% senior notes due 2028 (Ba2/BB-) were trading with strong premiums in the aftermarket.

Meanwhile, money continued to enter the space with high-yield mutual and exchange-traded funds seeing inflows of $1.542 billion through Wednesday’s close, according to Refinitiv Lipper US Fund Flows.

Thursday’s session

Only one deal came at the extremely busy high-yield drive-through window during Thursday's session in the new issue market.

At Home Holding priced an upsized $275 million (from $250 million) issue of 8¾% five-year senior secured notes (Caa1/B-) in a drive-by deal that came through talk.

The rest of Thursday's transactions had been in the market overnight or longer.

Veritas priced an upsized $1 billion (from $600 million) issue of 7½% five-year senior secured notes (B2/B) at par, tight to talk. The issue was heard to be playing to around $2 billion of demand, according to a bond trader who had the new Veritas paper trading par ¼ bid, par ½ offered, late Thursday afternoon.

ANGI Homeservices priced a $500 million issue of 3 7/8% eight-year senior notes (Ba3/BB-) at the tight end of talk.

QVC priced a $500 million issue of 4 3/8% eight-year senior secured bullet notes (Ba2/BB+/BBB-) at the wide end of talk.

PRA Group priced a $300 million issue of 7 3/8% five-year senior notes (Ba2/BB+) at the tight end of yield talk.

On deck for Friday is LogMeIn Inc. with a $750 million offering of seven-year senior secured notes (B1/B-/BB-) talked to yield 5½% to 5¾%.

Occidental flat

Occidental’s newly priced three-tranche megadeal fell flat in the aftermarket, despite playing to massive demand during bookbuilding.

The 6 5/8% senior notes due 2030 and the 6 3/8% senior notes due 2028 were hovering around par throughout Thursday’s session.

The notes were changing hands in the 99 7/8 to par 1/8 context in high-volume activity, a source said.

While Occidental’s 5 7/8% senior notes due 2025 were also wrapped around par early in the session, they weakened as the session progressed and stood poised to close the day at 99 5/8, a source said.

All three tranches were active with more than $50 million in reported volume.

Occidental priced the massively upsized $3 billion three-tranche offering on Wednesday.

The deal included a $900 million tranche of the 5 7/8% notes, a $600 million tranche of the 6 3/8% notes and a $1.5 billion tranche of the 6 5/8% notes, all of which priced at par.

The 5 7/8% notes priced at the tight end of talk for a yield in the 6% area.

The 6 3/8% notes priced in the middle of yield talk in the 6 3/8% area.

The 6 5/8% notes priced in the middle of talk in the 6 5/8% area.

The initial size of the offering was $1.5 billion.

The deal is the second junk-rated deal that Occidental has priced since becoming a fallen angel.

The Houston-based oil and gas company priced a $2 billion three-tranche offering in late June.

Pricing of that deal was substantially wider and included a $500 million tranche of 8% senior notes due 2025, a $500 million tranche of 8½% senior notes due 2027 and a $1 billion tranche of 8 7/8% senior notes due 2030.

Ford lags

Ford’s recently priced megadeal was lagging in high-volume activity on Thursday.

The 3.37% notes due 2023 were changing hands in the 99 to 99½ context with more than $34 million in reported volume.

The 4 1/8% notes due 2027 traded down to a 98-handle and were changing hands in the 98½ to 98 7/8 context heading into Thursday’s close, a source said.

The notes had more than $25 million in reported volume.

The spreads for the notes were not unreasonable and there could even be an argument that the spreads could have been tighter, a source said.

However, on a relative value basis, some of Ford’s other issues may look cheaper than the company’s latest offering, the source said.

Ford’s issues, in particular, have been lifted by the Fed with the some eligible for purchase through the Federal Reserve’s Secondary Market Corporate Credit Facility.

“The Fed is holding it. If the Fed stops holding the floor, its going to fall,” a source said.

Ford Motor Credit priced a $2.25 billion two-tranche offering of senior notes (expected Ba2/BB+/BB+) in a Wednesday drive-by.

The deal included a $1 billion tranche of 3.37% notes due Nov. 17, 2023, which priced at 99.988 to yield 3 3/8%.

The 3.37% notes priced tight to talk for a yield in the 3½% area.

The deal also included a $1.25 billion tranche of 4 1/8% senior notes due Aug. 17, 2027, which priced at par.

The 4 1/8% notes priced on the tight end of talk for a yield in the 4¼% area.

Trading up

While the megadeals from Wednesday’s session were putting in a lackluster performance in the secondary space, several other deals were trading with large premiums.

Booz Allen Hamilton’s 3 7/8% senior notes due 2028 traded up to 102 late Thursday afternoon, according to a market source.

The notes were active with more than $50 million in reported volume.

The company priced an upsized $700 million issue of the 3 7/8% notes at par on Wednesday.

Pricing came at the tight end of yield talk in the 4% area.

The initial size of the deal was $500 million.

Black Knight InfoServ’s 3 5/8% senior notes due 2028 rose to a 101-handle on Thursday.

The notes were changing hands in the 101 3/8 to 101½ context heading into the market close.

Black Knight priced an upsized $1 billion issue of the 3 5/8% notes at par on Wednesday.

Pricing came tighter than yield talk in the 3 7/8% area. The offering was upsized from $750 million.

FirstCash’s 4 5/8% senior notes due 2028 were also trading with a large premium in the aftermarket.

The 4 5/8% notes were marked at 101¾ bid, 102¼ offered on Thursday.

FirstCash priced a $500 million issue of the 4 5/8% notes at par on Wednesday. Pricing came tighter than the 4¾% to 5% yield talk.

The deal was upsized from $400 million.

Indexes down

Indexes were soft on Thursday.

The KDP High Yield Daily index dropped 6 basis points to close the day at 67 with the yield now 5.54%.

The index was flat on Wednesday, gained 1 bp on Tuesday and shaved off 1 bp on Monday.

The ICE BofAML US High Yield index again teetered on negative territory.

The index dropped 21.5 bps with the year-to-date return now 0.064%.

The index was down 18.2 bps on Wednesday, gained 9 bps on Tuesday and was up 2.1 bps on Monday.

The CDX High Yield 30 index sank 47 bps to close Thursday at 104.25. The index rose 40 bps on Wednesday after dropping 34 bps on Tuesday and 17 bps on Monday.

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