Bally’s, IEA price low-grade bonds; Ford in focus; Crocs at a premium; Cinemark gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 6 – Infrastructure and Energy Alternatives Inc. (IEA) and Bally’s Corp. wrapped up their high-yield bond deals on Friday.

Meanwhile, the secondary space was unchanged on Friday following a soft week that saw spreads widen with CCC credits underperforming as investors continued to shed risk.

New and recent issues continued to dominate the tape. However, earnings-related news sparked activity in some outstanding issues.

The Ford Motor Credit Co. LLC newly priced 2.7% senior notes due 2026 (Ba2/BB+/BB+) were active with the notes continuing to trade at a premium to their issue price.

While Crocs, Inc. 4 1/8% senior notes due 2031 (B1/BB-) also continued to trade at a premium, they were losing steam heading into the market close.

Outside of recent issues, Cinemark USA, Inc.’s senior notes were making gains after the company reported earnings.

Primary

At the conclusion of a roadshow, Infrastructure and Energy Alternatives Inc. (IEA) priced a $300 million issue of 6 7/8% eight-year senior notes (B3/B+/B) at par, in the middle of talk and wide to initial guidance, on Friday.

And late Friday, Bally’s Corp. announced that it priced its downsized $1.5 billion offering of senior notes (B3/CCC+/B) backing the GameSys acquisition: $750 million of 5 5/8% notes due 2029 and $750 million of 5 7/8% senior notes due 2031.

The week ahead gets underway to a slim active new issue calendar.

Sunnova Energy Corp. is on the road with a $350 million offering of five-year green senior notes (B1/B-) guided to yield in the low-to-mid 6% area, and expected to price in the week ahead.

August

By no means has the month of August 2021 lived up to the old saw about the Dog Days of Summer, thus far.

The first week of this August put up $13.2 billion of issuance in a front-loaded week that saw nearly $10 billion price on Monday and Tuesday.

The new issue market may not sustain that pace for the rest of the month, sources say.

One trader forecast that new issue volume will slacken significantly in the week ahead.

However, they add, a formidable post-Labor Day shadow calendar is now taking shape.

The junk market, having turned out $344 billion of new deal volume in the year to date, is already in a virtual tie with last year's all-time issuance record.

The gunsights of the 2021 high-yield primary are now trained on the $400 billion mark.

Widening spreads

The cash bond market was again largely unchanged on Friday. However, it was a soft week for the secondary space.

Spreads widened 16 basis points to 342 with CCC notable underperformers, according to a BofA Global Research report.

CCC spreads have widened 90 bps from their tights in July and currently trail BB credits by 40 bps, according to the report.

There has been a general de-risking taking place in the secondary space with investors shedding riskier credits, a source said.

Ford in focus

Ford Motor Credit’s 2.7% senior notes due 2026 were in focus on Friday although the notes were largely unchanged.

The 2.7% notes continued to trade at par ½ bid, par ¾ offered, a level reached after breaking for trade, throughout Friday’s session.

There was more than $70 million in reported volume.

Ford priced a $1.5 billion issue of the 2.7% notes at par in a Thursday drive-by.

The yield printed toward the tight end of yield talk in the 2¾% area.

Crocs weakens

Crocs 4 1/8% senior notes due 2031 were losing steam heading into late Friday afternoon.

The notes were changing hands in the par 3/8 to par 5/8 context after launching the day at par ½ bid, par ¾ offered, sources said.

There was more than $24 million on the tape.

In a heavily oversubscribed offering, Crocs priced a $350 million issue of the 4 1/8% notes at par on Thursday.

The yield printed at the tight end of yield talk in the 4¼% area.

The deal was heard to be 5x oversubscribed.

Cinemark pops

Cinemark’s senior notes were making large gains following the movie chain operator’s earnings report.

The 5¼% senior notes due 2028 rose 2 5/8 points to close the day at 93½, according to a market source.

There was more than $12 million in reported volume.

While less active, Cinemark’s 5 7/8% senior notes due 2026 gained more than 2 points to close the day at 97¼.

Cinemark’s junk bonds were on the rise following a better-than-expected earnings report.

The company reported revenue of $294.65 million versus analyst expectations for $260.98 million.

Thursday fund flows

The daily cash flows of the dedicated high-yield bond funds were largely flat on Thursday, a market source said.

High-yield ETFs saw $49 million of inflows on the day.

However actively managed high-yield funds sustained $20 million of outflows on Thursday, the source said.

News of Thursday's daily flows follows a Thursday report that the combined funds sustained $1.16 billion of outflows in the week to the Wednesday, Aug. 4 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

It was the third negative weekly cash flow in the past four weeks for the combined junk funds, the market source noted.

All of the latest week's outflows, and more, were concentrated in the ETFs, which ended the period with cash flows of negative-$1.4 billion.

Year-to-date flows for the combined funds ended the most recent week at negative-$15.3 billion.

Indexes

The KDP High Yield Daily index fell 2 basis points to close Friday at 70.07 with the yield 3.71%.

The index was down 2 bps on Thursday, 11 bps on Wednesday and 4 bps on Tuesday after rising 1 bp on Monday.

The index posted a cumulative loss of 18 bps on the week.

The CDX High Yield 30 index rose 11 bps to close Friday at 109.44.

The index gained 34 bps on Thursday, was down 14 bps on Wednesday, gained 6 bps on Tuesday and fell 9 bps on Monday.

The index gained 28 bps on the week.

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