Issuers price $2.65 billion; Atlas Air, Scan Global on deck; Catalent soars on buyout interest

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 6 – A trio of single-tranche issuers priced a combined $2.65 billion face amount of junk on Monday.

One of the three deals upsized.

One priced on accelerated timing.

Executions appeared solid with one deal pricing at the rich end of talk while two came in the middle of talk.

A comparatively modest $1.57 billion equivalent calendar remained in place at Monday's close.

The new issue market has been busier than it had been expected to be, heading into 2022 year-end, an investor reflected on Monday.

However it's probably not as busy as it should be, the investor asserted, noting that as of late last week high-yield spreads were the lowest that they have been since April 2022, while investor risk appetite is as good as it has been since the Fed undertook its campaign to tame inflation, in March 2022.

Meanwhile, it was another red day in the secondary space as the market continued to give back gains from last week’s post-Fed surge.

The cash bond market was off another ½ point with several bids-wanted-in-competition lists circulating the market, a source said.

While it was a red day for the broader market, topical news sent Catalent, Inc.’s capital structure soaring.

The pharmaceutical company’s junk bonds jumped 2 to 5 points in heavy volume following news Danaher had expressed interest in acquiring the company.

Several recent issues remained active and were pulling back alongside the broader market.

Uniti Group LP, Uniti Fiber Holdings Inc., Uniti Group Finance 2019 Inc., CSL Capital, LLC’s 10½% senior secured notes due 2028 (B2/B/BB+) continued to see heavy volume with the notes lower alongside the broader market.

Charter Communications, Inc. subsidiaries CCO Holdings, LLC and CCO Holdings Capital Corp.’s new 7 3/8% senior notes due 2031 (B1/BB-) gave back all gains and fell below par during Monday’s session.

Catalent attracts buyers

Catalent’s junk bonds (B1/BB-) were in focus on Monday with the notes adding 2 to 5 points following news Danaher was interested in acquiring the pharmaceutical company.

Catalent’s 3½% senior notes due 2030 were the most actively traded in the debt stack.

The notes jumped 5 points to close they day just shy of 90, a source said.

There was $29 million in reported volume.

Catalent’s 3 1/8% senior notes due 2029 jumped 4½ points to close the day at 89 5/8.

There was $20 million in reported volume.

Catalent’s 5% senior notes due 2027 rose 2 points to close the day at 98¼.

There was $10 million in reported volume.

Catalent was making large gains after Danaher expressed interest in purchasing the company.

Uniti weaker

Uniti’s recently priced 10½% senior secured notes due 2028 gave back some of the strong gains made since breaking for trade with the notes lower alongside the broader market.

The 10½% notes were off 3/8 to ½ point although they remained on a 101-handle.

The notes were changing hands in the 101 1/8 to 101 3/8 context heading into the market close, a source said.

There was $25 million in reported volume.

The notes were giving back some of the strong gains made since breaking for trade.

The notes closed Friday in the 101¾ to 102 context, a level reached shortly after the $2.6 billion issue, which priced at par, broke for trade on Feb. 2.

Below par

Charter subsidiary’s CCO Holdings recently priced 7 3/8% senior notes due 2031 fell below par amid the market weakness on Monday.

The 7 3/8% notes were off ½ point to close Monday in the 99½ to par context, according to a market source.

There was $24 million in reported volume.

The notes, which traded as high as 101½ in the post-Fed rally last Thursday, are among the first new issues of 2023 to drop below their issue price, a source said.

CCO priced the $1.1 billion issue at par on Jan. 30.

Indexes

The KDP High Yield Daily index fell 39 points to close Monday at 53.56 with the yield now 6.8%.

The index posted a cumulative gain of 58 points on the week last week.

The ICE BofAML US High Yield index fell 68.8 bps with the year-to-date return now 4.363%.

The CDX High Yield 30 index fell 27 bps to close Monday at 102.92.

The index posted a cumulative gain of 53 bps on the week last week.

Junk ETFs see $1.1 billion Friday outflows

High-yield ETFs sustained a very sizable $1.1 billion daily outflow of cash on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds were positive on the day, posting $244 million of inflows on Friday, the source said.

The combined funds are tracking $1.3 billion of net inflows for the week that will conclude with Wednesday's close, according to the market source.

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