Coinbase is crypto-hot; Cheniere Energy trades up in junk secondary; Gap tranches improve

By Paul A. Harris and Cristal Cody

Tupelo, Miss., Sept. 14 – High-yield traders apparently do want a piece of the popular cryptocurrency market, as evidenced in a massively oversubscribed offering on Tuesday from crypto trader Coinbase Global, Inc.

Alternatively, buyers are simply hungry for deals in a September market that has not yet lived up to the hype.

The secondary junk bond market tone was softer with oil prices only modestly better and indexes mostly flat to lower by the close.

“Early on, it was very strong in higher-grade high-yield energy, but then the whole market sort of turned around. Oil just went to sleep.”

Crude oil prices edged up over the day. West Texas Intermediate crude oil benchmark futures for October deliveries added 1 cent to settle Tuesday at $70.46 a barrel.

In the secondary market, Cheniere Energy Partners, LP’s new 3¼% senior notes due January 2032 (Ba2/BB/BB+) were seen going out about 1 point to 1¼ points better than issuance.

Gap, Inc.’s $1.5 billion of senior notes (Ba3/BB) priced in two tranches on Monday traded about 1 point to 1½ points higher on Tuesday.

Coinbase makes big bucks

In a blowout Tuesday deal, cryptocurrency trader Coinbase Global, Inc. priced an upsized $2 billion amount of senior guaranteed notes (Ba1/BB+) in two tranches.

The deal, which was upsized from $1.5 billion, was playing to $9.5 billion across both tranches at the close of books, allowing the issuer to price both tranches 12.5 basis points inside of price talk, sources said.

It included $1 billion of 3 3/8% seven-year notes and $1 billion of 3 5/8% 10-year notes.

Both priced at par, and were upsized from $750 million.

Upcoming

Although the Tuesday news stream in the new issue market was reasonably steady, it was much quieter than Monday.

With a full week of the post-Labor Day primary market in the rearview mirror, issuance volume is not living up to expectations, sources say.

“Where are all the deals?!” a junk bond trader demanded to know on Tuesday afternoon, adding that September issuance is no longer likely to come close to the $60 billion that some sellside sources forecast in the run-up to Labor Day.

The Tuesday session saw only one drive-by deal.

Morgan Automotive Group priced an upsized $300 million add-on to the LCM Investments Holdings II, LLC 4 7/8% senior notes due May 1, 2029 (B2/BB-) at 102 to yield 4.561%.

The size of the add-on increased from $270 million.

The price came at the rich end of the 101.5 to 102 price talk.

Although the total dollar amount of deals on the active forward calendar, $4.73 billion, is healthy, all of it is coming in six tranches from four issuers.

In terms of the total number of issuers, the active calendar is on the sparse side, sources say.

One deal is on deck to price Wednesday.

Diversey Holdings Ltd. talked its $500 million offering of eight-year senior notes (Caa1/B) to yield in the 4¾% area on Tuesday.

Official talk comes well inside of initial guidance in the low-to-mid 5% area.

The deal, which is flagged as Wednesday business, is heard to be playing to a hefty $4.5 billion of orders, a trader said.

Cheniere notes higher

Cheniere Energy Partners’ 3¼% senior notes due January 2032 (Ba2/BB/BB+) improved to 101, 101¼ in secondary trading, a market source said.

The company priced $1.2 billion of the notes on Monday at par to yield 3¼%.

Talk was tightened to the 3¼% area from initial guidance of 3½% to 3¾%.

The Houston-based LNG producer plans to use the proceeds to fund the tender/redemption of its 5 5/8% senior notes due 2026 and to prepay a portion of the Sabine Pass LNG 6¼% secured notes due 2022.

Gap tranches up

Gap’s $1.5 billion of senior notes (Ba3/BB) priced in two tranches on Monday finished higher in the secondary market on Tuesday.

Gap’s $750 million of notes due October 2029 improved to 101 bid, while the $750 million tranche of notes due October 2031 rallied to 101¼, 101½, a source said.

The 2029 issue priced at par to yield 3 5/8%, at the tight end of talk in the 3¾% area and inside of initial guidance in the low 4% area.

The 10-year notes printed at par to yield 3 7/8%, at the tight end of talk in the 4% area and in line with initial guidance that had the 10-year notes pricing 25 basis points behind the eight-year notes.

The San Francisco-based clothing and accessories retailer accelerated the timing on the deal, which initially was scheduled to remain in the market until Tuesday.

$345 million Monday outflows

The dedicated high-yield bond funds sustained $345 million of net daily outflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $323 million of outflows on the day.

Actively managed high-yield funds sustained $22 million of outflows on Monday, the source said.

The combined funds are tracking $811 million of net outflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes mixed

The iShares iBoxx High Yield Corporate Bond ETF closed Tuesday 4 cents lower at $88.01.

The KDP High Yield Daily index was mostly flat on the day at 70.5 with a yield of 3.44% after climbing 4 basis points to close Monday at 70.5 with a yield of 3.43%.

The CDX High Yield 30 index softened to 109.729 after adding 10 bps to finish Monday at 109.78.

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