Junk primary cranks out deals; pressure on secondary; DISH lags; Suburban Propane gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 11 – The domestic high-yield primary market continued to churn out deals at a rapid pace with $2.43 billion clearing the market.

Park Hotels & Resorts Inc., Kaiser Aluminum Corp., and Brookfield Residential were among the deals to price during Tuesday’s session.

Meanwhile, it was a heavy day in the secondary space with the cash bond market down ¼ to ½ point at the open.

With exchange-traded funds at a sizeable discount, arbitrage traders moved into the secondary and pushed prices down further with heavy selling, a source said.

However, the secondary space pared its losses as the selling pressure eased heading into the afternoon.

While the secondary market was heavy on Tuesday, the onslaught of new paper that priced during Monday’s session was holding up relatively well.

DISH DBS Corp.’s 5 1/8% senior notes due 2029 (B2/B-) were lagging their issue price in active trading.

LPL Financial Holdings Inc.’s 4 3/8% senior notes due 2031 (Ba2/BB) and Service Corp. International’s 4% senior notes due 2031 (Ba3/BB) were flat.

While they remained on a par-handle, EQT Corp.’s two tranches (Ba2/BB/BB+) were trading at decent premiums to their issue prices.

However, Suburban Propane Partners, LP’s 5% senior notes due 2031 (B1/BB-) outperformed with the notes on a 101-handle.

Tuesday’s primary

Gas shortages in the southeastern United States, set in train by the criminal hack of the Colonial Pipeline, caused heaviness in stocks which didn't really carry over into the junk bond market, sources said on Tuesday.

The new-issue bourse remained on a tear, with another $2.43 billion clearing the market.

Park Hotels & Resorts priced an upsized $750 million issue (from $650 million) of 4 7/8% eight-year secured notes (B+) at par, at the tight end of talk.

The deal played to $2.68 billion of demand across 110 accounts, according to a trader who spotted the notes trading at par ¾, bid 101¼ offered at Tuesday's close.

Also, Kaiser Aluminum priced an upsized $550 million issue (from $500 million) of 4½% 10-year senior notes (B1/BB/BB) at par, also at the tight end talk.

The deal was heard to be four-times oversubscribed, a trader said.

And Brookfield Residential drove by with $350 million of 5% notes and an upsized C$250 million issue (from C$200 million) of eight-year senior notes (both B2/B+).

Both priced at par.

The dollar-denominated notes came in the middle of talk while the Canadian dollar-denominated notes came at the wide end of talk.

With the Monday and Tuesday sessions putting up just shy of $10 billion of new issuance, the active forward calendar was thin heading into Tuesday's close.

One deal is known to be on deck for Wednesday.

Club Car LLC talked its $450 million offering of eight-year senior notes (Caa2/CCC+) to yield in the 6 3/8% area on Tuesday. Official talk comes tight to initial guidance in the high 6% area (see related stories in this issue).

DISH lags

DISH’s 5 1/8% senior notes due 2029 were lagging their issue price in active trading on Tuesday.

The notes were marked at 99 5/8 bid, 99 7/8 offered in the late afternoon.

In a deal that was heard to be as much as 2x oversubscribed, DISH priced an upsized $1.5 billion, from $1.25 billion, issue of the 5 1/8% notes at par in a Monday drive-by.

Pricing came at the tight end of yield talk in the 5¼% area.

Flat

LPL Financial’s 4 3/8% senior notes due 2031 and Service Corp.’s 4% senior notes due 2031 fell flat in the aftermarket.

LPL Financial’s 4 3/8% notes were marked at par 1/8 bid, par 3/8 offered in the late afternoon.

The broker dealer priced a $400 million issue of the 4 3/8% notes at par in a Monday drive-by.

The yield printed in the middle of the 4¼% to 4½% yield talk.

Service Corp.’s 4% senior notes due 2031 were wrapped around their issue price – a level the notes had been stuck at since breaking for trade.

The 4% notes were marked at par bid, par ¼ offered.

Service Corp. priced an $800 million issue of the 4% notes at par on Monday.

Pricing came in the middle of yield talk in the 4% area.

EQT at a premium

EQT’s recently priced tranches of senior notes were trading with a decent premium despite the heavy day in the secondary space. However, the notes remained on a par handle.

EQT’s 3 1/8% senior notes due 2026 were marked at par 3/8 bid, par ½ offered in the late afternoon.

EQT’s higher yielding but longer duration counterparts were slightly higher.

The 3 5/8% notes due 2031 were marked at par 5/8 bid, par 7/8 offered, a source said.

EQT priced a $500 million tranche of the 3 1/8% notes and a $500 million tranche of the 3 5/8% notes at par on Monday.

The 3 1/8% notes priced at the tight end of yield talk in the 3¼% area. The 3 5/8% notes priced at the tight end of yield talk in the 3¾% area.

Suburban Propane outperforms

Suburban Propane’s 5% senior notes due 2031 were the outperformers of Monday’s deal with the notes trading up to a 101-handle.

The 5% notes were marked at 101 bid, 101¼ offered in the late afternoon.

Suburban Propane priced a $650 million issue of the 5% notes at par on Monday.

Pricing came at the tight end of the 5% to 5 1/8% yield talk, which tightened from earlier talk for a yield in the 5¼% area.

$339 million Monday outflows

The dedicated high-yield bond funds sustained $339 million of net outflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $454 million of outflows on the day.

However actively managed high-yield funds were positive on the day, posting $115 million of inflows on Monday, the source said.

The combined funds are tracking $410 million of net outflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes down

Indexes were in the red on Tuesday after a mixed start to the week.

The KDP High Yield Daily index dropped 10 points to close Tuesday at 69.69 with the yield now 3.85%. The index gained 2 points on Monday.

The ICE BofAML US High Yield index dropped 26.6 bps with the year-to-date return now 2.081%.

The index gained 5.4 bps on Monday.

The CDX High Yield 30 index was down 11 bps to close Tuesday at 109.49.

The index dropped 25 bps on Monday.

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