Kosmos prices; CA Magnum joins packed junk calendar; Alliant at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 21 – The domestic high-yield primary market saw one deal price during Thursday’s session while more than $4 billion is set to price before the week draws to a close.

Kosmos Energy Ltd. priced a $400 million issue of 5.5-year senior notes (B3/B+/B).

Option Care Health Inc.’s $500 million offering of eight-year notes (B3/B-) and LABL, Inc. $1.21 billion two-part offering are on deck for Friday’s session.

However, it has been radio silence on the Monitronics International, Inc. (Brinks Home) $1.1 billion offering of seven-year senior secured first-lien notes due 2028 (Caa1/B-).

The coming week is also expected to be active with CA Magnum Holdings launching a roadshow for a $1.01 billion offering of five-year senior secured notes, the latest in a series of leveraged buyout financing transactions.

Meanwhile, the secondary space was soft on Thursday despite the strength in equity markets as a rising 10-year Treasury yield again pressured rate-sensitive names.

The 10-year Treasury yield shot past 1.7% on Thursday, closing the day at the session high of 1.702%.

However, trading activity in the secondary space remained muted with focus remaining on new issues.

Alliant Holdings Intermediate, LLC and Alliant Holdings Co-Issuer, Inc.’s recently priced tranches were trading at a premium to their issue prices despite the weakness in the market.

Thursday’s primary

Most of Thursday's news in the dollar-denominated high-yield primary market came with an emerging markets cache.

Houston-based Kosmos Energy Ltd. priced a $400 million issue of 7¾% 5.5-year senior notes (B3/B+/B) at par, 12.5 basis points through the 7 7/8% to 8% yield talk, and 50 bps beneath the midpoint of initial guidance in the 8¼% area.

It was heard to be three-times to 3.5-times oversubscribed, a trader said.

The deepwater driller's assets include production offshore Ghana, Equatorial Guinea and the U.S. Gulf of Mexico, as well as a gas development offshore Mauritania and Senegal.

Meanwhile CA Magnum Holdings started a roadshow on Thursday for a $1.01 billion offering of five-year senior secured notes backing the buyout of India-based Hexaware Technologies by Carlyle Group.

The deal, which is being transacted on the U.S. high-yield desk, is in the market with initial guidance of 5¾% to 6%.

Busy Friday

In the wake of Thursday's action three deals were left on the active forward calendar as business slated to price ahead of the coming weekend.

Option Care Health is marketing $500 million of eight-year notes (B3/B-). The deal was playing to $1 billion of orders early Thursday morning, a trader said.

Pending official price talk initial guidance is in the high 4% area.

LABL, Inc. is also expected to price its $1.21 billion two-part deal ahead of the weekend: $750 million seven-year secured notes initially guided at 5½% to 5¾%, and $460 million eight-year unsecured notes with initial guidance of 7¾% to 8%.

LABL is heard to have garnered $3 billion of demand, heavily skewed toward the secured notes, market sources say.

With respect to the unsecured notes investors are seeking covenant concessions, they add.

Meanwhile it has been radio silence throughout most of the week on the Monitronics International, Inc. (Brinks Home) $1.1 billion offering of seven-year senior secured first-lien notes due 2028 (Caa1/B-).

Investors are seeking considerably more rate (talk is heard to have backed up into the elevens) and covenant concessions, according to traders, some of whom are wondering aloud whether the deal is actually still in the market.

Should Monitronics pull the offer it would be a conspicuous event given the deal's size, and the fact that it came to the market with as much as $500 million of reverse inquiry behind it, a trader said late Thursday.

“It was a very telegraphed deal,” the source added.

Alliant at a premium

While it was a soft day in the secondary space, Alliant’s recently priced tranches were trading at premiums to their issue prices.

The insurance brokerage firm’s 5 7/8% senior notes due 2029 (Caa2/CCC+) continued to trade in the par ½ to par ¾ context on Thursday – a level reached shortly after breaking for trade.

While the company’s 4¼% senior secured notes 2027 (B2/B) were trading at a premium to their discounted reoffer price, they remained below their previous levels.

The 4¼% notes were also changing hands in a par ½ to par ¾ context.

However, they were off about 5/8 point from their previous level. The 4¼% notes were changing hands on a 101-handle prior to the add-on.

Alliant priced a $450 million tranche of the 5 7/8% notes at par on Thursday. The yield printed at the tight end of yield talk in the 6% area.

The two-tranche offering also included a downsized $225 million, from $475 million, add-on to the 4¼% senior secured notes due Oct. 15, 2027 (B2/B), which priced at 100.5 to yield 4.154%.

The issue price came at the cheap end of the 100.5 to 100.75 price talk.

Cash to put to work in junk

The dedicated high-yield bond funds saw $157 million of daily net inflows on Wednesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $120 million of inflows on the day.

High-yield ETFs saw $37 million of inflows on Wednesday, the source said.

News of Wednesday's daily flows came ahead of a Thursday afternoon report that the combined funds saw $2.296 billion of net inflows in the week to Wednesday's close, according to information posted on the Internet by the Refinitiv Lipper Fund Flow Report Newsline.

Those are the largest inflows since the week ending April 7, according to the market source.

As the Oct. 18 week wore on dollar-denominated new issue activity has slowed to a trickle, a trader remarked late Thursday afternoon.

Given the technical picture painted by the fund flow news, and the fact that high-yield accounts say they have cash to put to work, it's a little curious that the market has not been busier.

However, that cash is not burning holes in investors' pockets, the trader asserted.

“Lately investors have become more patient.” the source said.

Indexes

The KDP High Yield Daily index shaved off 1 point to close Thursday at 69.42 although the yield remained flat for the third consecutive day at 3.84%.

The index gained 1 point on Wednesday after slipping 1 point on Tuesday and 2 points on Monday.

The CDX High Yield 30 index dropped 15 bps to close Thursday at 109.24.

The index gained 6 bps on Wednesday and 16 bps on Tuesday after slipping 5 bps on Monday.

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