Kinetik, Icahn each bring junk add-ons; USI at a premium; Spectrum Brands rally continues

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 15 – In an active mid-December Friday session in the high-yield primary market, two drive-by issuers price a $500 million total face amount of unsecured notes, with each issuer bringing a single add-on tranche.

Kinetik Holdings LP priced an upsized $300 million add-on to its 6 5/8% senior sustainability-linked notes due Dec. 15, 2028 (Ba1/BB+/BB+).

Icahn Enterprises LP and Icahn Enterprises Finance Corp. (IEP) priced an upsized $200 million add-on its of 9¾% senior bullet notes due Jan. 15, 2029 (Ba3/BB).

The pipeline heading into the final weeks of December are unclear with some forecasting new deal activity had run its course while others would not be surprised to see additional issuance given the supportive backdrop.

Meanwhile, the secondary space took a breather from its phenomenal post-Fed rally with the market either side of unchanged on Friday after adding more than 2 points in the past 2 sessions.

While activity in the space dwindled, new and recent deals remained active with performances strong as the market prepares to close 2023 at the height of the year.

USI Inc.’s new 7½% senior notes due 2032 (Caa1/CCC+) held on to a solid premium in active trade on Friday.

Spectrum Brands Holdings, Inc.’s 3 7/8% senior notes due 2031 (B2/B) continued their bull run with the notes hitting their highest point of the year in active trade.

Add-ons

An active mid-December Friday session in the high-yield primary market had two drive-by issuers price a $500 million total face amount of unsecured notes, with each issuer bringing a single add-on tranche.

Both were tapping issues that came earlier in the month.

Both add-ons upsized.

Both issuers were in the market to refinance debt.

And both deals priced at the rich ends of price talk.

Kinetik Holdings priced an upsized $300 million add-on to its 6 5/8% senior sustainability-linked notes due Dec. 15, 2028 at 100.5, according to market sources.

The add-on size increased from $200 million.

The add-on immediately became fungible with the original notes which priced on Dec. 4.

Thus the originals and the add-on notes were trading as a single series late Friday afternoon, whereupon they changed hands at par 7/8, a trader said, adding that the Kinetic add-on was heard to have generated $730 million of demand.

Meanwhile, Icahn Enterprises priced an upsized $200 million add-on its of 9¾% senior bullet notes due Jan. 15, 2029 at 100.625 to yield 9.587%.

The deal size increased from the $150 million.

The book for the tap was heard to contain in excess of $450 million of orders, sources said.

The pipeline

When markets reopen on Monday they will do so in the approach to deep December.

And toward the middle of the pre-holiday week ahead, 2023 market activity will start winding down in earnest, sources say.

That does not preclude new issue activity in the early part of the coming week, given the supportive capital markets backdrop and a late-year rate outlook that has become notably accommodative, some say.

Nevertheless, some sources forecast that Friday’s action would close the book on the 2023 high-yield primary.

JPMorgan has telegraphed that it is finished for the year, a portfolio manager said.

Others say wait and see.

There is cash to be put to work, preferably in new issues, and that could generate at least a modicum of primary market business on Monday and Tuesday, a trader said.

In any case, the active new issue calendar finished the week empty.

USI at a premium

USI’s new 7½% senior notes due 2032 were trading with a solid premium in heavy volume on Friday.

The notes traded in a range of par 1/8 to par 5/8 and stood poised to close the day at par 3/8, a source said.

There was $47 million in reported volume.

USI Inc. priced a $620 million issue of the 7½% notes at par in a Thursday drive-by.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

Spectrum Brands

Spectrum Brands’ 3 7/8% senior notes due 2031 continued their bull run on Friday with the notes closing the day at their highest level of the year.

The notes added 1 point to end the day wrapped around 91, a source said.

The yield was 5.3% which was a little head-scratching for a single B credit, a source said.

However, the notes have always traded tight to the index.

The notes have seen a massive runup over the past month and a half with the notes trading in the 78 to 80 range in mid-October, a source said.

Fund flows

High-yield ETFs had daily cash inflows in excess of $1 billion for the second consecutive day, on Thursday, the most recent session for which data was available at press time, according to a market source.

The junk ETFs had $1.03 billion of inflows on Thursday, which came on the heels of Wednesday’s $1.1 billion inflow.

Actively managed high-yield funds sustained $160 million of outflows on Thursday.

News of Thursday’s daily flows follows a Thursday afternoon report that the combined funds had $759 million of net inflows for the week to Wednesday, Dec. 13.

The past five weeks have had $14.2 billion of net inflows to the junk funds, the market source said.

Preceding that interval, however, was an eight-week period during which the funds sustained $11.5 billion of net outflows.

Monthly cash flows into the dedicated junk bond funds, for November, came to $12.7 billion, the third-largest monthly inflows on record, the market source said, adding that the biggest monthly inflows came in March 2020 which had $20.5 billion, and April 2020 which saw $17.1 billion.

Year-to-date, to Thursday’s close, the combined high yield funds have sustained $9 billion of net outflows, according to the market source.

Indexes

The KDP High Yield Daily index shaved off 5 basis points to close Friday at 50.64 with the yield now 6.8%.

The index jumped 94 bps on Thursday, 17 bps on Wednesday and 10 bps on Tuesday after falling 7 bps on Monday.

The index added 109 bps on the week.

The CDX High Yield 30 index fell 12 bps to close Friday at 105.38.

The index was up 7 bps on Thursday, 113 bps on Wednesday, 35 bps on Tuesday and 1 bp on Monday.

The index posted a cumulative gain of 144 bps on the week.

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