Continental prices; Allison, Axalta, Ford flat; Stericycle, Sunoco gain

By Abigail W. Adams

Portland, Me., Nov. 10 – After an onslaught of new issuance during Monday’s session, the domestic high-yield primary market took a breather on Tuesday with only one drive-by deal pricing.

Continental Resources Inc. priced an upsized $1.5 billion offering of senior bullet notes due January 2031 (existing Ba1/BB+/BBB-).

The offering comes as the rally in the secondary space also took a break with the market closing Tuesday largely unchanged after ripping more than 3 points since last week.

With more than $6 billion pricing on Monday, new paper dominated the tape.

However, performances were mixed.

Allison Transmission Inc.’s 3¾% senior notes due Jan. 30, 2031 (Ba3//BB), Axalta Coating Systems LLC’s 3 3/8% senior notes due 2029 (B1/BB-) and Ford Motor Credit Co. LLC’s two tranches of senior bullet notes (Ba2/BB+/BB+) fell flat in active trading.

However, Sunoco LP’s 4½% senior notes due 2029 (expected B1/BB-) and Stericycle Inc.’s 3 7/8% senior notes due 2029 (BB-/BB) were putting in strong performances in the aftermarket.

Continental’s drive-by

Continental Resources priced an upsized $1.5 billion, from $1 billion, issue of senior bullet notes due January 2031 (existing Ba1/BB+/BBB-) at par to yield 5¾% in a Tuesday drive-by, according to a market source.

Pricing came at the midpoint of talk for a yield in the 5¾% area. Initial guidance was for a yield of 5¾% to 6%.

Proceeds will be used to fund the tender offer for the oil and gas company’s 5% senior notes due 2022 and the 4½% senior notes due 2023. (See related article in this issue)

The offering sparked activity in the 2022 and 2023 notes.

Continental’s 5% senior notes due 2022 were changing hands at par ¼ on Tuesday.

The 4½% senior notes due 2023 traded as high as 102, a source said.

Flat

While recent offerings met with healthy demand during bookbuilding, several deals fell flat in the secondary space – products of their tight pricing, sources said.

Allison Transmission’s 3¾% senior notes due Jan. 30, 2031 (Ba3//BB) were wrapped around par on Tuesday.

The notes were marked at par bid, par ¼ offered early in the session, according to a source.

They continued to trade in that range heading into the afternoon and stood poised to close the day at par 1/8.

Allison priced a $1 billion issue of the 3¾% notes at par in a Monday drive-by.

Pricing came at the tight end of talk for a yield of 3¾% to 4%. Initial guidance was in the low 4% area.

Axalta Coating Systems’ 3 3/8% senior notes due 2029 (B1/BB-) also fell flat in aftermarket activity.

The 3 3/8% notes were marked at 99 7/8 bid, par 1/8 offered early in Tuesday’s session, a source said.

They remained wrapped around par heading into the market close.

Axalta priced an upsized $700 million, from $600 million, issue of the 3 3/8% notes at par in a Monday drive-by.

Pricing came at the tight end of talk for a yield in the 3½% area. Initial guidance was for a yield in the mid to high 3% area, sources said.

Ford’s two tranches also saw a lackluster reception in the secondary space.

The 3 3/8% senior notes due 2025 were largely stuck at par in high-volume activity.

Similarly, the 4% senior notes due 2030 were changing hands in the par to par ¼ context heading into the market close, a source said.

Ford priced a $1.5 billion tranche of the 3 3/8% notes and a $1 billion tranche of the 4% notes at par on Monday.

The 3 3/8% notes printed at the tight end of talk for a yield of 3 3/8% to 3½%. Initial price talk was in the 3¾% area.

The 4% notes printed at the tight end of talk for a yield of 4% to 4 1/8%. Initial price talk had the notes coming with a yield in the 4 3/8% area.

On the rise

While several of the deals to price during Monday’s session fell flat in the aftermarket, Sunoco’s 4½% senior notes due 2029 and Stericycle’s 3 7/8% senior notes due 2029 were not among them with both issues putting in strong performances.

Sunoco’s 4½% senior notes were marked at par 3/8 bid, par 7/8 offered early in the session.

They continued to gain strength as the session progressed and were changing hands in the par 7/8 to 101 1/8 context heading into the market close.

Sunoco priced an upsized $800 million, from $500 million, issue of the 4½% notes at par in a Monday drive-by.

Pricing came at the low end of talk for a yield of 4½% to 4¾%. Initial guidance was for a yield in the high 4% to 5% area.

Stericycle’s 3 7/8% senior notes due 2029 were changing hands in the par ½ to par 5/8 context early in the session.

However, they also gained steam as the session progressed and rose to a 101-handle.

The notes were trading in the 101¼ to 101½ context heading into the close.

Stericycle priced an upsized $500 million, from $400 million, issue of the 3 7/8% notes at par on Monday.

Pricing came tighter than talk for a yield of 4% to 4¼%. Initial talk was in the low to mid-4% area.

Indexes mixed

Indexes were mixed on Tuesday with some continuing to rocket higher and others giving back some gains after a meteoric rise over the past week.

The KDP High Yield Daily index shaved off 12 points to close Tuesday at 67.74 with the yield now 4.94%. The index jumped 69 points on Monday.

The ICE BofAML US High Yield index backed off some of its gains and shaved off 28.1 bps with the year-to-date return now 3.234%.

The index blew past the 3% year-to-date return threshold on Monday when it jumped 122.3 bps.

The index was brushing up against negative returns just two weeks ago.

The CDX High Yield 30 index rose another 17 bps to close Tuesday at 107.62.

The index jumped 141 bps on Monday.

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