United Rentals on a 3-handle; NFP weakens; G-III at a premium; Charter active

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 31 – The domestic high-yield primary market rounded out the first month of the third quarter with a $1 billion plus offering clearing the market.

United Rentals (North America), Inc. priced a $1.1 billion offering of senior notes due Feb. 15, 2031 (Ba3/BB-) on a 3-handle in a drive-by.

The European primary also saw some action with doValue SpA pricing a €265 million offering at a discount.

The primary market will launch August with a few deals on the forward calendar, including Western Global Airlines LLC’s $420 million offering of five-year senior notes (B3/B-/B+) and Israel-based Leviathan Bond Ltd.-Delek’s $2.25 billion four-part secured notes offering (Ba3/BB-/BB).

Meanwhile, the secondary space was largely unchanged on Friday despite a volatile day for equities, a market source said.

The overall cash bond market was also largely unchanged on the week with spreads stabilizing around 520 basis points, according to a BofA Global Research report.

New paper, earnings, and end-of-month activity were the drivers of trading on Friday, which was an overall uneventful session, a source said.

After a strong break, NFP Corp.’s 6 7/8% senior notes due August 2028 (Caa2/CCC+) gave back much of their gains during Friday’s session.

G-III Apparel Group Ltd.’s 7 7/8% senior secured notes due August 2025 (Ba3/BB) were trading at a healthy premium in high-volume activity.

Charter Communications Inc. subsidiaries CCO Holdings LLC/CCO Holdings Capital Corp.’s 4¼% senior notes due Feb. 1, 2031 (B1/BB) were active and making nominal gains after a large earnings beat.

Three-handle for URI

An otherwise quiet late-July Friday in the high-yield new issue market saw United Rentals price a $1.1 billion issue of senior notes due Feb. 15, 2031 at par to yield 3 7/8%.

The deal, which was playing to $4.5 billion of demand by early Friday afternoon, came at the tight end of the 3 7/8% to 4% price talk, a trader said.

Early guidance was in the low 4% area.

In Europe, Italy-based financial services company doValue SpA priced a €265 million issue of 5% five-year senior secured notes (BB/BB) at 98.913 to yield 5¼%, with the coupon and yield coming on top of talk.

The week ahead

The typically sleepy month of August in the junk bond market will get underway to a thin forward calendar.

Western Global Airlines is shopping $420 million of five-year senior notes in a deal expected to price early in the week ahead. As the market awaits official price talk initial guidance is 8¼% to 8½% sources say.

And in a deal being marketed to high-yield accounts, the Israel-based Leviathan-Delek $2.25 billion four part secured notes offer is also expected to price early in the Aug. 3 week.

The offer took on the cachet of investment-grade rated Chevron Corp. when Chevron recently acquired Houston-based Noble Energy which has a 39.66% stake in Leviathan, according to market sources.

That aspect of the deal cannot have been helped Friday when Chevron reported a cataclysmic $8.3 billion loss for the second quarter of 2020 and wrote down $5.7 billion of oil and gas assets, warning that financial results may continue to be depressed into the third quarter, a trader said.

Initial talk on Leviathan has the three-year notes coming in the 5 7/8% area, the five-year notes in the 6 3/8% area, the seven-year notes in the 6¾% area and the 10-year notes in the 7¼% area.

Tranche sizes are expected to be $500 million minimum. And if demand supports it, the company might upsize the overall deal to $2.5 billion, sources say.

Among high-yield investors eyeballing Leviathan, interest tends to be concentrated among the fast-money accounts, a trader said on Friday.

NFP weakens

NFP’s 6 7/8% senior notes due 2028 gave back much of their gains on Friday following a strong break the previous session.

The 6 7/8% notes launched Friday’s session on a 101-handle.

However, the notes shaved off most of their premium as the session progressed.

They were marked at par ¼ bid, par ¾ offered in the early afternoon and dropped down to par 1/8 bid heading into the market close.

The notes were among the most actively traded during Friday’s session with $62 million in reported volume.

The insurance brokerage and consulting company priced an upsized $1.25 billion issue of the 6 7/8% notes in a Thursday drive-by.

The issue size increased from $950 million.

The yield printed at the tight end of yield talk in the 7% area.

G-III trades up

G-III Apparel’s 7 7/8% senior secured notes due 2025 were trading with a healthy premium in the aftermarket.

The notes were changing hands in the par 7/8 to 101 1/8 context late Friday afternoon, a market source said.

They were active with more than $49 million in reported volume.

The deal carried a hefty coupon for secured paper.

However, the notes from the clothing company with a portfolio of fashion brands that include DKNY, Calvin Klein, Dockers and Tommy Hilfiger were secured by intellectual property as opposed to real estate, a source said.

The lack of real estate backing the notes made them less attractive than other bonds from the sector that were secured by real estate.

“You might as well just play Macy’s,” the source said.

G-III Apparel priced an upsized $400 million issue of the 7 7/8% notes at par on Thursday following a multiday roadshow.

The yield printed tight to yield talk in the 8% area. Initial guidance was 8% to 8¼%.

The deal also underwent covenant changes.

The initial size of the offering was $350 million.

Due to the $50 million upsize, S&P Global Ratings rated the notes BB instead of their initial BB+.

Charter active

Charter’s 4¼% senior notes due 2031 were active and making nominal gains following a blockbuster earnings report from the telecommunications company.

The 4¼% notes rose to a 104-handle on Friday.

They were up about ½ point to trade in the 104 3/8 to 104¾ context.

More than $20 million of the bonds were on the tape during Friday’s session.

The notes have steadily posted gains since Charter priced a $1.5 billion add-on to the notes at 102 on July 21.

They were on the rise on Friday after Charter’s second-quarter earnings report.

Charter reported revenue of $11.7 billion which beat analyst expectations for revenue of $11.6 billion.

EBITDA was $4.5 billion which beat expectations for EBITDA of $4.3 billion, according to a market source.

Big ETF inflows on Thursday

High-yield ETFs had a massive $1.57 billion of daily inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds also had hefty inflows of $205 million on the day, bringing the combined funds' daily take to $1.77 billion on Friday, the source said.

News of Thursday's daily flows trails a Thursday afternoon report that the combined funds had $295 million of net inflows for the week to Wednesday's close, according to the Refinitiv Lipper Fund Flow Report Newsline.

Indexes gain

Indexes continued to post nominal gains on Friday with all posting gains on the week.

The KDP High Yield Daily index rose 16 basis points to close Friday at 66.96 with the yield now 5.64%.

The index gained 4 bps on Thursday, 13 bps on Wednesday, 6 bps on Tuesday and 2 bps on Monday.

The index posted cumulative gains of 41 bps on the week.

The CDX High Yield 30 index rose 5 bps to close Friday at 102.84.

The index added 9 bps on Thursday, 78 bps on Wednesday, took off 13 bps on Tuesday, and gained 43 bps on Monday.

The index posted cumulative gains of 122 bps on the week.

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