Junk primary prices $3.75 billion; Lithia gains; Tenet improves; funds lose $1.7 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 20 – The domestic high-yield primary market had an active session with six issuers pricing $3.75 billion in seven dollar-denominated tranches.

SRS Distribution Inc., Hilton Grand Vacations Inc. and Xenia Hotels & Resorts, Inc. were among the issuers to clear the market on Thursday.

Meanwhile, the secondary space opened Thursday lower but firmed as the session progressed.

However, while the market was firm at the close with paper quoted higher, it did not translate into trades – volume outside of new issues remaining muted.

The secondary space is now resting against a key support level, a source said.

“It’ll be interesting to see where we open and close tomorrow,” the source said.

With a negative tone to the market in the early part of the week, a soft close on Friday might be a meaningful indicator for the market’s future direction.

In recent issues, Lithia Motors Inc.’s 3 7/8% senior notes due 2029 (Ba2/BB+) continued to gain in high-volume activity with the demand seen during bookbuilding trailing the notes into the secondary space.

NFP Corp.’s 4 7/8% senior notes due 2028 (B1/B) were also putting in a strong performance with the notes on a 101-handle.

Tenet Healthcare Corp.’s 4¼% senior secured first-lien notes due 2029 (B1/B+/B+) improved on Thursday with the notes hitting par after trading well below the previous session.

While the market tone improved on Thursday, money continued to leave the space with high-yield exchange-traded and mutual funds having outflows of $1.705 billion in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

Thursday’s primary

A big Thursday in the high-yield new issue market saw six issuers raise $3.75 billion by placing seven tranches of junk-rated, dollar-denominated bonds.

Executions were a mixed bag, though some were unmistakably razor sharp.

SRS Distribution brought the biggest load of debt, a downsized $1.1 billion two-part deal (from $1.25 billion).

A$650 million tranche of 4 5/8% seven-year senior secured notes (B3/B-) and a downsized $450 million tranche of 6 1/8% eight-year senior unsecured notes (Caa2/CCC) both priced at par, at the tight ends of downwardly revised talk. The unsecured tranche size decreased from $600 million with the shift of $150 million of proceeds to the term loan.

Hilton Grand Vacations priced an upsized $850 million issue (from $675 million) of 5% eight-year senior notes (B2/B-) at par, at the tight end of talk.

The deal was 2.5-times oversubscribed at the upsized amount, according to a trader who added that $175 million of orders were withdrawn when pricing fell below 5 1/8%.

Xenia Hotels & Resorts priced an upsized $500 million issue (from $400 million) of 4 7/8% eight-year senior secured notes (B) at par, 12.5 bps inside of talk.

The 4 7/8% notes saw a strong break and were marked at 101 3/8 bid, 101 5/8 offered shortly after pricing, a source said.

Lithia in demand

Lithia Motors’ 3 7/8% senior notes due 2029 were in demand on Thursday with the notes continuing to gain after a strong break the previous session.

The 3 7/8% notes were marked at 101½ bid, 102¼ offered heading into the market close, according to a market source.

There was more than $113 million in reported volume.

Lithia Motors priced an upsized $800 million, from $500 million, issue of the 3 7/8% notes at par on Thursday.

Pricing came at the tight end of yield talk in the 4% area.

The deal was heard to have played to around $1 billion of orders.

NFP on a 101-handle

NFP’s 4 7/8% senior notes due 2028 were putting in a strong performance in the secondary space with the notes trading on a 101-handle.

The 4 7/8% notes were marked at 101 3/8 bid, 101 5/8 offered, a source said.

NFP priced a $325 million issue of the 4 7/8% notes at par on Wednesday.

The yield printed in the middle of the 4¾% to 5% yield talk.

Tenet improves

Tenet Healthcare’s 4¼% senior secured notes due 2029 improved in active trading on Thursday.

After closing out the previous session well below par, the 4¼% notes traded up to their issue price.

They were wrapped around par heading into the market close.

There was more than $32 million in reported volume during the session.

The notes improved alongside the general market on Thursday.

They closed out the previous session, which was a soft day for the market, in the 99 5/8 to 99¾ context.

Tenet Healthcare priced a $1.4 billion issue of the 4¼% notes at par on Tuesday.

Indexes mixed

Indexes were mixed on Thursday.

The KDP High Yield Daily index dropped 4 points to close Thursday at 69.44 with the yield now 3.95%.

The index was down 10 points on Wednesday, 1 point on Tuesday and 2 points on Monday.

The ICE BofAML US High Yield index gained 5.9 basis points with the year-to-date return now 1.838%.

The index dropped 24.7 bps on Wednesday and shaved off 0.6 bps on Tuesday after gaining 1.3 bps on Monday.

The CDX High Yield 30 index gained 20 bps to close Thursday at 109.37.

The index dropped 11 bps on Wednesday, 16 bps on Tuesday and 28 bps on Monday.

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