Skillz prices high yielding bonds; secondary firm post-Fed; Iron Mountain improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 15 – The active high-yield calendar cleared with Skillz Inc. pricing a double-digit yielding issue on Wednesday.

Meanwhile, the secondary space was volatile on Wednesday with the market opening the day flat but ripping after the Federal Reserve’s announcement.

The market closed the day up ¼ to 3/8 point after the Federal Reserve announced it would complete its bond tapering program by March 2022 and penciled in three rate hikes after the completion of its bond tapering program.

“People were expecting a more aggressive posture, but they’re going to be very methodical about how they do things,” a source said.

While the market closed the day strong, volume remained light with recent deals, large liquid issues and topical news the drivers of activity in the space

Iron Mountain Information Management Services, Inc.’s recently priced 5% senior notes due 2032 (Ba3/BB-) remained active in the aftermarket with the notes improving alongside the broader market.

American Airlines Group, Inc.’s 11¾% senior notes due 2025 were down slightly in active trading with the Omicron Covid variant continuing to pressure the reopening trade.

Akumin Inc.’s 7½% senior secured notes due 2028 (B2/B-) were on the rebound on Wednesday after the company provided forward guidance following its acquisition of Alliance Healthcare.

The notes were under pressure during the previous session following earnings.

Skillz yieldz

Skillz priced a $300 million issue of 10¼% five-year first-lien secured notes (B3/B-) at 95 to yield 11.598% on Wednesday, clearing the active new issue calendar.

The coupon came on top of coupon talk. However, the issue price came two points cheap to discount talk of 97. The deal widened significantly from initial guidance that had it coming at 97 to yield in the 11% area.

The issue, with which the San Francisco-based game competition platform made its debut in the high-yield bond market, also underwent covenant changes.

Skillz was possibly the final deal of 2021, with some of the bigger dealers signaling they are finished for the year, some market sources say.

Others, however, expect that the primary market may still see one or more one-off deals – a relatively small add-on driven by reverse inquiry, for example – in the run-up to Christmas.

Iron Mountain improves

Iron Mountain’s recently priced 5% senior notes due 2032 improved in active trading after falling flat during the initial days the bonds were in the aftermarket.

The 5% notes were marked at par 3/8 bid, par ¾ offered early in Wednesday’s session and were changing hands in the par ½ to par ¾ context heading into the market close, a source said.

The notes have largely traded flat since breaking for trade on Monday with the high-yield market under pressure in the run up to the Federal Reserve announcement.

However, the notes improved alongside the broader market on Wednesday.

Iron Mountain priced $750 million of the 5% notes at par in a Monday drive-by.

American Airlines active

American Airlines’ 11¾% senior secured notes due 2025 were off about ½ point in active trading on Wednesday with the reopening trade again under pressure.

The 11¾% notes closed Wednesday at 122 5/8 with about $23 million in reported volume, according to a market source.

The notes have traded in a range of 121 to 125 over the past month as the market has attempted to price in the impact of the omicron variant.

The 11¾% notes are also a large, liquid issue with $2.5 billion outstanding, a source said.

Akumin gains

Akumin’s 7½% senior notes due 2028 were on the rebound on Wednesday after sinking to an all-time low the previous session.

The outpatient diagnostic imaging services provider’s 7½% senior notes due 2028 (B2/B-) gained 1¼ points on Wednesday.

They were changing hands in the 92¾ to 93 context on Wednesday with about $8 million in reported volume, according to a market source.

However, the notes traded down 2¼ points on Tuesday to an all-time low of 91¾ following third-quarter earnings.

Akumin released forward guidance on Wednesday detailing the company’s projected financials following its acquisition of Alliance Healthcare Services.

The small-cap company is projecting revenue of $760 million to $780 million and adjusted EBITDA of $155 million to $170 million in 2022.

While a highly speculative company, the 7½% notes now yield almost 9% and will be an interesting name to watch, a source said.

The 7½% notes are among the worst performing deals of 2021. Akumin priced the $375 million issue at par in July with proceeds to be used to help fund its acquisition of Alliance.

$516 million Tuesday outflows

The high-yield ETFs sustained sizable outflows of $516 million on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds, meanwhile, saw positive flows on the day, posting $24 million of inflows on Tuesday, the source said.

Indexes

The KDP High Yield Daily index shaved off 2 points to close Wednesday at 65.4 with the yield now 4.14%. The index fell 12 points on Tuesday and was down 4 points on Monday.

The CDX High Yield 30 index gained 29 basis points to close Wednesday at 108.64. The index fell 15 bps on Tuesday.

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