Ally, NuStar, AA price; Transocean holds; U.S. Steel improves; funds lose $2.75 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 16 – The domestic high-yield primary market’s drive-by window remained wide open on Thursday with three deals pricing.

Ally Financial Inc. priced $750 million of 3 7/8% senior holding company notes due May 21, 2024 at 98.992 to yield 4.1%.

American Airlines Group Inc. priced $750 million of three-year senior notes at par to yield 5% in a deal that was upsized from $350 million.

NuStar Logistics, LP priced a $500 million issue of seven-year senior notes at par to yield 6%.

Friday also promises to be active with Berry Global Group, Inc. set to price its $3 billion two-part offering of senior secured notes.

The forward calendar also continued to grow with Neiman Marcus Group LLC planning to start a roadshow on Monday for a $550 million offering of five-year second-lien notes.

Meanwhile, the secondary space was significantly firmer on Thursday as markets snapped back from the most recent bout of volatility brought on by an escalation in tension between the United States and China.

Transocean Ltd.’s newly priced 5 3/8% senior notes due 2023 were in focus and holding onto a premium in the secondary space.

United States Steel Corp.’s 6¼% senior notes due 2026 were improved in high-volume activity on Thursday after dropping to their lowest level of the year during the previous session.

Superior Energy Services, Inc.’s 7 1/8% senior notes due 2021 were under pressure on Thursday with the notes continuing their downward spiral since the company reported earnings a few weeks ago.

Meanwhile, high-yield mutual and exchange traded funds posted the largest outflow of the year with $2.75 billion exiting the space in the week through Wednesday’s close.

The substantial outflow is the second consecutive one for junk funds with a modest $212 million outflow in the week ended May 8.

Ally sells 3 7/8% notes

Ally Financial priced $750 million of 3 7/8% senior holding company notes due May 21, 2024 (S&P: BB+/Fitch: expected BB+) at 98.992 to yield 4.1%.

The transaction involved both the high-yield and investment-grade syndicate desks, a source said.

The yield printed on top of yield talk.

Early guidance was in the 4¼% area, a trader said.

Active bookrunner RBC Capital Markets LLC will bill and deliver. Barclays, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC were also active bookrunners.

Big upsize for American

American Airlines Group priced $750 million of three-year senior notes (B1/BB-) at par to yield 5%.

The deal saw a big upsize, from $350 million, and was driven into the market on a significant amount of reverse inquiry, according to a source.

The notes traded ½ point higher in the secondary market, which is not bad considering it's a three-year deal, the investor remarked.

Early guidance had the deal coming to yield 5% to 5¼%.

JP Morgan was the lead.

The Fort Worth-based air carrier plans to use the proceeds to fund contributions to its pension fund.

NuStar prices atop talk

NuStar Logistics priced a $500 million issue of seven-year senior notes (Ba2/BB-/BB) at par to yield 6%.

The yield printed on top of yield talk and inside of initial guidance which was in the 6¼% area.

The deal was three-times oversubscribed at noon on Thursday, an investor said.

Joint active bookrunner RBC Capital Markets LLC will bill and deliver. Mizuho Securities USA Inc., MUFG and SunTrust Robinson Humphrey Inc. were also joint active bookrunners.

The San Antonio-based midstream master limited partnership plans to use the proceeds to repay debt under its revolving credit facility and for general partnership purposes.

Berry $3 billion for Friday

Looking to the Friday session, Berry Global Group set price talk in its $3 billion two-part offering of senior secured notes.

The deal, which was shopped by means of a Thursday conference call with investors, includes a $2 billion tranche of seven-year first priority notes (expected Ba2/confirmed BBB-) talked to yield in the 5% area, and a $1 billion tranche of eight-year second priority notes (expected B2/confirmed BB) talked to yield in the 6% area.

Books were scheduled to close late Thursday afternoon and the offering is set to price on Friday.

The deal is in very good shape, market sources say.

Wells Fargo Securities LLC is the left bookrunner.

Neiman Marcus roadshow

The Thursday session saw a modest buildup of the active forward calendar.

Neiman Marcus Group plans to start a roadshow on Monday for a $550 million offering of five-year second lien notes.

The offer is set to price mid-to-late in the May 20 week.

Credit Suisse (USA) LLC is the sole bookrunner.

The Dallas-based luxury fashion retailer plans to use the proceeds to prepay amounts outstanding under its extended term loan.

Transocean holds

Transocean’s newly priced 5 3/8% senior notes due 2023 were active and holding on to their gains in the secondary space on Thursday.

The notes were quoted at par ½ bid, 101 offered early in the session, according to one source.

The notes were trading at par 3/8 bid, par 5/8 offered in the late afternoon, others said.

The 5 3/8% notes traded as high as par ¾ but were largely level with their closing on Wednesday.

More than $96 million of the bonds were on the tape by the late afternoon.

Transocean priced an upsized $525 million issue of the 5 3/8% notes at 99.5 to yield 5.516% in a Wednesday drive-by.

The deal was upsized from $500 million and priced on top of talk.

The deal was heavily oversubscribed and was heard to have played to $4 billion of orders.

United States Steel improves

United States Steel’s 6¼% senior notes due 2026 were making gains in high-volume activity on Thursday.

The notes were up about 1 point to change hands at 87½, according to a market source.

More than $36 million of the bonds were on the tape by the late afternoon.

While improved on Thursday, the notes traded down to 86½ on Wednesday, their lowest level of the year.

U.S. Steel’s capital structure saw above average trading volume on Thursday with an increase in buying activity driving the notes higher, a market source said.

The activity comes on the heels of Treasury Secretary Steve Mnuchin’s comments on Wednesday that the Trump administration was on the verge of reaching an agreement with Mexico and Canada, which may involve lifting tariffs on imported steel.

U.S. Steel CEO David Burritt provided testimony to the Congressional Steel Caucus on Wednesday urging lawmakers to maintain the tariff.

Superior Energy under pressure

Superior Energy’s 7 1/8% senior notes due 2021 remained under pressure on Thursday with the notes continuing the downward trend seen since its earnings report.

The notes were changing hands at 78 3/8 on Thursday with more than $28 million of the bonds on the tape.

They were seen at 79 bid, 79½ offered on Wednesday and were trading as high as 82¼ at the start of the week.

“They’ve gotten crushed the past few days,” a source said.

While there was no recent news in the name, the oilfields services company reported a large earnings miss a few weeks ago.

Wednesday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Wednesday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $19 million of outflows on the day.

Actively managed high-yield funds saw $165 million of outflows on Wednesday.

The Wednesday outflows from the actively managed funds came on the heels of a whopping $1.65 billion amount of daily outflows from those funds on Tuesday, according to market sources.

Those big Tuesday outflows were believed to have been sustained by a wide swath of accounts, an investor said.

Indexes gain

Indexes posted gains on Thursday after seeing losses for the majority of the week.

The KDP High Yield Daily index rose 3 basis points to close Thursday at 69.96. However, the yield remained flat at 5.83%.

The index was down 3 bps on Wednesday, 2 bps on Tuesday and dropped 10 bps on Monday.

The ICE BofAML US High Yield index gained 24.3 bps with the year-to-date return now 8.258%.

The index slid 6.6 bps on Wednesday, rose 19.7 bps on Tuesday, and sank 42.4 bps on Monday.

The index has been mixed throughout the week, dropping below 8% returns on Monday only to pop back above it on Tuesday.

The index has had a meteoric rise in 2019, shooting past 8% returns in early April.

The CDX High Yield 30 index dropped 32 bps to close Thursday at 106.56.

The index has been mixed throughout the week, sliding 6 bps on Wednesday, rising 32 bps on Tuesday and plummeting 102 bps on Monday.

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