Acadia, Level 3, Delta, New Gold price; Hillenbrand, Realogy, BWX up; American Axle lags

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 10 – The domestic high-yield primary market had another active session with five issuers tapping the market.

Delta Air Lines Inc. price a $1.25 billion issue of long five-year senior notes (expected ratings Baa3/BB/BB+).

Level 3 Financing, Inc. priced an upsized $1.2 billion issue of eight-year senior notes (Ba3/BB/BB).

Acadia Healthcare Co., Inc. priced a $450 million issue of eight-year senior notes (Caa1/B-).

New Gold Inc. priced a $400 million issue of seven-year senior notes (Caa1/B).

And Virgin Media Inc. priced an £800 million equivalent two-tranche offering, which included a $500 million dollar-denominated tranche.

The forward calendar also grew with deals from Lummus Technology and MGM China Holdings Ltd. on deck.

Meanwhile, the secondary space “was all over the map,” on Wednesday with the market mixed as it digested the latest comments for the Federal Reserve Open Market Committee, sources said.

New paper remained in focus in the secondary space with some issues trading with steep premiums while others dropped below par.

Hillenbrand, Inc.’s newly priced 5¾% senior notes due 2025 (Ba1/BB+/BB+) continued to trade several points above their issue price.

Realogy Group LLC and Realogy Co-Issuer Corp.’s 7 5/8% senior secured second-lien notes due 2025 (B3) and BWX Technologies Inc.’s 4 1/8% senior notes due 2028 (Ba3/BB) were also trading with healthy premiums in the aftermarket.

However, American Axle & Manufacturing, Inc.’s 6 7/8% senior notes due 2028 (B2/B-) were struggling with the notes lagging their issue price.

Bid fades for new Delta paper

A busy Wednesday session in the primary market saw Delta Air Lines price a $1.25 billion issue of long five-year senior notes at 99.986 to yield 7 3/8%.

The yield printed at the tight end of yield talk in the 7½% area. Initial talk was in the 8% area.

The notes traded to 101¼ bid out of the gate Wednesday afternoon, according to traders who subsequently watched the bid fade to par ½ bid, 101 offered, then down to par 3/8 bid, then par ¼ bid.

It seemed as though an offer may have surfaced from the dealer, whereupon the flippers came out in force, a trader remarked.

Wednesday session

Elsewhere, Level 3 Financing priced an upsized $1.2 billion issue of eight-year senior notes at par to yield 4¼%.

The issue size increased from $1 billion.

The yield printed in the middle of yield talk in the 4¼% area, and at the wide end of the 4% to 4¼% initial talk.

Acadia Healthcare priced a $450 million issue of eight-year senior notes at par to yield 5½%.

The yield printed at the tight end of yield talk in the 5 5/8% area. Initial talk was in the low 6% area.

The new paper was marked at par bid, par ¼ offered late Wednesday afternoon.

New Gold priced a $400 million issue of seven-year senior notes at par to yield 7½%.

The yield printed at the tight end of the 7½% to 7¾% yield talk. Initial guidance was in the mid-to-high 7% area.

Timing on the deal was accelerated. When announced, the New Gold offer was scheduled to remain in the market until Thursday.

And Virgin Media priced about £800 million equivalent of eight-year vendor financing notes due July 15, 2028 (B1/B/B+), including a £400 million add-on and a $500 million new tranche.

The calendar

There was also news on the calendar, including one straight-out junk deal.

Lummus Technology plans to kick off a $460 million offering of eight-year senior notes (Caa1/B-) on a Thursday investor call.

The deal is set to price in the middle part of the June 15 week.

Away from the middle range, Macao-based MGM China Holdings expects to price a benchmark dollar-denominated offering of five-year senior notes (expected ratings Ba3/BB-/BB-) on Thursday.

Initial price talk is in the high 5% area, according to a bond trader.

And the deadline for Varsity Brands Holding Co., Inc.’s new $100 million senior secured notes, a true private, has been accelerated to 2 p.m. Thursday. Commitments were previously due on Friday.

Hillenbrand skyrockets

Hillenbrand’s 5¾% senior notes due 2025 skyrocketed in the aftermarket. Following a strong break on Tuesday, the notes maintained their large premium.

They were marked at 103½ bid, 104 offered on Wednesday, a market source said.

They shot up to 103 bid shortly after pricing and continued to see healthy demand in the aftermarket during Wednesday’s session.

The small size of the offering helped support the trading level of the notes with buyers willing to pay up to receive their desired allocation, sources said.

Hillenbrand priced an upsized $400 million issue of the 5¾% notes at par on Tuesday.

The issue size increased from $300 million.

The yield printed on top of final yield talk which had been tightened from earlier talk in the 6% area.

BWX trades up

BWX Technologies’ 4 1/8% senior notes due 2028 were putting in a solid performance in the secondary space with the notes trading with a decent premium, a source said.

The 4 1/8% notes were changing hands in the par ½ to 101¼ context during Wednesday’s session.

However, volume in the name was light, a source said.

BWX priced a $400 million issue of the 4 1/8% notes at par in a Tuesday drive-by.

Pricing came at the tight end of talk in the 4¼% area.

Realogy at a premium

Realogy’s 7 5/8% senior notes due 2025 were putting in a strong performance in the secondary space.

The notes were marked at 101½ bid, 102 offered late Wednesday, a source said.

They were active with more than $33 million in reported volume.

While the real estate services company is not the strongest credit, the 7 5/8% notes were secured second-lien.

There’s been strong demand in the market for the secured part of capital structures, a source said.

With the healthy coupon and the notes second-lien, the deal looked good, the source said.

The deal also came with a full covenant package, which helped drive the trading level of the notes.

While covenants were weak heading into 2020, they have tightened since the March meltdown.

“When we walked into 2020, [companies] were able to get crazy deals off. In this market, they would never be able to do it, even with the recent runup,” a source said.

While that might change if the market rally continues, for the time being covenants on new deals, especially from the leisure sector, remain tight, the source said.

Realogy priced an upsized $550 million issue of the 7 5/8% notes at par on Tuesday.

The issue size increased from $400 million.

The yield printed at the tight end of revised yield talk in the 7¾% area. Earlier talk was 8% to 8¼%.

American Axle lags

American Axle’s 6 7/8% senior notes due 2025 were struggling in the secondary space on Wednesday.

The 6 7/8% notes were marked at 99¾ bid, par ¼ offered late Wednesday, a source said.

They were changing hands at 99 5/8 heading into the market close.

The notes were active with more than $28 million in reported volume during the session.

The note’s lackluster performance was attributed to their tight pricing.

American Axle priced a $400 million issue of the 6 7/8% notes at par on Tuesday.

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

$61 million Tuesday inflows

The dedicated high-yield bond funds had $61 million of net inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $525 million of inflows on the day.

However high-yield ETFs were negative on Tuesday, sustaining $464 million of outflows on the day, the source said.

With only Wednesday's number remaining to go in the tally the combined funds are tracking $4.3 billion of net inflows for the week to Wednesday's close, according to the market source.

Indexes mixed

Indexes were mixed on Wednesday

The KDP High Yield Daily index took off 21 bps to close Wednesday at 66.74 with the yield now 6%.

The index was down 17 bps on Tuesday after a 32 bps gain on Monday.

The ICE BofAML US High Yield index erased another 24.3 bps with the year-to-date return now negative 2.887%. The index was down 34.6 bps on Tuesday.

The CDX High Yield 30 index gained 50 bps to close Wednesday at 102.14.

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