Junk new deals arrive as drive-bys; Tenet improves; US Foods gains; Covanta on a 101-handle

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 17 – Amid a steady stream of news in the high-yield new issue market on Wednesday two issuers came with $1 billion-plus drive-by deals.

Hertz Corp. and Venture Global Calcasieu Pass LLC each managed to work their way through the primary market with sizeable offering as one day’s business.

Meanwhile, the secondary space was largely unchanged on Wednesday despite the weakness in equities.

While the market stood poised to close the day towards its lows and rate-sensitive names continued to see some selling activity, many remained on the sidelines with the hope the market rally will hold until the end of the year, a source said.

The market remains flush with cash with new issues the area where money is being put to work.

New and recent deals continued to dominate the tape with the majority of new deals performing well.

While Tenet Healthcare Corp.’s 4 3/8% senior secured first-lien notes due 2030 (B1/B+/B+) struggled out of the gate, the notes improved as the session progressed and closed the day with a par-handle.

US Foods, Inc.’s 4 5/8% senior notes due 2030 (B3/B+) also struggled early in the session but caught a bid as the session progressed and closed the day at a healthy premium to their issue price.

However, Covanta Holding Corp.’s 4 7/8% sustainability-linked senior notes due 2029 were putting in a strong performance with the notes trading up to a 101-handle.

Hertz and Venture

Hertz Corp. priced $1.5 billion of senior notes (Caa1/B) in two tranches on Wednesday.

The deal saw $250 million shifted to the longer-maturity eight-year notes from the five-year notes.

The execution saw a downsized $500 million of five-year notes price at par to yield 4 5/8%, tight to yield talk in the 4¾% area. Initial guidance was in the 5% area. The tranche size decreased from $750 million.

An upsized $1 billion tranche of eight-year notes priced at par to yield 5%, at the tight end of the 5% to 5¼% yield talk. Initial guidance was in the mid-5% area. The tranche size increased from $750 million.

The deal was heard to be playing to $5 billion of orders across both tranches.

The Hertz 4 5/8% notes due 2026 were par ¾ bid, 101½ offered, late Wednesday, a trader said.

The 5% notes due 2029, which saw the big upsize, were 101 bid, 101¾% offered, the source added.

Meanwhile Venture Global Calcasieu Pass LLC priced an upsized $1.25 billion issue (from $750 million) of 3 7/8% 12-year senior secured bullet notes (Ba3/BB) at par, at the tight end of talk.

The deal was driven to market on $1.15 billion of reverse inquiry, according to a trader who added that it ended up playing to a $3 billion order book.

Venture Global attracted crossover investors who believe there is a path to investment-grade ratings for the company, the trader said.

Some investors were in with reverse inquiry at 3 7/8%, the source said, adding that others dropped out at 3 7/8%.

The upside is the spread compression that will ensue should the credit become investment grade. The downside is the duration-risk attached to a three-handle 12-year bullet, the trader said.

The Venture Global 3 7/8% notes due 2033 were trading at par 5/8 bid, par 7/8 offered at the Wednesday close.

Ready for Thursday

There were also two announcements of deals set to price Thursday.

Hub International Ltd. plans to price $1.2 billion of high-yield notes in two tranches.

The deal features a $650 million tranche of seven-year senior secured notes (expected ratings B2/B) with initial guidance in the mid-4% area, and a $550 million tranche of eight-year senior unsecured notes (expected ratings Caa2/CCC+) with initial guidance in the high-5% area.

The deal is heard to be completely done in reverse inquiry, a trader said, adding that the market favors Alliant Holdings bonds as a comparison to the Hub deal.

At guidance, the Hub deal would pretty much come on top of the Alliant bonds, the trader added.

The other overnight deal announced Wednesday is the CURO Group Holdings Corp. $225 million fungible add-on to the 7½% senior secured notes due Aug. 1, 2028.

During the Wednesday session S&P Global Ratings announced it dropped the ratings on CURO's senior secured notes to CCC+ from B-, a trader noted.

However, the source added, the deal is whispered to come in the par area, at which price it would be 2.5 points cheap to the existing paper.

Tenet improves

Tenet Healthcare’s 4 3/8% senior secured first-lien notes due 2030 improved on Wednesday after struggling out of the gate.

The 4 3/8% notes were trading in a tight range of par 1/8 to par 3/8 heading into the market close, according to a market source.

They were struggling below par on the break.

The initial struggle of the notes was most likely due to weak allocations. The deal also “priced on the screws,” a source said.

Tenet Healthcare priced a $1.45 billion issue of the 4 3/8% notes at par on Tuesday.

The yield came in the middle of yield talk in the 4 3/8% area.

The deal was heard to have played to $2.4 billion of orders.

At a premium

US Foods’ 4 5/8% senior notes due 2030 also improved in active trading on Wednesday after initially struggling.

The notes stood poised to close the day at par ½ bid, 101 offered, a source said. They were struggling to stay above par early in the session.

US Foods priced a $500 million issue of the 4 5/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 4¾% area.

Covanta on a 101-handle

Covanta’s 4 7/8% sustainability-linked senior notes due 2029 were the outperformers of the deals to price during Tuesday’s session with the notes climbing to a 101-handle.

The 4 7/8% notes were marked at 101 bid, 101½ offered, a source said.

Covanta priced a $300 million issue of the 4 7/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 5% area.

Fund flows

The dedicated high-yield bond funds saw $221 million of daily net inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $276 million of inflows on the day.

However actively managed high-yield funds were negative on Tuesday, sustaining $55 million of outflows on the day, the source said.

Indexes

The KDP High Yield Daily index shaved off 5 points to close Wednesday at 68.15 with the yield now 3.93%. The index dropped 43 points on Tuesday and 14 points on Monday.

The CDX High Yield 30 index fell 12 bps to close Wednesday at 109.19. The index was up 4 bps on Tuesday and was flat on Monday.

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