PolyOne, Arconic price; Kaiser Aluminum adds-on; Ford, Cenovus Energy gain; Hertz sell-off continues

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 29 – The domestic high-yield primary market returned to action on Wednesday with three deals and one add-on pricing in quick-to-market trades.

Arconic Corp. priced an upsized $700 million split-rated issue of five-year first lien secured notes (Ba1/BB+/BBB-).

PolyOne Corp. priced a $650 million issue of five-year senior notes (Ba3/BB-).

Vail Resorts Inc. priced an upsized $600 million issue of five-year senior notes (B2/expected BB).

And Kaiser Aluminum priced a $50 million add-on to its recently priced 6½% senior notes due May 1, 2025 (B1/BB+/BB).

Meanwhile, it was a strong day for the secondary space with equities rallying on a potential treatment for Covid-19 and WTI crude oil futures surging on lower than expected inventories.

Ford Motor Co.’s 8½% senior notes due 2023 and 9% senior notes due 2025 (Ba2/BB+/BBB-) were making gains as investors digested the car company’s first quarter earnings report.

Fellow fallen angel Cenovus Energy Inc.’s 4¼% senior notes due 2027 were among the biggest gainers of Wednesday’s session, despite reporting large losses in its first quarter earnings report.

Meanwhile, Hertz Corp.’s junk bonds continued to sell off after the rental car company announced that it had missed payments on its vehicle operating lease agreement and was in discussion with lenders.

Drive-bys

The high-yield primary market drive-through window reactivated in a big way on Wednesday.

Arconic priced an upsized $700 million split-rated issue of five-year first lien secured notes (Ba1/BB+/BBB-) at par to yield 6% in a drive-by.

The issue size increased from $600 million.

The yield printed at the tight end of the 6% to 6¼% yield talk. Initial guidance was in the low-to-mid 6% area.

In the secondary market a trader had them at par 5/8% bid, par 7/8 offered at the close.

PolyOne priced a $650 million issue of five-year senior notes (Ba3/BB-) at par to yield 5¾%.

The yield printed at the tight end of the 5¾% to 6% yield talk. Initial talk was in the low 6% area.

Early Wednesday afternoon the market heard there was $1.5 billion in the book.

The new paper jumped after breaking for trade with the notes changing hands on a 101-handle heading into the market close, a source said.

Vail Resorts priced an upsized $600 million issue of five-year senior notes (B2/expected BB) at par to yield 6½% in a deal heard to be playing to a big book.

The issue size increased from $500 million.

The yield printed at the tight end of the 6¼% to 6½% yield talk, and toward the tight end of initial talk in the 6% to 7% area.

The deal was heard to be playing to more than $4.7 billion of orders, sources said.

Timing was accelerated. When announced the Vail notes offer had been expected to remain in the market until Thursday.

Kaiser Aluminum priced a $50 million add-on to its 6½% senior notes due May 1, 2025 (B1/BB+/BB) at 101.00.

The price came at the rich end of the 100.5 to 101 price talk.

Ford gains

Ford’s recently priced senior notes continued to see high volume in the aftermarket with two of its recently three tranches making gains as investors’ digest the company’s first quarter earnings.

Ford’s 8½% senior notes due 2023 gained 1 point to close Wednesday at 99½, according to a market source.

The notes continued to see high volume with more than $65 million on the tape heading into the market close.

The notes have largely traded on a 98-handle since pricing at par on April 17.

Ford’s 9% senior notes due 2025 were also improved with the notes up ½ point to 97 3/8, a source said.

The notes saw more than $54 million in reported volume during Wednesday’s session.

However, Ford’s 9 5/8% senior notes due 2030 were little changed on Wednesday with the notes closing the day at 98 3/8.

The notes were making gains despite a reported cash burn of $2 billion in the first quarter and an expected loss of up to $5 billion in the second quarter.

However, Ford’s recent drawdowns from its credit facilities and $8 billion capital raise in junk bonds gave the company enough liquidity to survive through the third quarter, even with no vehicle production.

Cenovus gains

Cenovus Energy’s 4¼% senior notes due 2027 were among the major gainers of Wednesday’s session following the company’s first-quarter earnings report.

The 4¼% notes were up 6 5/8 points to close Wednesday at 77 with more than $20 million in reported volume, according to a market source.

Cenovus reported a $1.8 billion loss in the first quarter due to cratering oil prices.

However, if oil markets stabilize, many believe there is hope for the company, a market source said.

Cenovus Energy was one of several companies that recently achieved fallen angel status with Fitch and S&P downgrading the company to junk in March.

Hertz sell-off continues

Hertz junk bonds continued to sell-off on Wednesday after the company announced it was in discussions with lenders after missing its monthly payment on its vehicle operating lease agreement.

The car rental company’s badly battered capital structure dropped another 3½ to 6 points, a source said.

The 7 5/8% senior notes due 2022 were the most actively traded issue. The notes dropped 6 points to 37 with more than $17 million in reported volume, according to a market source.

The 5½% senior notes due 2024 were down 5 points to 20½.

The 6% senior notes due 2028 were down 4½ points to 18½ with more than $11 million in reported volume.

The bankruptcy many were anticipating may come to pass if the company is not able to make the payment on its vehicle operating lease by May 4 or its lenders do not agree to waive the resulting default, sources said.

$528 million Tuesday inflows

The dedicated high-yield bond funds saw $528 million of 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 $438 million of inflows on the day.

Actively managed high-yield funds saw $90 million of inflows on Tuesday, the source said.

With only Wednesday's daily fund flows numbers remaining to go into the tally the combined funds are tracking $1 billion of inflows for the week to Wednesday's close, the market source added.

Indexes gain

Indexes were posting gains on Wednesday after a mixed start to the week.

The KDP High Yield Daily index rose 18 basis points to close Wednesday at 62.64. However, the yield remained flat at 7.5%.

The index saw a slight decrease of 3 bps on Tuesday and was up 2 bps on Monday.

The ICE BofAML US High Yield index gained 39.2 bps with the year-to-date return now negative 10.111. The index gained 11.4 bps on Tuesday after dropping 7 bps on Monday.

The CDX High Yield 30 index rose 126 bps to close Wednesday at 94.77. The index gained 15 bps on Tuesday and 40 bps on Monday.

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