High yield: Great Lakes, Club Car price; secondary heavy; Kaiser flat; Park Hotels gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 12 – The domestic high-yield primary market saw two oversubscribed deals price on a rough day for risk assets.

Club Car LLC priced an upsized $525 million issue of eight-year senior notes (Caa2/CCC+) and Great Lakes Dredge & Dock Corp. priced a $325 million issue of eight-year senior notes (B2/B).

Meanwhile, it was another heavy day in the secondary space as April’s consumer price index report rattled investors and sparked a run from risk assets.

Major equity benchmarks were down more than 2% and the 10-year Treasury yield hit 1.7%.

The CDX index dropped about ½ point and some credits in the cash bond market were down as much as 1 point, a source said.

However, while the secondary space was heavy, it held up well compared to other asset classes.

Volume outside of new issues remained light with few holders selling. “It’s just bids,” a source said. “It’s still very difficult to buy.”

Despite the down day for the market, Park Hotels & Resorts Inc.’s 4 7/8% senior notes due 2029 (B+) were gaining strength with the notes trading up to a 101-handle.

While the notes maintained a slight premium, Kaiser Aluminum Corp.’s 4½% senior notes due 2031 (B1/BB/BB) continued to trade on a par-handle at roughly the same level they hit after breaking for trade.

While several recent issues were holding above par, DISH DBS Corp.’s 5 1/8% senior notes due 2029 (B2/B-) continued to trend lower in active trading with the notes now firmly below par.

Wednesday’s primary

Inflation jitters triggered by Wednesday's consumer price index report from the U.S. Bureau of Labor Statistics, which helped to set off selling in the stock market, appeared to leave the high-yield primary market largely unscathed, sources said.

Two issuers priced oversubscribed deals at the conclusions of brief roadshows.

Club Car LLC priced an upsized $525 million issue (from $450 million) of MajorDrive Holdings IV, LLC eight-year 6 3/8% senior notes at par, in the middle of talk.

The deal was playing to around $2 billion of orders on Wednesday morning, according to an investor.

And Great Lakes Dredge & Dock Corp. priced a $325 million issue of 5¼% eight-year senior notes at par, at the tight end of talk.

That deal was also oversubscribed, and allocations were not great, the investor said.

The notes had a strong break with the notes wrapped around 102 heading into the close.

Trailing the torrid Monday and Tuesday sessions, Wednesday was a light news day in the primary market.

The new issue calendar took aboard a couple of offers including $300 million of eight-year automatically exchangeable notes from BidFair Holdings Inc. and Sotheby's

The dividend-funding deal will price as an issue of BidFair senior unsecured notes but will be automatically exchanged into Sotheby's senior secured notes as soon as Sotheby's has sufficient debt-, liens- and restricted payments capacity to secure the issue (see related stories in this issue).

Park Hotels gains

Park Hotels’ 4 7/8% senior notes due 2029 were gaining strength in the secondary space despite a rough day for risk assets.

After a strong break, the 4 7/8% notes climbed another ¼ point. They were marked at 101 bid, 101¼ offered heading into the market close.

The notes closed the previous session at par ¾ bid.

Park Hotels is a solid credit and the offering was oversubscribed, sources said. However, the underwriter might also have been supporting the deal to make sure it was well bid, a source said.

On Tuesday, the company priced an upsized $750 million, from $650 million, issue of the 4 7/8% notes at par.

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

The deal was heard to have played to $2.68 billion of demand.

Kaiser flat

While the notes continued to trade at a slight premium to their issue price, Kaiser Aluminum’s 4½% senior notes due 2031 remained stuck on a par-handle.

They were marked at par ¼ bid, par ¾ offered – a level reached shortly after breaking for trade, a source said.

Kaiser Aluminum priced an upsized $550 million, from $500 million, issue of the 4½% notes at par on Tuesday.

The yield printed at the tight end of the 4½% to 4¾% yield talk. The deal was heard to be heavily oversubscribed.

DISH down

While the majority of recent issues were holding at or above par, despite heavy market conditions, DISH’s recently priced 5 1/8% senior notes due 2029 sank further below on Wednesday.

The notes were down ¼ point on Wednesday to 99¼ bid, 99¾ offered. They sank below par on Tuesday.

In addition to general weak market conditions, the lackluster performance of DISH’s new notes was attributed to an oversaturation of paper from the company.

“Who needs more DISH?” a source said.

Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, according to a market source.

High-yield ETFs sustained $549 million of outflows on the day.

The junk ETFs have been putting up negative numbers throughout the present reporting period, which ended with Wednesday's close. They saw $454 million of outflows on Monday, $243 million of outflows last Friday, and $157 million of outflows last Thursday, the first day of the present reporting period.

Meanwhile, actively managed high-yield funds saw $200 million of daily inflows on Tuesday, the source said.

Actively managed junk funds have posted modest or better inflows throughout the present reporting period, with $115 million of inflows on Monday, $50 million of inflows last Friday and $100 million of inflows last Thursday, according to the market source.

Indexes down

Indexes continued to drop on Wednesday.

The KDP High Yield Daily index was down 8 points to close Wednesday at 69.61 with the yield now 3.88%.

The index was down 10 points on Tuesday after gaining 2 points on Monday.

The ICE BofAML US High Yield index was down 15.4 bps with the year-to-date return now 1.927%.

The index dropped 26.6 bps on Tuesday after gaining 5.4 bps on Monday.

The CDX High Yield 30 index dropped 40 bps to close Wednesday at 109.09.

The index was down 11 bps on Tuesday and 25 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.