Urban One prices; primary expected to open floodgates next week; Hilcorp soars; Lamar active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 8 – The domestic high-yield primary market saw one deal clear the market on Friday.

Urban One, Inc. priced an $825 million issue of seven-year senior secured notes (B3/B-).

The deal brings the weekly tally to $8.73 billion, which priced over 12 tranches.

While the primary market was not as active as expected over the past week, the floodgates are expected to open during the Jan. 11 week, sources said.

Meanwhile, the secondary space continued to firm on Friday.

While soft at times in intraday activity, the market was strong heading into the close as equities and crude oil futures extended their gains.

Hilcorp Energy I, LP and Hilcorp Finance Co.’s two tranches of senior notes (Ba3/BB-) were in focus with both trading on a 102-handle.

Lamar Advertising Co.’s 3 5/8% senior notes due 2031 (B1/BB-) were also active and trading at a premium to their issue price. However, the notes remained on a par-handle.

Crestwood Midstream Partners LP’s 6% senior notes due 2028 (B1/BB-) continued to improve in active trading with the notes closing the day on a 101-handle.

Friday’s primary

A quiet Friday session in the new issue market saw Urban One price an $825 million issue of seven-year senior secured notes (B3/B-) at par to yield 7 3/8%.

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

At initial guidance, which was in the 8% area, the deal was heard to have garnered $3 billion of interest, traders said, adding that at final talk it remained at least two-times oversubscribed (see related story in this issue).

Issuance in the first week of 2021 came in at $8.73 billion in an even dozen tranches.

A more vigorous late-week period had been anticipated, sources said.

Some issuers may have elected to wait in the face of the calamitous events that were unfolding at the time in Washington D.C., a trader said.

However, in the week ahead “the floodgates are expected to open,” the source added.

“People are going to be looking at rates and telling themselves that on the timeline of one month they may have waited too long, and are thus coming at the wrong time,” the trader remarked.

“But on the timeline of 10 years, it is much more likely to be the right time come with a deal.”

And the mergers and acquisitions window is open, the trader added.

In Europe, the new issue market also passed a quieter-than-expected first week of the New Year, a London-based senior debt capital markets banker said.

Investors in Europe were keenly tuned in to the unfolding Senate runoff races in the state of Georgia, for a pair of seats in the U.S. Senate, the banker said.

With the mayhem in Washington DC which followed close on the heels of those runoff results, people were unable to take their eyes off of the television, the official added.

Look for new issue activity in Europe to pick up significantly in the week ahead, the banker advised.

European primary market business for the Jan. 11 week is expected to included Verisure Holding AB's €2.42 billion of notes.

The debt refinancing deal features up to €1.15 billion of secured notes and up to €1.27 billion of unsecured notes.

Hilcorp soars

Hilcorp Energy’s two tranches of senior notes were in focus on Friday with the notes trading up to a 102-handle.

The oil and gas company’s 6% senior notes due 2031 traded as high as 102 7/8 during Friday’s session.

They were changing hands in the 102 1/8 to 102 3/8 context in the late afternoon, a source said.

There was more than $95 million in reported volume heading into the market close.

Hilcorp’s 5¾% senior notes due 2029 were trading at roughly the same level.

The notes also traded as high as 102 7/8. They were changing hands in the 102½ to 102 5/8 context in the late afternoon.

There were more than $85 million of the bonds on the tape during Friday’s session.

The notes were in hot demand during bookbuilding with Hilcorp a higher-rated credit in the energy sector, which has been hot over the past week as crude oil futures surged.

WTI crude oil futures extended their gains and settled on Friday at $52.73, an increase of $1.90 or 3.74%.

Hilcorp priced an upsized $600 million, from $500 million, tranche of the 5¾% notes and an upsized $600 million, from $500 million, tranche of the 6% notes at par on Thursday.

The 5¾% notes priced tighter than talk in the 6% area. The 6% notes priced tighter than talk in the 6¼% area.

Lamar active

Lamar’s newly priced 3 5/8% senior notes due 2031 (B1/BB-) were active on Friday.

While the notes were trading at a premium to their issue price, they remained on a par-handle.

The 3 5/8% notes were changing hands in a tight range of par ¼ to par ¾ during Friday’s session, according to a market source.

There was more than $25 million on the tape during the day.

Lamar priced a $550 million issue of 10-year senior notes (B1/BB-) at par to yield 3 5/8% on Thursday.

The yield printed at the tight end of yield talk in the 3¾% area.

Crestwood gains

Crestwood’s 6% senior notes due 2028 (B1/BB-) gained momentum in active trading on Friday.

The notes moved up to a 101-handle and were changing hands in the 101 to 101 3/8 context heading into the market close.

The notes remained active with more than $23 million on the tape.

While at a premium to their issue price, the notes were on a par-handle for most of Thursday’s session.

“Oil going up to $52 has to help,” a source said.

$77 million Thursday inflows

The dedicated high-yield bond funds saw $77 million of daily net inflows on Thursday, according to a market source.

Actively managed high-yield funds saw $110 million of inflows on the day.

However, high-yield ETFs sustained $33 million of outflows on Thursday, the source said.

News of Thursday's daily flows trails a Thursday report that the combined funds sustained $196 million of net outflows in the week to the Wednesday, Jan. 6 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

The latest fund flow numbers come trailing an incoming tide of cash, the likes of which the market has never seen before.

Inflows to the combined bond funds in 2020 totaled a record $45.2 billion, according to the market source.

Indexes gain

The KDP High Yield Daily index rose 7 points to close Friday at 69.2 with the yield now 4.19%.

The index gained 11 points on Thursday, 1 point on Wednesday and 2 points on Tuesday.

The ICE BofAML US High Yield index gained 5.8 points with year-to-date returns now 0.23%.

The index was up 7.3 bps on Thursday, 10.7 bps on Wednesday and 1.9 bps on Tuesday.

While the index launched the year in the red, it turned positive on Wednesday.

The CDX High Yield 30 index rose 8 bps to close Wednesday at 109.33.

The index was up 39 bps on Thursday.

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