Four issuers price $1.72 billion; Citgo in focus; Turning Point soars; funds add $1.34 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 4 – The domestic high-yield primary market was active on Thursday with four issuers pricing a cumulative $1.72 billion.

Among them was Rent-A-Center, Inc. with a heavily oversubscribed offering.

Meanwhile, the secondary space continued to grind tighter on Thursday with better-than-expected earnings reports pouring in.

New paper and earnings-related news were the main drivers of trading activity.

Citgo Petroleum Corp.’s 6 3/8% senior notes due 2026 (B3/B+/BB) were in focus with the notes trading up to a 101-handle.

Diversified Healthcare Trust’s 4 3/8% senior notes due 2031 (Ba3/BB) were also putting in a strong performance in active trading.

While a small issue, Turning Point Brands, Inc.’s 5 5/8% senior secured notes due 2026 (Ba3/BB) were in hot demand with the notes jumping to a 103-handle.

Outside of recent issues, L Brands, Inc.’s senior notes were making gains after the company raised its fourth-quarter guidance and provided an update on efforts to spin off its Victoria’s Secret brand.

Meanwhile, fund flows turned positive over the past week with high-yield mutual and exchange-traded funds adding $1.337 billion, according to the Refinitiv Lipper Fund Flow report.

Thursday’s primary

An active Thursday in the high-yield primary market saw four issuers, each bringing a single tranche of dollar-denominated junk bonds, raise a combined total of $1.72 billion.

High-powered executions, practically the only kind seen since the beginning of the year, continued to hold sway in the new issue market.

Three of Thursday's four deals priced inside of talk, while the fourth priced in the middle of talk that had been downwardly revised.

Rent-A-Center, which brought Thursday's sole drive-by deal, played to big demand, allowing it to ratchet pricing tighter and tighter during the hours it was in the market.

The $450 million issue of eight-year senior notes (B2/B) came at par to yield 6 3/8%, 12.5 basis points inside of the 6½% to 6¾% price talk, and a whopping 87.5 bps below the wide end of the 7% to 7¼% initial guidance.

The deal was heard to have played to $2.1 billion of demand across 100 accounts, a trader said.

When the lights went down Thursday only one deal was stationed on the active forward calendar as business expected to clear ahead of the coming weekend.

Citgo in focus

Citgo’s 6 3/8% senior secured notes due 2026 were in focus on Thursday with the notes trading up to a 101-handle.

The notes traded in a range of par 5/8 to 101 7/8 during the session and were changing hands in the 101 3/8 to 101½ context heading into the market close, according to a market source.

There was more than $112 million in reported volume during Thursday’s session.

Citgo priced a $650 million issue of the 6 3/8% notes at par to yield 6.361% on Wednesday.

The deal priced tighter than talk for a yield in the 6½% area.

Diversified Healthcare up

Diversified Healthcare’s 4 3/8% senior notes due 2031 were putting in a strong performance in the aftermarket.

The notes traded in a range of 101 5/8 to 102 3/8 during the session with the final prints in the 101 7/8 to 102 1/8 context, a source said.

The bonds were active with more than $73 million on the tape.

Diversified Healthcare priced a $500 million issue of the 4 3/8% notes at par on Wednesday.

Pricing came at the tight end of yield talk in the 4½% area.

Turning Point in demand

While the issue was small, Turning Point Brands’ 5 5/8% senior secured notes due 2026 were active with the notes soaring to a 103-handle.

The 5 5/8% notes were changing hands in the 103½ to 103 7/8 context throughout Thursday’s session, a source said.

There was about $25 million of the bonds on the tape.

Turning Point priced a $250 million issue of the 5 5/8% notes at par to yield 5.624%.

Pricing came at the tight end of talk in the 5¾% area.

L Brands gains

L Brands’ senior notes were making large gains on Thursday after the company raised its fourth-quarter guidance and gave an update on its effort to spin off its Victoria’s Secret brand.

The 6 7/8% senior notes due 2035 were the most active of the capital structure. They gained 2 5/8 points and stood poised to close the day at 120¾, according to a market source.

There was more than $35 million of the bonds on the tape.

L Brands lifted its fourth-quarter guidance to earnings per share of $2.95 to $3 from its earlier outlook of $2.70 to $2.80, according to a company news release.

The company also announced that it is planning on completing the separation of its Bath & Body Works and Victoria’s Secret brands.

Indexes gain

Indexes continued their upward momentum on Thursday.

The KDP High Yield Daily index gained 18 points to close Thursday at 69.59 with the yield now 4.06%.

The index gained 10 points on Wednesday, 6 points on Tuesday and was flat on Monday.

The ICE BofAML US High Yield index gained 13.9 bps on Thursday with the year-to-date return now 0.946%. The index was up 20.3 bps on Wednesday, 16.4 bps on Tuesday and 7.3 bps on Monday.

The CDX High Yield 30 index rose 37 points to close Thursday at 109.35.

The index gained 20 points on Wednesday and 48 points on Tuesday after dropping 168 points on Monday.

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