Six issuers sell $2.06 billion; Chesapeake in focus; Clear Channel, Levi Strauss trade up

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Feb. 3 – Amid a heavy news flow in the Wednesday new issue market, six issuers each priced single dollar-denominated tranches of junk to raise a combined total of $2.06 billion.

Meanwhile, the secondary space remained firm on Wednesday with earnings reports continuing to come in better than expected, sources said.

Following the flurry of primary market activity on Tuesday, new paper was in focus with the majority of recent deals performing well.

Chesapeake Energy Corp.’s two tranches of senior notes (B1/BB-) were in the spotlight with the notes making large gains in the aftermarket.

Clear Channel Outdoor Holdings, Inc.’s 7¾% senior notes due 2028 (Caa2/CCC) and Levi Strauss & Co.’s 3½% senior notes due 2031 (Ba2/BB+) were also trading with large premiums in the aftermarket.

However, Rackspace Technology Global Inc.’s 3½% senior secured notes due 2028 (B1/B+) were the outliers in terms of performance with the notes wrapped around their issue price.

Technical strength

Executions pointed to a market that continues to enjoy robust technical strength.

One of Wednesday's deals prices inside of talk. Four came at the tight or rich ends. The remaining one priced in the middle of talk.

And the Wednesday session produced further indications that the high-yield market remains hot.

For the third time in two weeks dealers brought a PIK toggle holdco deal backing a shareholder dividend – one of the market's most aggressive structures. Innophos priced a $175 million issue of Iris Holdings, Inc. 8¾%/9½% five-year senior PIK toggle notes (Caa1/CCC+) at par, a Wednesday deal that came in the middle of talk.

Also on Wednesday the active forward calendar underwent a modest amount of build-up (see related stories in this issue).

Chesapeake in focus

Chesapeake Energy’s two tranches of senior notes skyrocketed in the aftermarket.

The company’s 5 7/8% notes due 2029 rocketed up to a 105-handle.

They were marked at 105¼ bid, 105¾ offered heading into the market close, according to a market source.

Chesapeake’s other tranche of 5½% senior notes due 2026 were seen changing hands at 103 7/8 heading into the market close.

Both tranches were trading with about a 4½% yield in heavy volume, a source said.

Chesapeake Energy priced a $500 million tranche of the 5 7/8% notes and a $500 million tranche of the 5½% notes at par on Tuesday as part of its exit from bankruptcy.

The deal was a blowout with both tranches as much as 10x oversubscribed, a source said.

The 5 7/8% priced tighter than the 6% to 6¼% yield talk; the 5½% notes priced on top of talk that had them coming 37.5 bps inside of the eight-year notes.

Trading up

Clear Channel’s 7¾% senior notes due 2028 and Levi’s 3½% senior notes due 2031 were also putting in strong performances in the aftermarket.

Clear Channel’s 7¾% notes rose to a 101-handle and were trading at 101½ heading into the market close.

There was about $40 million in reported volume.

Clear Channel priced a $1 billion issue of the 7¾% notes at par on Tuesday.

The deal was heard to be oversubscribed and priced inside of talk for a yield in the 8% area.

Levi Strauss’ 3½% senior notes due 2031 were marked at 101¾ bid, 102¼ offered on Wednesday.

There was about $60 million in reported volume.

Levi Strauss priced a $500 million issue of the 3½% notes at par on Tuesday.

Pricing came at the tight end of the 3½% to 3¾% yield talk.

Rackspace flat

While the majority of deals to price during Tuesday’s session jumped in the aftermarket, Rackspace’s 3½% senior secured notes due 2028 fell flat.

The notes were marked at 99 7/8 bid, par 1/8 offered on Wednesday, according to a market source.

There was about $40 million in reported volume.

Rackspace priced a $550 million issue of 3½% notes at par on Tuesday.

Pricing came at the tight end of the 3½% to 3¾% price talk.

$915 million Tuesday inflows

The dedicated high-yield bond funds saw robust net daily inflows of $915 million on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $805 million of inflows on the day.

Actively managed high-yield funds had $110 million of inflows on Tuesday, the source said.

Indexes gain

Indexes continued their upward momentum on Wednesday.

The KDP High Yield Daily index gained 10 points to close Wednesday at 69.41 with the yield now 4.15%. The index was up 6 points on Tuesday and was flat on Monday.

The ICE BofAML US High Yield index rose another 20.3 bps with the year-to-date return now 0.807%.

The index was up 16.4 bps on Tuesday and 7.3 bps on Monday.

The CDX High Yield 30 index gained 20 points to close Wednesday at 108.98.

The index was up 48 points on Tuesday after dropping 168 points on Monday.

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