Tenneco moves off junk calendar; PBF Energy flat; Radiology Partners jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 15 – In the junk bond new issue market, the day was finally here: Tenneco Inc. placed its long-awaited leveraged buyout offering.

Meanwhile, it was a soft day in the secondary space with the cash bond market off ¼ point as the downturn gained steam.

While cracks in China’s economy were pointed to as sparking the risk-off sentiment on Tuesday, market players have anticipated some selling with credit spreads near their tightest levels of the year and the final two weeks of August a historically rough time for the market.

While the broader market was weak, focus remained on new paper with the secondary performance of several recent deals mixed.

PBF Energy Inc.’s new 7 7/8% senior notes due 2030 (Ba3/BB/BB) were wrapped around their discounted issue price in heavy volume.

RingCentral Inc.’s recently priced 8½% senior notes due 2030 (B1/BB/BB) continued to move lower in heavy volume with the notes now trading firmly on a 98-handle.

Outside of new paper, Radiology Partners, Inc.’s 5¼% senior secured notes due 2025 (B3/CCC+) jumped in heavy volume as the notes continued to break out of a multi-month downtrend sparked by an S&P Global Ratings downgrade that questioned the stability of its capital structure.

Tenneco’s day

Nearly ten months after initial financing plans envisioned a syndicated placement, secured debt backing Apollo’s buyout of Tenneco Inc. sold on Tuesday, having spent the interim as a hung bridge loan on dealer balance sheets.

Right up to the finish it was not an easy deal, sources said.

The upsized $1.9 billion issue of Tenneco 8% senior secured notes due Nov. 17, 2028 (B1/B) priced at 85 to yield 11.933%.

The notes broke sharply lower in the secondary market where they were seen at 83 1/8 bid, 83 7/8 offered, heading into the Tuesday close, a high-yield portfolio manager said.

The issue size increased from $1.75 billion with a shift of proceeds from the concurrent term loan.

The issue price came at the cheap end of price talk in the 85.5 area. Initial price guidance was 85 to 86.

The yield printed slightly beyond the wide end of the 11.643% to 11.931% yield talk. Initial yield guidance was 12%.

Along with price talk at the cheap end of guidance, which surfaced early Tuesday, there were investor-friendly document changes.

As late as the Tuesday open the bonds were playing to $2.3 billion of orders in a book that featured a significant presence from the hedge funds, a sellside source said.

However a lot of the demand came in the form of tiered orders, between 12% and 13%, the source added.

The portfolio manager, who passed on the Tenneco bonds, said that despite a run of oversubscribed August deals that priced tight to talk and inside of initial guidance, deals like Tenneco, initially structured in the early days of 2022 when the high-yield market was still quite rich, will almost certainly run into resistance.

Calendar

Away from Tenneco, Maxim Crane Works, LP started a roadshow on Tuesday for a $500 million offering of Maxim Crane Works Holdings Capital, LLC five-year second-priority senior secured notes (Caa1/B-), in the market with initial guidance of 11¾% to 12%, and expected to price on Thursday.

J.P. Morgan Securities LLC is on the left for the Maxim Crane deal.

Word circulated the market on Tuesday that it will be JPMorgan’s last deal before Labor Day, the portfolio manager said.

PBF Energy flat

In the secondary market, PBF Energy’s new 7 7/8% senior notes due 2030 fell flat in heavy volume with the notes wrapped around their discounted issue price.

The 7 7/8% notes were trading in a tight range of 99¼ to 99½ throughout the session with the notes wrapped around 99 3/8 heading into the close.

There was $93 million in reported volume.

The lack of movement in the notes was largely a result of heavy market conditions on Tuesday with the notes pricing cheap compared to the BB index, a source said.

PBF Energy priced a $500 million issue of the 7 7/8% notes at 99.324 to yield 8% in a Monday drive-by.

The yield printed at the wide end of tightened talk for a yield of 7 7/8% to 8%.

Initial talk was for yield of 8% to 8¼%.

RingCentral lower

RingCentral’s recently priced 8½% senior notes due 2030 continued to move lower in heavy volume with the notes now trading on a 98-handle.

The notes were off ½ point to trade in the 98¼ to 98¾ context heading into the close, according to a market source.

There was $19 million in reported volume.

The 8½% notes have struggled since pricing at par on Aug. 11 with the notes breaking below a 99-handle the previous session.

Radiology Partners jumps

Radiology Partners’ 5¼% senior secured notes due 2025 jumped in active trade on Tuesday with the notes continuing to snap a multi-month downtrend sparked by an S&P downgrade that questioned the stability of its capital structure.

The 5¼% notes gained 3½ to 4 points in active trade.

The notes traded as high as 74½ early in the session although the rally lost some steam with the notes wrapped around 73 heading into the close.

The yield narrowed to about 20 3/8%.

There was $20 million in reported volume.

Tuesday’s gains helped the notes continue to climb out of a months-long downtrend that followed S&P’s early June downgrade of the company.

The notes were trading on a 66-handle last week.

While Radiology Partners’ secured notes bounced on Tuesday, its 9¼% senior notes due 2028 (Caa3/CCC-) were unchanged in light volume with the notes trading in the 38 to 40 context.

Indexes

The KDP High Yield Daily index was down 14 basis points to close Tuesday at 50.08 with the yield 7.62%. The index shaved off 1 bp on Monday.

The ICE BofAML US High Yield index was down 17.8 bps with the year-to-date return now 6.384%. The index fell 44 bps on Monday.

The CDX High Yield 30 index fell 39 bps to close Tuesday at 102.38.

The index added 9 bps on Monday.

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