Primary prices $4.6 billion; forward calendar swells; United Rentals in focus; Rolls-Royce trades off

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 3 – August in the high yield primary market got underway with a monster Monday with 11 new deals announced.

Apache Corp., Service Corp. International, Nationstar Mortgage Holdings Inc., (Mr. Cooper Group), Sensata Technologies, Inc., Group 1 Automotive Inc. and Avis Budget Car Rental LLC and Avis Budget Finance Inc. priced a cumulative $4.6 billion in drive-by action.

The forward calendar also swelled with Melco Resorts Finance Ltd., Xerox Holdings Corp., Harvest Midstream I LP and STL Holding Co. LLC jumping on board.

Meanwhile, the secondary space was largely flat on Monday with volume relatively light as the active pipeline of new issuance took center stage, sources said.

United Rentals (North America), Inc.’s new 3 7/8% senior notes due 2031 (Ba3/BB-) were in focus with the notes trading with a large premium.

NFP Corp.’s recently priced 6 7/8% senior notes due 2028 (Caa2/CCC+) were again on the rise on Monday.

Outside of new paper, Rolls-Royce Holdings plc’s 3 5/8% senior notes due 2025 were trading off in high-volume activity on Monday, giving back some of the gains from their rally the previous week.

Monster Monday

August in the high-yield primary market got underway with a monster Monday during which 11 new deals were announced.

When the dust settled Monday evening terms were available on the following:

• Apache’s $1.25 billion (Ba1/BB+) in two bullet tranches – $500 million 4 5/8% five-year notes and an $750 million 4 7/8% seven-year notes, both par-pricing tranches up half a point in late Monday trading;

• Service Corp. International’s $850 million issue of 3 3/8% 10-year senior notes (Ba3/BB);

• Nationstar Mortgage Holdings’ (Mr. Cooper Group) $850 million 5½% eight-year senior notes (B2/B);

• Sensata Technologies’ $750 million issue of 3¾% 10.5-year senior notes (Ba3/BB+);

Group 1 Automotive’s $550 million issue of 4% eight-year senior notes (Ba2/BB+); and

• Avis Budget Car Rental LLC and Avis Budget Finance Inc. $350 million non-fungible (mirror notes) add-on to their 5¾ % senior notes due July 15, 2027 (B3/B-).

There was also a buildup of the calendar:

• Melco Resorts Finance plans to price a $500 million add-on to its 5¾ % senior notes due July 21, 2028 (expected ratings Ba2/BB) on Tuesday morning;

• Xerox Holdings plans to price $800 million of senior notes in two bullet tranches on Wednesday;

• Harvest Midstream plans to price a $600 million of eight-year senior notes (expected ratings TBD/BB-/BB-) on Wednesday; and

STL Holding, doing business as DSLD Homes, plans to price a $225 million of 5.5-year senior notes later in the Aug. 3 week (see related stories in this issue).

United Rentals in focus

United Rentals’ recently priced 3 7/8% senior notes due 2025 were in focus on Monday with the notes trading with a healthy premium to their issue price.

Following a strong break, the 3 7/8% notes continued to gain with the notes changing hands in the 101¾ to 102 context heading into the market close, a source said.

The notes rose to a 101-handle after freeing for trade last Friday.

There was more than $103 million of the bonds on the tape during Monday’s session.

While the notes priced tight, they played to heavy demand, which followed them into the secondary space, a source said.

United Rentals priced a $1.1 billion issue of the 3 7/8% notes in a Friday drive-by.

The notes priced at the tight end of the 3 7/8% to 4% price talk.

They played to more than $4.5 billion in orders, a source said.

NFP gains

NFP’s 6 7/8% senior notes due 2028 returned to a 101-handle on Monday after shaving off much of their premium on Friday.

The 6 7/8% notes were changing hands in the 101 to 101 3/8 context heading into Monday’s close, a source said.

The notes remained active with more than $16 million in reported volume.

NFP priced a $1.25 billion issue of the 6 7/8% notes on July 30.

While the notes saw a strong break, reaching a 101-handle shortly after freeing for trade, they lost much of their premium during last Friday’s session, dropping as low as par 1/8 bid, sources said.

NFP priced a $1.25 billion issue of the 6 7/8% notes last Thursday.

Rolls-Royce trades off

Rolls-Royce’s 3 5/8% senior notes due 2025 were trading off on Monday after a rally the previous week sent the notes soaring.

The notes were down more than 3 3/8 point to close Monday at par ½, a market source said.

They saw more than $20 million in reported volume.

While trading off on Monday, the 3 5/8% notes rallied the previous week adding more than 6 points to trade as high as 104.

The notes traded around 97 for much of July.

The 3 5/8% notes were posting gains the previous week following news that Rolls-Royce was exploring pairing its propulsion system with Boom Supersonic’s flagship supersonic passenger aircraft.

However, the notes were trading off on Monday following news the company would also team up with Virgin Galactic Holding Inc. on the development of a new supersonic aircraft.

$1.09 billion Friday inflows

Actively managed high-yield funds, the asset managers said, saw $1.09 billion of daily net inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs were negative on the day, sustaining $102 million of net outflows on Friday, the source said.

Hence there were $988 million of net inflows to the dedicated high-yield bond funds on Friday, the market source added.

Indexes mixed

While some posted nominal gains and other nominal losses, indexes were largely flat on Monday.

The KDP High Yield Daily index rose 7 basis points to close Monday at 67.03 with the yield now 5.61%.

The index posted cumulative gains of 41 bps on the week last week.

The ICE BofAML US High Yield index is fast approaching positive territory.

The index gained 21.58 bps with the year-to-date return now negative 0.007%.

The index posted a cumulative gain of 87.4 bps on the week last week.

The CDX High Yield 30 index shaved off 2 bps to close Monday at 102.82.

The index posted cumulative gains of 122 bps on the week last week.

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