TransDigm, Midwest Gaming price; calendar balloons; Michaels holds premium; CEC gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 12 – The April 12 week got off to a torrent of headlines in the high-yield primary market.

The session saw a pair of $750 million drive-by deals both ending up with 4 7/8% prints.

Midwest Gaming priced a $750 million issue of 4 7/8% eight-year senior secured notes (B3/B+) at par, in the middle of talk.

Elsewhere a familiar name on the high-yield landscape, TransDigm Inc., priced a $750 million issue of 4 7/8% eight-year senior subordinated notes (B3/B-) at par, at the wide end of talk.

Meanwhile, the secondary space was slightly weaker on Monday, a source said.

However, focus remained on new issues, which continued to perform well.

While activity in the name died down, Michaels Cos., Inc.’s two tranches of senior notes held onto the premiums gained in active trading on Friday.

CEC Entertainment LLC’s 6¾% senior secured notes due 2026 (Caa1/CCC) continued to gain with the notes moving up to a 101-handle.

Outside of new issues, TransDigm’s 6¼% senior notes due 2026 were active although little changed as holders rotated into the company’s latest offering.

Pair of drive-by deals

Midwest Gaming priced a $750 million issue of 4 7/8% eight-year senior secured notes (B3/B+) at par, in the middle of talk.

Timing was accelerated. The deal was initially scheduled to remain in the market until Tuesday.

It was playing to around $2 billion of orders, a trader said.

TransDig priced a $750 million issue of 4 7/8% eight-year senior subordinated notes (B3/B-) at par, at the wide end of talk.

The TransDigm deal, which had come with initial talk in the 5% area, was wrapped around par and trading unimpressively, sources said shortly after Monday's close.

The perception in the market was that with a 4%-handle yield much of the juice had been squeezed out of TransDigm's new senior subs, a trader remarked.

The existing TransDigm 4 5/8% senior subordinated notes due January 2029 were trading at par ¼ bid, implying a yield to worst of around 4¼%, another trader remarked, characterizing the new bond's 62.5 basis points concession to the existing paper as modest.

Meanwhile a raft of deal announcements sent the active forward calendar – empty at Friday's close – soaring to $11 billion.

Friday fund flows

High-yield ETFs sustained biggish outflows of $787 million on Friday, the most recent session for which data was available at press time, according to a market source.

However actively managed high-yield finds were squarely in the green on Friday, seeing $285 million inflows on the day, the source said.

Michaels holds

While volume in the name was muted, Michaels’ recently priced tranches maintained the large premiums reached after breaking for trade on Friday.

Michaels 5¼% senior secured notes due 2028 (Ba3/B) were changing hands on a 101-handle.

They were trading in the 101½ to 101¾ context heading into the market close, a source said.

However, there was only $13 million in reported volume during Monday’s session.

The 7 7/8% senior notes due 2029 (B3/CCC+) continued to trade in the 103¾ to 104 context – a level reached shortly after breaking for trade.

While a far cry from the volume seen Friday, the notes remained active with $30 million on the tape.

Michaels priced a downsized $850 million, from $1 billion, tranche of the 5¼% notes and a $1.3 billion tranche of 7 7/8% notes at par on Friday to back the acquisition of the arts and crafts retailer by Apollo Global Management.

The 5 ¼% notes priced at the tight end of yield talk in the 5 3/8% area; the 7 7/8% notes priced at the tight end of yield talk in the 8% area.

CEC gains

CEC Entertainment’s 6¾% senior secured notes due 2026 gained momentum in active trading on Monday with the notes reaching a 101-handle.

The 6¾% notes were marked at 101 bid, 101¼ offered on Monday. They were active with more than $50 million on the tape.

“It’s surprising how some of these CCCs have shot up,” a source said.

However, while there is still an element of caution in the high-yield space regarding lower-quality credits, the coupons have been hefty compared to where things have been pricing, a source said.

CEC Entertainment priced an upsized $650 million, from $600 million, issue of the 6¾% notes at par on Friday.

The yield printed at the tight end of the 6¾% to 6 7/8% yield talk.

TransDigm active

As market players awaited TransDigm’s latest offering, the aerospace manufacturer’s 6¼% senior notes due 2026 were active.

While the notes saw heavy volume, there was little movement in terms of price with the notes continuing to trade in the 106 to 106¼ context.

There was more than $21 million in reported volume.

The yield on the notes was about 2 7/8%, a source said.

Holders were most likely rotating out of the old issue and into the latest offering, a source said.

Indexes down

Indexes started the week on soft footing after all posted cumulative gains the previous week.

The KDP High Yield Daily index dropped 6 points to close the day at 69.54 with the yield now 3.96%.

The index posted a cumulative gain of 31 points on the week last week.

The ICE BofAML US High Yield index dropped 6.3 bps with the year-to-date return now 1.565%.

The index posted a cumulative gain of 53.4 bps on the week last week.

The CDX High Yield 30 index dropped 12 bps to close Monday at 109.51.

The index posted a cumulative gain of 28 bps on the week last week.

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