P&L, Academy, United Shore price; sell-off intensifies; Cars.com lags; new paper weakens

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 28 – P&L Development, LLC, Academy Ltd. and United Shore Financial Services, LLC brought $1.62 billion of new paper to the high-yield primary market on Wednesday.

Meanwhile, the sell-off in high-yields intensified on Wednesday with the market down ¾ to 1 point, a source said.

While the high-yield space has held up well amid the volatility in equities over the past two weeks, the market was showing signs of cracking on Wednesday.

Large bids-wanted-in-competition lists were circulating the market with selling pressure dragging down the overall space, a source said.

New deals, which had typically performed well, were increasingly weak on the break and recent deals, which had initially performed well, dropped below par.

Cars.com Inc.’s newly priced 6 3/8% senior notes due 2028 (B3/B) gave up their early gains and sank well below par in active trading.

MultiPlan’s 5¾% senior notes due 2028 (B3/B-) dropped to a 98-handle and Advantage Sales & Marketing Inc.’s 6½% senior notes due 2028 (B2/B) traded down to a 97-handle.

Dave & Buster's Entertainment, Inc.’s 7 5/8% senior secured notes due 2025 (Caa1/B-) returned to focus with the notes dropping below par after previously trading with a large premium.

$1.62 billion trio

In the face of continued and intensifying pandemic-related turbulence in the global capital markets dealers reefed their sails and pushed into the gale on Wednesday, pricing a trio of single tranche deals totaling $1.62 billion.

All three deals priced at the conclusions of roadshows.

None upsized.

Executions reflected the chop, with one deal coming in the middle of talk, one at the wide end, and one on top of upwardly revised talk.

For example, United Shore Financial Services priced an $800 million issue of 5½% five-year senior notes (Ba3//B+) at par, on top of final yield talk which had widened from earlier formal talk in the 5¼% area.

The order book was heard to be slightly lagging deal size early Wednesday, according to a bond trader who surmised that the deal may have needed the additional yield to get across the finish line.

P&L Development, meanwhile, priced a $415 million issue of 7¾% five-year senior secured notes (B3/B-/B) in the middle of talk, buoyed by considerable reverse inquiry, with $775 million of orders heard to be in the books on Wednesday morning, according to the trader.

And amid the capital markets tumult there remains a $4 billion dollar-denominated calendar, ostensibly to clear ahead of the weekend.

In fact, with the high-yield index trading ¼ to ½ point lower in the early going, on Wednesday, that calendar actually grew.

Aston Martin Lagonda Global Holdings plc plans to price £840 million equivalent of five-year senior secured notes (expected ratings Caa2/CCC) in dollar-denominated and sterling-denominated tranches on Friday. Initial talk on both is in the high 8% to 9% area, sources say.

The active calendar also contains one megadeal.

PetSmart LLC has been marketing $2.35 billion of notes in two tranches, in a roadshow that had been expected to run through Wednesday.

The deal features $1.2 billion of seven-year senior secured notes (B1/B) guided in the mid-5% area, and $1.15 billion of eight-year unsecured notes (Caa1/CCC+) guided to come 200 to 225 basis points in back of the secured notes.

The PetSmart bond deal, in addition to its $2.3 billion seven-year term loan, are heard to be hitting headwinds, a trader said on Wednesday.

Cars.com lags

Cars.com’s newly priced 6 3/8% senior notes due 2028 (B3/B) gave back all of their early gains and dropped firmly below par amid the sell-off in the broader market.

The 6 3/8% notes traded in a range of 98¾ to par on Wednesday with the notes losing steam as the session progressed, a source said.

They were trading in the 98¾ to 99 1/8 context heading into the market close with more than $36 million of the bonds on the tape.

The notes were trading with a premium after breaking for trading, reaching as high as par ¼ bid, par ¾ offered before closing Tuesday at par 1/8, a source said.

Cars.com priced a $400 million issue of the 6 3/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 6½% area. Initial talk was in the 6¾% area.

Weaker

MultiPlan’s 5¾% senior notes due 2028 (B3/B-) and Advantage Sales & Marketing’s 6½% senior notes due 2028 continued to trade off in high-volume activity on Wednesday.

MultiPlan’s 5¾% notes dropped to a 98-handle and were marked at 98¼ bid, 98 5/8 offered heading into the market close, a source said.

There was more than $30 million in reported volume.

The notes fell flat after breaking for trade and closed the previous session at par.

Advantage Sales & Marketing’s 6½% senior notes due 2028 continued to trade off on Wednesday.

The notes traded as low as 97 and were on a 97-handle heading into the close, a source said.

There was more than $28 million in reported volume.

The 6½% notes have struggled since the sales and marketing company priced a $775 million issue of the notes at par on Oct. 26.

Dave & Buster’s drops

Dave & Buster’s 7 5/8% senior secured notes due 2025 gave back their premium and dropped well below par in active trading on Wednesday.

The notes traded down to a 98-handle and stood poised to close the day at 98 5/8, a source said.

There was more than $27 million of the bonds on the tape heading into the market close.

The notes were previously trading on a 101-handle.

The heavily oversubscribed offering was initially in high demand during bookbuilding and in the aftermarket.

However, the notes were previously performing well with investors betting on a reopening.

With Covid-19 cases spiking and European countries imposing renewed lockdowns, investors were losing confidence in the “reopening trade,” a source said.

$1 billion of outflows

The dedicated high-yield bond funds sustained just over $1 billion of daily net outflows on Tuesday, the most recent session for which data was available at press time, a market source said.

High-yield ETFs sustained $933 million of outflows on the day, trailing Monday's $873 million of outflows.

Actively managed high-yield funds saw $75 million of outflows on Tuesday, the source said.

With only Wednesday's daily numbers remaining to go into the tally the combined funds are tracking $1.95 billion of net outflows in the week to Wednesday's close, according to the market source.

Indexes down

Indexes extended their slide on Wednesday.

The KDP High Yield Daily index dropped 35 points to close Wednesday at 66.28 with the yield now 5.58%.

The index was down 5 points on Tuesday and 11 points on Monday.

The ICE BofAML US High Yield index sank 69.9 bps with the year-to-date return now 0.177%.

The index slid 8.3 bps on Tuesday and 30 bps on Monday.

The CDX High Yield 30 index plummeted 112 bps to close Wednesday at 103.8. The index was down 16 bps on Tuesday and 67 bps on Monday.

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