Primary quiet; Olin, BMC Software trade up; Live Nation gains continue

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 15 – The domestic high-yield primary market was quiet on Friday after a blockbuster week that had 18 issuers price $11.45 billion in 20 dollar-denominated tranches.

Only one deal was on the active forward calendar heading into Friday’s close – Northwest Fiber, LLC and Northwest Fiber Finance, Inc.’s $250 million offering of eight-year senior notes.

The secondary space was equally quiet on Friday.

During the past week the Federal Reserve followed through with its previous announcement and directly injected cash into high-yield exchange-traded funds, but the move had little impact, sources said.

While the secondary space closed Friday largely unchanged after another volatile day for equities, several recent deals continued to gain in the secondary.

Olin Corp.’s new 9½% senior notes due 2025 (Ba3/BB-) were trading well above their discounted issue price in high-volume activity.

BMC Software’s dollar-denominated tranches also continued to gain in active trading on Friday after seeing a strong break the previous session.

Live Nation Entertainment, Inc.’s 6½% senior notes due 2027 (Ba2/BB-) also continued to gain.

Northwest on tap

Northwest Fiber kicked off a $250 million offering of eight-year senior notes.

A one-on-one roadshow runs through Thursday.

Initial talk has the deal coming in the low 11% area with 2 to 3 points of OID, traders said.

The primary market could remain a busy place in the week ahead, pending market conditions, according to a syndicate banker who offered neither issuer names nor industry sectors during a brief Friday telephone call.

The Federal Reserve buys junk

A quiet Friday capped off a week in which $11.45 billion of dollar-denominated, junk-rated issuance cleared the market, making the May 11 week the fifth biggest, year to date.

The past week also saw the Federal Reserve Bank of New York's first direct injection of cash into the high-yield bond asset class, sources noted.

The Fed put $305 million to work in junk via the high-yield ETFs.

Although it's a significant amount of cash, those who follow the daily cash flows of the dedicated high-yield bond funds (see below) will instantly realize that as much as twice the amount of the Fed injection frequently flows in and out of the high-yield ETFs on a daily basis, a trader said on Friday.

Occasionally three times the amount of the Fed's $305 million junk injection – and sometimes more – can be seen moving in or out of the junk ETFs in a single day.

“I think it's more of a headline than anything,” the trader said, speaking on the telephone, on Friday afternoon.

In terms of its impact “It isn't really enough to move the needle,” the trader said, adding that what did move the needle in junk, during the past week, was market conditions propelled by headlines about the coronavirus pandemic, the economy and the contentious politics of the United States.

The Friday session turned up a smattering of news in the primary market.

Olin in focus

Olin’s new 9½% senior notes due 2025 were trading with a healthy premium to their discounted issue price in high-volume activity on Friday.

The notes were trading in a range of par to 101½ during Friday’s session. They were marked at 101¼ bid, 101½ offered heading into the market close, a source said.

With more than $40 million in reported volume, the notes were the most actively traded in the secondary space on Friday.

The coupon was a hefty one for a BB credit, a source said.

The chemical products and small caliber ammunition supplier is also a well-known name in the high-yield market.

Olin priced a $500 million issue of the 9½% notes at 99.5 to yield 9.626% late Thursday.

Pricing came at the wide end of price talk for a yield in the 9½% area.

BMC trades

BMC’s dollar denominated tranches continued to gain in active trading on Friday.

BMC’s 7 1/8% senior notes due 2025 were changing hands in the 101½ to 102 1/8 context late Friday, a market source said.

The bonds had more than $26 million in reported volume during Friday’s session.

The 7 1/8% notes were up about 5/8 point from Thursday’s close.

The 9 1/8% senior notes due 2026 were also changing hands in the 101½ to 102 context on Friday, a source said.

More than $13 million of the notes were on the tape by the afternoon.

The notes were up about ½ point from Thursday’s close.

BMC priced a $1.35 billion equivalent three-tranche offering on Thursday, which included a $600 million tranche of 7 1/8% first-lien notes due 2025, a $350 million tranche of the 9 1/8% second-lien notes due 2026 and a €370 million tranche of 6½% first-lien notes due 2025 – all tranches priced at par.

The 7 1/8% notes priced tight to the 7 1/8% to 7¼% yield talk. The tranche was upsized from $500.

The 9 1/8% notes priced tight to the 9 1/8% to 9¼% yield talk.

Live Nation gains

Live Nation’s 6½% senior notes due 2027 continued to gain in active trading on Friday.

The notes were up about 1 point to trade in the 101½ to 102 context during Friday’s session.

The notes from the events promoter and venue operator were in demand during bookbuilding and in the aftermarket despite uncertainty surrounding the resumption of concerts and festivals.

However, the company has $3.2 billion of cash on the books and enough liquidity to get it through the near future, a source said.

“They have some time,” the source said.

The 6 ½% notes have gained since Live Nation priced an upsized $1.2 billion issue at par on Wednesday.

$502 million Thursday inflows

The dedicated high-yield bond funds had $502 million of net daily inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield asset managers saw $885 million of inflows on the day.

However high-yield ETFs were negative on the day, sustaining $383 million of outflows on Thursday, the source said.

News of Thursday's daily flows trails a Thursday afternoon report that the combined funds had $4.485 billion of net inflows in the week to the Wednesday, May 13 close, according to Lipper US Fund Flows.

That's the fourth largest inflow on record, and it extends the current run of consecutive inflows to seven weeks, during which time the junk funds have seen a whopping $27.6 billion of net inflows, the market source said.

Meanwhile, with funds that report on a monthly basis, as opposed to a weekly basis, reporting $1.5 billion of net inflows for the month of April 2020, that month's inflows increased to $17.1 billion, a new monthly record, easily eclipsing the previous record-holder, the month of October 2011, during which $9.9 billion flowed into the high-yield funds, the market source added.

Indexes down on week

Indexes were mixed on Friday. However, all closed the week with cumulative losses.

The KDP High Yield Daily index was down 15 basis points to close Friday at 62.37 with the yield now 7.6%.

The index was down 40 bps on Thursday, 19 bps on Wednesday, gained 19 bps on Tuesday, and dropped 10 bps on Monday.

The index had a cumulative loss of 65 bps on the week.

The ICE BofAML US High Yield index shaved off 6 bps with the year-to-date return now negative 9.861%.

The index dropped 60.1 bps on Thursday, was down 42.6 bps on Wednesday, gained 42.8 bps on Tuesday and was largely flat on Monday, shaving off 0.4 bps.

The index had a cumulative loss of 66.3 bps on the week.

The CDX High Yield 30 index dropped 29 bps to close Friday at 92.6. The index shaved off 3 bps on Thursday, plummeted 122 bps on Wednesday and was down 13 bps on Tuesday and 24 bps on Monday.

The index had a cumulative loss of 191 bps on the week.

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