Eight issuers tap primary market; Cedar Fair flat; Adient trades up; Ford weakens

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 21 – The domestic high-yield primary market was on fire on Tuesday with eight issuers stepping forward, despite the weakness in the market.

Univision Communications Inc., Builders FirstSource Inc., Alliant Holdings Intermediate LLC, Kaiser Aluminum Corp., Sally Beauty Holdings, Inc., Performance Food Group Inc., Navistar International Corp., and SeaWorld Entertainment, Inc. all stepped forward with offerings.

Meanwhile, the secondary space was again soft on Tuesday as the rout in WTI crude oil futures spilled into the June contract.

However, focus remained on new paper with several recent deals putting in mixed performances in the secondary space.

Ford Motor Co.’s three tranches of senior notes (Ba2/BB+/BBB-) continued to dominate activity in the secondary space with the notes sinking further below their issue price in the high-volume activity.

Cedar Fair Entertainment Co.’s 5½% senior secured notes due 2025 (Ba2/BB-) remained wrapped around par in high-volume activity.

However, Adient US LLC’s 9% first lien senior notes due 2025 (Ba3/B+) were trading at a steep premium in the aftermarket.

Busy Primary

Eight speculative grade issuers stepped forward on a busy Tuesday in the primary market.

Seven came with drive-by deals.

Univision Communications priced a $370 million issue of 9½% five-year senior secured notes (B2/B) at 99.026 to yield 9¾%.

The yield came at the tight end of the 9¾% to 10% yield talk, which also factored in an original issue discount. Initial talk was in the low 10% area, including a discount.

Builders FirstSource priced an upsized $350 million add-on to its 6¾% senior secured notes due June 1, 2027 (B1/BB+) at 98.75 to yield 6.974%.

The issue size increased from $250 million.

The issue price came at the rich end of the 98.5 to 98.75 price talk. Initial price talk is in the 98.5 area.

Alliant Holdings and Alliant Holdings Co-Issuer priced a $300 million add-on to their 6¾% senior notes due Oct. 15, 2027 (existing ratings Caa2/CCC+) at par to yield 6¾%.

The issue price came in the middle of price talk in the par area. Initial talk was 99.5 to par.

Kaiser Aluminum priced a $300 million issue of 6½% five-year senior notes (B1/BB+/BB) at par with a 6.499% yield to maturity.

The yield came tight to the 6½% to 6¾% yield talk, and through initial guidance in the 7% area.

In the only deal to be in the market overnight, Sally Beauty Holdings priced a $300 million issue of five-year senior secured second-lien notes (Ba2/BB-) at par to yield 8¾%.

The yield printed in the middle of yield talk in the 8¾% area, and tight to earlier expectations in the high 8% area.

Performance Food Group priced an upsized $275 million issue of five-year senior notes (B2/B) at par to yield 6 7/8% in a Tuesday drive-by.

The issue size increased from $250 million.

They yield printed at the tight end of both official yield talk and early guidance, which were set in the 7% area.

Elsewhere, Navistar International Corp. disclosed plans to price a $500 million offering of five-year senior secured notes in a Tuesday drive-by.

Price talk was 9½% to 9¾%, according to a trader who added that the deal was upsized to $600 million, and was heard to be three- to four-times oversubscribed.

And SeaWorld Entertainment was in the market with a $227.5 million drive-by offering of five-year first-priority senior secured notes (expected ratings B3/B-).

Final terms for Navistar and SeaWorld were not available at press time.

Ford falls

Ford’s three tranches of senior notes sank further below their issue price in high-volume activity on Tuesday.

The 8½% senior notes due 2023 dropped more than 3½ points. They traded down to a 94-handle in intraday activity but closed the day at 95¼, a market source said.

The bonds saw more than $165 million in reported volume.

The 9% senior notes due 2025 traded off more than 5 points to close the day at 93¾ with more than $140 million in reported volume.

The 9 5/8% senior notes due 2030 dropped almost 6 points to close the day on a 93-handle. The bonds saw more than $53 million in reported volume, according to a market source.

Ford priced a $3.5 billion tranche of the 8½% notes, a $3.5 billion tranche of the 9% notes, and a $1 billion tranche of the 9 5/8% notes at par on April 17.

While the notes were heard to have played to massive demand during bookbuilding, they have struggled since hitting the secondary space with the notes quickly dropping below par.

Better-than-anticipated allocations were pointed to as a possible cause for the poor performance of the tranches.

Ford has also been the subject of negative headlines with Bloomberg reporting that Ford Credit may see a loss of $2.8 billion due to the plunging value of used cars and the company, alongside other automakers, negotiating with the United Auto Workers Union on a plan to reopen factories.

Cedar Fair flat

Cedar Fair’s 5½% senior secured notes due 2025 fell flat in the secondary space with the notes wrapped around par in high-volume activity.

The deal “was kind of a dud,” a market source said. The lack of movement was attributed to the tight pricing.

While the bonds did not move much in terms of price, they were among the most actively traded in the secondary space on Tuesday with more than $50 million in reported volume.

Cedar Fair priced an upsized $1 billion issue of the 5½% notes at par in a Monday drive-by.

The yield came at the tight end of the 5½% to 5¾% yield talk. Initial talk was in the 6½% area.

The issue size increased from $875 million.

There was a substantial amount of reverse inquiry involved in the deal, a source said.

Adient jumps

Adient’s 9% first lien senior notes due 2025 were trading with a steep premium in the secondary space.

The notes were changing hands in the 102¼ to 103 context during Tuesday’s session, a source said.

The performance of the notes was attributed to their hefty coupon.

Adient priced an upsized $600 million issue of the 9% notes at par in a Monday drive-by.

The deal priced tighter than talk for a yield in the 9¼% area. Initial talk was in the high 9% area.

The deal was upsized from $500 million.

$563 million Monday inflows

The dedicated high-yield bond funds saw $563 million of net inflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $350 million of inflows on the day

High-yield ETFs saw $213 million of inflows on Monday, the source said.

The combined funds are tracking $2.67 billion of inflows for the week that wraps up with Wednesday's close, according to the market source.

Indexes extend losses

Indexes extended their losses on Tuesday after launching the week on soft footing.

The KDP High Yield Daily index sank 90 basis points to close Tuesday at 63.09 with the yield now 7.41%. The index was down 24 bps on Monday.

The ICE BofAML US High Yield index sank 113.9 bps with the year-to-date return now negative 10.019%. The index dropped 41.8 bps on Monday.

The CDX High Yield 30 index sank 123 bps to close Tuesday at 92.9.

The index dropped 213 bps on Monday.

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