Beazer Homes drives by junkland; Shelf Drilling falls; Spirit Aero lower on audit failure

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 12 – Beazer Homes USA, Inc. had the junk bond primary space to itself as the company brought $250 million of new senior notes in a drive-by offering.

Meanwhile, Tuesday was another quiet and flat day in the secondary space with the latest Consumer Price Index report failing to move the needle in the market.

While the report came in higher than expected, it was flat month-over-month and did not dramatically alter market expectations for rate cuts.

“They’re just glad it wasn’t worse than last month,” a source said.

The cash bond market was largely unchanged as the CDX added ¼ point with trading volumes again light.

The market remains new-issue focused with market players awaiting the reactivation of the primary to put money to work, a source said.

With activity surrounding recent deals diminishing, topical news pushed some outstanding issues to the forefront.

Shelf Drilling Holdings Ltd.’s 9 5/8% senior secured notes due 2029 (B3/B-/B) were lower in active trade after a large runup last week.

Spirit AeroSystems Inc.’s senior notes were taking a hit in active trade after the Federal Aviation Administration released the results of an audit of Boeing’s 737 Max jet production.

Junk primary

Beazer Homes USA priced Tuesday’s sole dollar deal, a $250 million issue of seven-year senior notes (B1/B+) that came at par to yield 7½%, at the tight end of talk, in a drive-by.

Demand for Beazer’s new notes was heard to be 3.5-times deal-size, according to a bond trader who had them par ½ bid, 101 offered, in late Tuesday afternoon trading.

Meanwhile the stage was set for a sizable trans-Atlantic trade on Wednesday.

Aston Martin Lagonda Global Holdings plc upsized its two-part offering of five-year senior secured notes (B3/B-/B) to £1.15 billion equivalent from £1.14 billion equivalent, indicated tranche sizes and set price talk on Tuesday.

An £800 million equivalent tranche of dollar-denominated notes is talked to yield 10¼% to 10½%, inside of the 10½% to 11% early guidance.

A £350 million tranche of sterling-denominated notes are talked to yield 50 basis points behind the dollar-denominated notes.

There were also document changes.

Both tranches are heard to be playing to big demand, a trader said on Tuesday afternoon.

The book for the dollar-denominated notes was heard to contain $4.3 billion of orders, while the sterling-denominated notes were playing to £1.2 billion of demand, the trader said.

The March 11 week is turning into a banner one for sterling-denominated issuance.

Heathrow Finance plc priced an upsized £400 million issue (from £350 million) of seven-year senior secured bullet notes (B1//BB+) at par to yield 6 5/8%, at the tight end of talk, on Tuesday.

And in addition to the aforementioned Aston Martin £350 million tranche, Pinewood Studios plans to sell £500 million of Pinewood Finco plc six-year senior secured notes (expected ratings: BB+/BBB) this week.

Initial guidance is in the mid-6% area.

Year-to-date sterling-denominated junk issuance, which has been slow, is poised to quintuple by the end of the week.

Shelf Drilling lower

Shelf Drilling’s 9 5/8% senior secured notes due 2029 were lower in active trade on Tuesday after a runup the previous session, a source said.

The notes were down ½ to ¾ point.

They were trading in the 97 to 97¼ context heading into the market close, a source said.

The notes had nearly double their average trading volume.

There was $18 million on the tape heading into the market close.

The notes traded as high as 98 on Monday after closing the previous week on a 96-handle.

Shelf Drilling was trading on a 99-handle in January until Saudi Aramco announced that it was abandoning plans to boost its oil capacity.

The movement in the offshore oil driller’s senior notes on Monday and Tuesday may have been in response to Aramco’s earnings with the conference call held on Monday.

Spirit AeroSystems lower

Spirit AeroSystems’ senior notes were taking a hit on Tuesday after the FAA released an audit report that was less than flattering for the Boeing supplier.

Spirit AeroSystems’ 9¾% senior secured second-lien notes due 2030 (B3/B-) were down ¾ to 1 point.

The notes dropped to trade in the 110½ to 111 context, a source said.

There was $12 million in reported volume.

The 4.6% senior notes due 2028 (Caa1/CCC+) fell to the 93¾ to 94¼ context.

There was $4 million in reported volume.

Spirit AeroSystems’ capital structure surged in early March after news broke that Boeing was in talks to acquire the aero parts manufacturer.

However, the results of the FAA’s audit were again dragging down the Boeing supplier with the FAA revealing that Spirit AeroSystems had received seven failing grades on 13 product audits.

Boeing and Spirit Aero have both been plagued with quality control issues over the past year.

Indexes

The KDP High Yield Daily index inched up 1 basis point to close Tuesday at 50.82 with the yield 6.81%. The index shed 8 bps on Monday.

The ICE BofAML US High Yield index inched up 3 bps with the year-to-date return now 1.063%.

The index shaved off 2.6 bps on Monday.

The CDX High Yield 30 index gained 21 bps to close Tuesday at 106.95.

The index crept up 1 bp on Monday.

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