Rakuten prices blowout upsized junk offering; Fortress adds; Shelf Drilling recovers

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 3 – In a two-deal day in the junk bond primary dollar market, one deal had an extra amount of buzz as Tokyo-based Rakuten Group Inc. brought an upsized offering that priced out of a several-times-oversubscribed order book.

Meanwhile, the secondary space had a soft open but firmed into the close with the cash bond market ending the day largely unchanged, a source said.

Trading activity remained muted with the market laser focused on new issuance and the deals in the pipeline.

As market players awaited the deals on deck to break for trade, Fortress Transportation and Infrastructure Investors LLC’s new 7% senior notes due 2031 (Ba3/B+/BB-) were active with the notes improved as market conditions firmed.

Comstock Resources Inc.’s mirror add-on to the 6¾% senior notes due 2029 (B2/B/B+) were also trading at a healthy premium to their reoffer price.

Shelf Drilling Holdings Ltd.’s 9 5/8% senior secured notes due 2029 (B3/B-/B) had a reprieve on Wednesday from the selling pressure of the past two sessions.

Day of Rakuten

Double-B high-yield credits held the primary market spotlight on Wednesday.

The session had two single-tranche issuers price a $2.4 billion face amount of junk.

Japan-based Rakuten Group Inc. priced an upsized $2 billion issue of 9¾% five-year bullet notes (BB) at 99.512 to yield 9 7/8%.

The blowout deal upsized from $1.25 billion, and was heard to command a whopping $11.3 billion of demand at close-of-books, a trader said.

The yield printed at the tight end of yield talk.

And Brandywine Operating Partnership, LP priced an upsized $400 million issue (from $300 million) of 8 7/8% five-year senior notes (Ba1/BB+) at 99.505 to yield 9%, on top of yield talk.

Meantime the active calendar took aboard dollar- and sterling-denominated offerings, among them Genesee & Wyoming Inc.’s $1 billion eight-year senior secured notes (Ba3/BB), in the market with initial price talk of 6½% to 6¾%.

Down along the credit curve GEO Group Inc. rolled out a $1.2 billion two-part deal: a $700 million tranche of five-year senior secured notes (B1/BB), initial guidance in the high-8% area, and a $500 million tranche of seven-year senior unsecured notes (B3/B), with initial guidance in the low-to-mid 10% area.

Those deals, which were announced Wednesday, take places alongside a pair of previously announced offers.

Dye & Durham Corp. plans to place $500 million of five-year senior secured notes (B1), with early guidance in the low 9% area.

That deal, announced to the market in front of $1.2 billion of reverse inquiry, was heard to be playing to $2.3 billion of demand on Wednesday morning, a trader said.

And Herbalife International Inc. along with HLF Financing Sarl LLC are marketing $700 million of five-year senior secured notes (Ba2/B+) with early guidance in the 11% area.

Herbalife’s offer came into the market on $350 million of reverse inquiry, however the order book had yet to reach deal-size on Wednesday morning, a trader said.

All are expected to price before the end of the week.

Fortress Transportation adds

Fortress Transportation’s 7% senior notes due 2031 improved on Wednesday as the broader market firmed.

The notes added 3/8 to ½ point to close the day in the par ½ to par ¾ context, a source said.

There was $37 million in reported volume.

The notes had a decent break and closed the previous session in the par 1/8 to par 3/8 context.

Fortress Transportation priced an upsized $700 million, from $650 million, issue of the 7% notes in a Tuesday drive-by.

Pricing came at the midpoint of talk for a yield in the 7% area.

Comstock at a premium

Comstock Resources’ mirror add-on to the 6¾% senior notes due 2029 were trading with a solid premium to their reoffer price in heavy volume on Wednesday.

The mirror 6¾% notes were up about ¼ point to close the day in the 93¾ to 94 context, a source said.

Comstock priced an upsized $400 million, from $375 million, mirror add-on to the 6¾% senior notes due 2029 at 93 to yield 8.526% on Tuesday.

Pricing came on top of talk for a reoffer price of 93.

The add-on is not fungible to the outstanding issue and trades with its own Cusip.

Shelf Drilling recovers

Shelf Drilling’s 9 5/8% senior secured notes due 2029 partially recovered on Wednesday from the selling pressure of the past two sessions.

The 9 5/8% notes added 1½ points in active trade after dropping to a 92-handle the previous session.

The notes were trading in the 93¾ to 94¼ context heading into the market close, a source said.

There was $15 million in reported volume.

While the notes pared their losses on Wednesday, they remain down 3 points on the week.

The notes have been under pressure since Monday when the offshore driller announced a customer in the Middle East suspended the operation of four of its rigs.

Indexes

The KDP High Yield Daily index inched up 2 basis points to close Wednesday at 50.14 with the yield now 6.95%.

The index was down 12 bps on Tuesday and 63 bps on Monday.

The CDX High Yield 30 index was up 9 bps to close Wednesday at 106.81.

The index was down 26 bps on Tuesday.

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