Sinclair megadeal, Melco Resorts on tap; Hexion drops; Chemours under pressure; PG&E on the rise

By Abigail W. Adams and Paul A. Harris

Portland, Me., July 9 – The domestic high-yield primary market’s forward calendar continued to grow on Tuesday with two new deals on deck.

Melco Resorts Finance Ltd. was in the market with a $500 million offering of eight-year senior notes.

Sinclair Broadcast Group Inc. kicked off the high-yield portion of its financing for acquisitions from the Walt Disney Co. on Tuesday – a whopping $4,875,000,000 two-part offering.

Meanwhile, there was also an uptick of activity in the secondary space with liquidity returning to its pre-holiday levels.

Chemical makers were under pressure on Tuesday after BASF SE, one of the world’s largest chemical companies, slashed its earnings forecast.

Hexion Inc.’s recently priced 7 7/8% senior notes due 2027 were in focus with the notes dropping below par for the first time since pricing.

Chemours Co.’s 5 3/8% senior notes due 2027 were also trading off in high-volume activity.

Pacific Gas & Electric’s 6.05% senior notes due 2034 were among the most actively traded issues in the secondary space with the notes seeing a multi-point gain on the heels of California’s approval of legislation for the creation of a wildfire fund.

Sinclair’s megadeal

Sinclair Broadcast Group kicked off the high-yield portion of its financing for acquisitions from the Walt Disney Co. on Tuesday: a whopping $4,875,000,000 two-part offering via indirect, wholly owned subsidiaries Diamond Sports Group LLC and Diamond Sports Finance Co.

The deal features $2.55 billion of seven-year senior secured notes and $2,325,000,000 of eight-year senior unsecured notes.

The roadshow is set to start Wednesday and wrap up on July 18.

Proceeds, along with $4 billion of bank debt, will be used to help fund the acquisition of 21 Regional Sports Networks and Fox College Sports from Disney.

Elsewhere, Melco Resorts was marketing a $500 million offering of eight-year senior notes (expected ratings Ba2/BB).

The issuer, a wholly owned subsidiary of Macau based gaming and entertainment operator Melco Resorts and Entertainment Ltd., plans to use the proceeds to pay down bank debt under the revolving credit facility.

Hexion below par

Hexion’s recently priced 7 7/8% senior notes due 2027 dropped below par on Tuesday for the first time since pricing.

The 7 7/8% notes traded off 1 3/8 points to close Tuesday around 99½, according to a market source.

The notes saw more than $24 million in reported volume by the late afternoon.

The notes from the specialty chemicals maker were under pressure alongside the broader sector after BASF, one of the largest global chemical companies, slashed their earnings forecast due to a slowdown in the global economy.

The notes were also trading off the day after Hexion exited Chapter 11 bankruptcy.

Hexion priced a $450 million issue of the 7 7/8% notes at par on June 25 as part of its exit financing for bankruptcy.

Chemours down again

Chemours’ 5 3/8% senior notes due 2027 were also feeling pressure alongside the broader chemical sector on Tuesday.

The notes were down another 2¼ points on Tuesday, closing the day at 90¾, according to a market source.

More than $15 million of the bonds were on the tape during Tuesday’s session.

The notes have steadily traded down since the last week of June when its lawsuit against former parent company DuPont was unsealed.

The lawsuit alleges Chemours liabilities for the clean-up of DuPont products that used the PFOA chemical were overestimated.

Chemours spun-off from DuPont in 2015.

The lawsuit alleges DuPont misled the company about the amount of liabilities it would be taking on in the spin-off, which it stated could amount to billions of dollars.

PG&E gains

Pacific Gas & Electric’s 6.05% senior notes due 2034 were in focus on Tuesday with the notes seeing a multi-point gain following legislation in California for the creation of a wildfire fund.

The 6.05% notes rose 2¼ point in the high-volume activity to close the day at 111¼, according to a market source.

More than $60 million of the bonds were on the tape by the late afternoon.

The California Senate passed legislation on Monday for the creation of a $21 billion fund to help utilities facing liabilities from wildfires.

The legislation must be approved by the state Assembly to go into effect, according to Courthouse News Service.

Pacific Gas & Electric filed for bankruptcy in January due to liabilities from the California wildfires in 2017 and 2018.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Monday, according to a fixed income investor.

High-yield ETFs sustained $196 million of outflows on the day.

However, actively managed high-yield funds saw $60 million of inflows on Monday, the investor said.

The combined funds are tracking $255 million of inflows for the week that will conclude with Wednesday's close, the source added.

Indexes mixed

Indexes were mixed on Tuesday after launching the week either flat or with losses.

The KDP High Yield Daily index dropped 12 bps to close Tuesday at 71.81 with the yield now 5.44%. The index was flat on Monday after a 14-bps gain on the week last week.

The ICE BofAML US High Yield index dropped 14.8 bps on Tuesday with the year-to-date return now 10.191%.

The index shaved off 1.8 bps on Monday after a cumulative gain of 23.9 bps on the week last week.

The CDX High Yield 30 index gained 12 bps to close Tuesday at 107.44.

The index was down 38 bps on Monday after a cumulative gain of 11 bps on the week last week.

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