Clarivate, Paysafe megadeals price in junk market; SM Energy comes in; Ladder Capital gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 10 – The primary market put up another $2.9 billion on Thursday as three issuers priced a total of four junk-rated, dollar-denominated tranches.

Meanwhile, the secondary space was modestly firmer on Thursday despite the highly anticipated release of May’s consumer price index report which reflected the fastest rate of inflation since 2008.

While the report reflected a faster rate of inflation than anticipated, the high-yield market remained well bid with few feathers ruffled by the data.

“It really had no impact. It’s the same risk bid to the market,” a source said.

New paper remained in focus with recent issues continuing to perform well.

Ladder Capital Corp.’s 4¾% senior notes due 2029 (Ba2/BB-) were gaining some momentum in active trading on Thursday although the notes remained on a par-handle.

Ascent Resources Utica Holdings, LLC/ARU Finance Corp.’s 5 7/8% senior notes due 2029 continued to trade with the slight premium reached after breaking for trade.

While the notes were coming in from the altitudes reached after breaking for trade, SM Energy Co.’s 6½% senior notes due 2028 (B3/B/B) were still changing hands well above their issue price.

Meanwhile, money continued to leave the space with high-yield mutual and exchange-traded funds having outflows of $642 million in the week to Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

Thursday new issues

The primary sold $2.9 billion of new paper on Thursday as three issuers priced a total of four junk-rated, dollar-denominated tranches.

Two of the three issuers came with drive-bys.

One upsized its deal.

Executions came in line with expectations, as one of the four tranches priced at the tight end of talk, while the other three came in the middle of talk.

Among them, Clarivate Science Holdings Corp., which priced $2 billion in two tranches, put on the best Tuesday afternoon performances in the secondary market, a trader said.

The deal included $1 billion of 3 7/8% seven-year secured notes (B1/B) and $1 billion of 4 7/8% eight-year unsecured notes (Caa1/CCC+), both of which priced at par, in the middle of talk.

Bonds in both tranches traded well out of the gate, with the 3 7/8% secured notes seen at par 3/8 bid, par 7/8 offered, while the 4 7/8% unsecured notes were better at 101¼ bid, 101¾ offered, the trader said.

New dollar-denominated bonds from London-based Paysafe Ltd., which priced $400 million of Paysafe Holdings US Corp. 4% eight-year notes (B1/B+) at par, on top of talk, did not perform nearly as well in the secondary market.

The dollar-denominated tranche was heard to be well oversubscribed, with as much as $1.2 billion of orders in the book, sources said.

However lukewarm trading on the break prompted traders to call that level of demand into question.

The deal broke to 99¼ bid, par offered, according to one trader.

Another had them 99½ bid, going out on Thursday afternoon.

In a concurrent euro-denominated tranche Paysafe Finance plc priced €435 million of notes at par to yield 3%.

Ladder Capital gains

Ladder Capital’s 4¾% senior notes due 2029 continued to gain momentum in active trading on Thursday.

The notes were up ¼ point and stood poised to close the day at par 3/8 bid, par 7/8 offered.

Ladder Capital priced an upsized $650 million, from $400 million, issue of the 4¾% notes at par on Wednesday.

The yield printed at the tight end of the 4¾% to 5% yield talk.

Ascent Resources flat

Ascent Resources’ 5 7/8% senior notes due 2029 were flat on Thursday with the notes continuing to trade with the nominal premium reached after breaking for trade.

While the 5 7/8% notes were lifted about 1/8 point in intraday activity, they stood poised to close the day unchanged at par ¼ bid, par 3/8 offered.

Ascent Resources priced an upsized $400 million, from $350 million, issue of the 5 7/8% notes at par on Wednesday.

The yield printed at the tight end of yield talk in the 6% area.

SM Energy comes in

While the notes were coming in from the heights reached after breaking for trade, SM Energy’s 6½% senior notes due 2028 continued to trade with a large premium to their issue price.

The 6½% notes were set to close at par ¾ bid, 101 offered.

They traded as high as 101 7/8 after breaking for trade on Wednesday.

However, the trading level was “a little frothy,” a source said.

SM Energy priced an upsized $400 million, from $350 million, issue of the 6½% notes at par on Wednesday.

The yield printed lower than yield talk in the 6¾% area.

$1.03 billion daily outflows

High-yield ETFs sustained big daily outflows of $1.03 billion on Wednesday, the most recent session for which data was available at press time, according to a market source.

Those outflows accelerated ahead of Thursday's Consumer Price Index report, with junk bonds presently returning record low yields, the source noted (that exodus of cash appeared prescient as the CPI was reported up 5%, year-over-year, on Thursday).

Actively managed high-yield funds sustained $140 million of daily outflows on Wednesday, the market source added.

The combined funds sustained $642 million of net outflows in the week to Wednesday's close, according to a Thursday afternoon report from the Refinitiv Lipper Fund Flow Report Newsline.

Indexes gain

Indexes continued to post gains on Thursday.

The KDP High Yield Daily index rose 6 points to close the day at 69.95 with the yield now 3.72%.

The index was up 9 points on Wednesday, 7 points on Tuesday and 6 points on Monday.

The ICE BofAML US High Yield index broke the 3% year-to-date return threshold on Thursday.

The index was up 4.8 basis points with the year-to-date return now 3.045%.

The index gained 16.9 bps on Wednesday, 13.9 bps on Tuesday and 7.2 bps on Monday.

The CDX High Yield 30 index jumped 21 points to close the day at 110.1.

The index rose 4 bps on Wednesday, 2 bps on Tuesday and 1 bp on Monday.

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