Three issues clear junk primary; II-VI, Southwestern, Dun & Bradstreet at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 9 – The new issue market remained active on Thursday, a session which saw the placement of three issues of junk-rated, dollar-denominated bonds with a combined face value of $1.5 billion.

Meanwhile, the secondary space was largely unchanged on Thursday despite a pullback in equities that left the Nasdaq Composite particularly hard hit.

New and recent deals dominated the tape with the majority trading at large premiums to their issue prices.

Particularly, Southwestern Energy Co.’s 4¾% senior notes due 2032 (Ba3/BB/BB), Dun & Bradstreet Corp.’s 5% senior notes due 2029 (Caa1/B-/BB-) and II-VI Inc.’s 5% senior notes due 2029 (B2//BB) were trading with large premiums to their issue price.

The strong performance of recent deals was attributed to the recent slowdown in the new issue market, which saw only one $400 million offering price the previous week.

“There are guys with cash and they’re looking to put it to work in new issues,” a source said.

Meanwhile, fund flows were positive in the week to Wednesday’s close with high-yield mutual and exchange-traded funds adding $1.259 billion, according to the Refinitiv Lipper Fund Flow Report Newsline.

The inflows pared losses from last week’s $2.62 billion outflow.

WeWork, Howard, FirstCash

The Thursday session's most novel trade came in the form of a $550 million secondary sale of WeWork bonds by an affiliate of SoftBank, which bought $2.2 billion of WeWork securities two years ago on the heels of WeWork's failed attempt to go public.

The WeWork Cos. LLC/WW Co-Obligor 5% senior notes due July 10, 2025 (CCC+/CCC-) came deeply discounted, pricing at 85.989 to yield 9¾%, in the middle of the 9 5/8% to 9 7/8% yield talk.

The deal had a notable following among hedge funds, according to a trader who added that the offer was heard to have been playing to more than $750 million of orders.

The remainder of Thursday's new issue business cleaved more closely to the middle of the fairway. unsecured notes issues from Howard Midstream Energy Partners, LLC and FirstCash, Inc. that were oversubscribed and priced at the tight ends of talk.

With cash on the sidelines looking for a home in new issues, investors followed the Dec. 6 week's burst of issuance enthusiastically, a trader said, adding that investors realize that with the approaching holidays new issue supply is soon likely to diminish, and then disappear altogether until the new year.

Just about all of the week's deals have traded well, the source added.

One new deal was announced on Thursday.

Skillz Inc. started a roadshow for its debut high-yield bond deal, a $300 million offering of five-year first-lien secured notes, in the market with initial guidance that has the notes pricing at a discount to yield 11%, on a timeline that is expected to conclude with a Wednesday pricing.

At Thursday's close it was the sole offer on the active forward calendar.

Southwestern in demand

In the secondary, Southwestern Energy’s 4¾% senior notes due 2032 remained strong in active trading on Thursday.

The 4¾% notes continued to change hands in the 101 5/8 to 102 context – a level reached shortly after breaking for trade.

Southwestern Energy priced a $1.15 billion issue of the 4¾% notes at par on Wednesday.

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

The deal was heard to be at least 4x oversubscribed.

Dun & Bradstreet gains

Dun & Bradstreet’s 5% senior notes due 2029 were putting in a strong performance with the notes changing hands on a 101-handle.

The 5% notes were marked at 101 bid, 101½ offered heading into the market close, a source said.

The commercial analytics company priced a $460 million issue of the 5% notes at par on Wednesday.

The yield printed at the tight end of the 5% to 5¼% yield talk.

II-VI strong

II-VI’s 5% senior notes due 2029 continued to gain in active trading on Thursday following a strong break.

The 5% notes were changing hands in the 101¾ to 102¼ context heading into the market close.

They were wrapped around 101 after breaking for trade on Wednesday.

In a heavily oversubscribed offering, II-VI priced a $990 million issue of the 5% notes at par on Wednesday.

The yield priced tighter than yield talk in the 5¼% area.

The deal was heard to be 5x oversubscribed.

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