Ford brings $8 billion in three tranches; AMC prices at a discount; Hilton, CDW trade up

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 17 – The domestic high-yield primary market rounded out an active week with a deal that will have a significant impact on the high-yield space.

Ford Motor Co. was the talk of the town on Friday as the fallen angel priced $8 billion of senior notes (expected ratings Ba2/BB+/BBB-) in three bullet tranches.

The demand for the offering was intense, sources said.

AMC Entertainment Holdings, Inc. also priced a $500 million issue at a discount.

Meanwhile, the secondary space closed out the week on firm footing.

New paper remained in focus and continued to perform well – a byproduct of heavily oversubscribed offerings, a source said.

Hilton Hotels & Resorts’ two tranches of senior notes (Ba2/BB) were trading up in high-volume activity on Friday.

CDW Corp.’s 4 1/8% senior notes due 2025 (Ba2/BB-) were also trading well above their issue price.

After losing steam over the past two sessions, Spirit AeroSystems, Inc.’s 7½% senior notes due 2025 (Ba2/BB-) rebounded in active trading on Friday.

As AMC prepped its new offering, the embattled movie theater chain operator’s capital structure was improving.

Fallen angel for Friday

Fallen angel Ford Motor Co. commandeered a big parking space beneath the speculative-grade bond spotlight on Friday.

The automaker priced $8 billion of senior notes in three bullet tranches.

All three tranches priced at par and came with yields inside of yield talk:

• $3.5 billion of three-year notes will yield 8½%, through guidance in the 8¾% area. Initial talk was in the 9½% area;

• $3.5 billion of five-year notes will yield 9%, through guidance in the 9¼% area. Initial talk was in the 10% area; and

• $1 billion of 10-year notes will yield 9 5/8%, though guidance in the 10% area. Initial talk was in the 11% area.

Demand for the high-yielding Ford paper was intense, according to market sources. At one point, as price talk was in play, the three-part deal was playing to $27 billion of aggregate demand, a bond trader said.

AMC yields 11.031%

Elsewhere AMC Entertainment Holdings, Inc. priced a $500 million issue of 10½% five-year first-lien notes (B3/CCC+) at 98 to yield 11.031% in a drive-by.

The issue price came on top of price talk. The coupon came at the tight end of the 10½% to 11% coupon talk.

In addition to a standard high-yield call structure the notes feature a special call provision allowing the issuer to redeem 35% of the notes for the first 120 days using the proceeds of any loan received pursuant to the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Hilton on demand

Hilton Hotels’ two tranches of senior notes were trading up in high-volume activity on Friday.

The 5 3/8% senior notes due 2025 traded as high as 103½ on Friday.

However, they were changing hands in the 101½ to 102 context heading into the market close, a source said.

The notes were in focus with more than $70 million in reported volume during the session.

Hilton’s second tranche of 5¾% senior notes due 2028 also traded up to a 103 handle early in the session.

The notes were slightly higher than the five-year tranche heading into the market close.

They were marked in the 102 to 102½ context in the late afternoon.

With the notes “extremely oversubscribed” during bookbuilding, investors in search of greater allocations were pushing the notes up in the secondary space, a market source said.

While most of the new issues to price since volatility rocked capital markets have come as secured deals, the offering from Hilton was unsecured.

Hilton also brought the first eight-year tranche since early March.

While there was still a degree of caution in the trading activity, Hilton is a “solid name that’s not going anywhere,” a source said. “A name like this people really like, despite what’s going on.”

Hilton priced $1 billion in two tranches in a Thursday drive-by. The deal was heard to be as much as 14x oversubscribed.

The offering doubled in size from the initially announced $500 million offering of five-year notes with a $500 million eight-year tranche added during bookbuilding.

The 5 3/8% notes due 2025 priced at par at the tight end of yield talk in the 5½% area.

The 5¾% notes due 2028 also priced at par.

CDW trades up

CDW’s 4 1/8% senior notes due 2025 were also trading well above their issue price in high-volume activity on Friday.

The notes were changing hands in the 101¼ to 101¾ context with more than $31 million in reported volume.

CDW was the first junk-rated bond to price with a 4-handle since volatility rocked capital markets.

The deal was initially launched with a whisper for a 5-handle but talk tightened due to high demand, a market source said.

CDW priced an upsized $600 million issue of the 4 1/8% notes at par in a Thursday drive-by.

The issue size increased from $500 million.

The yield printed at the tight end of yield talk in the 4¼% area.

Spirit AeroSystems rebounds

Spirit AeroSystems’ 7½% senior notes due 2025 were rebounding in active trading on Friday after giving up much of their gains over the past two sessions.

The notes traded back up to a 101-handle on Friday. They were changing hands in the 101 to 101½ context during the session.

The bonds remained major volume movers with more than $53 million on the tape by the market close.

Spirit AeroSystems announced on Friday that it had terminated its unsecured $375 million short-term delayed-draw term loan facility following the closing of the 7½% notes.

An amendment to the company’s secured credit facility also became effective, providing flexibility related to future capital raises, Prospect News reported.

The 7½% notes, which priced at par in a Tuesday drive-by, traded as high as 103 after breaking for trade.

However, the notes were coming in over the past two sessions.

The 7½% notes closed Thursday at par ¼ bid, par ½ offered.

AMC improves

AMC’s capital structure was making gains as the embattled movie chain operator prepped a new offering.

The company’s outstanding notes were up between 6 to 10 points in decent volume on Friday.

AMC’s 5 7/8% senior notes due 2026 gained 10¼ points to 31½, according to a market source.

The 6 1/8% senior notes due 2027 rose 7¾ points to 30¾.

The 5¾% notes due 2025 were up 6 points to 31.

$780 million Thursday inflows

The dedicated high-yield bond funds had $780 million of daily inflows on Thursday, the most recent session for which data was available at press time, a market source said.

High-yield ETFs had $465 million of inflows on the day.

Actively managed high-yield funds saw $315 million of inflows on Thursday, the source said.

News of Thursday's daily cash flows follows a Thursday afternoon report that the combined funds saw a record $7.663 billion of inflows for the week to the Wednesday, April 15 close, topping the previous weekly record of $7.092 billion set just two weeks ago.

Indexes

Indexes closed Friday on firm footing although they were mixed on the week.

The KDP High Yield Daily index gained 23 basis points to close Friday at 64.23 with the yield now 7.2%. The index was down 15 bps on Thursday, 14 bps on Wednesday, gained 66 bps on Tuesday and dropped 11 bps on Monday.

The index had a cumulative gain of 49 bps on the week.

The ICE BofAML US High Yield index gained 59.9 bps with year-to-date returns now negative 8.462%.

The index was up 7 bps on Thursday, dropped 48.9 bps on Wednesday after gaining 91.4 bps on Tuesday and 120.7 bps on Monday.

The index had a cumulative gain of 230.1 bps on the week.

The CDX High Yield 30 index rose 73 bps to close Friday at 96.26. The index dropped 12 bps on Thursday, 201 bps on Wednesday, 11 bps on Tuesday and 109 bps on Monday.

The index posted a cumulative loss of 333 bps on the week.

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