Primary prices $3.68 billion (and Delta); Cheniere gains; Cablevision secureds lose steam

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 16 – The domestic high-yield primary market continued to churn out new deals with five issuers pricing $3.68 in junk-rated paper.

However, if you add the investment-grade rated Delta SkyMiles deal – as many did, since it was a collaborative effort involving both the high-yield and investment-grade syndicate desks – Wednesday's total jumps to $9.68 billion.

Meanwhile, the secondary space was largely unchanged on Wednesday with the Federal Reserve’s announcement regarding interest rates failing to move the market.

The move to keep interest rates near zero for the near future will continue to promote buying in the high-yield market, a source said.

However, the announcement was widely anticipated.

The frenzy surrounding new paper continued on Wednesday with new deals dominating trading activity.

Specialty Building Products Holdings, LLC’s (U.S. Lumber Group) 6 3/8% senior notes due 2028 (B3/B-) and Cheniere Energy Inc.’s 4 5/8% senior secured notes due 2028 (Ba3/BB) continued to gain in active trading.

Qorvo, Inc.’s 3 3/8% senior notes due 2031 were also trading with a premium (Ba1/BB+), although they did not reach the same heights as other deals in the market.

Cablevision Lightpath LLC’s two tranches of senior notes were active although the secured tranche shaved off most of its premium heading into the market close.

And Altice France SA’s 5 1/8% senior secured notes due 2029 (B2/B) were largely hovering around par.

Delta clears the primary

Another big day in the primary market saw five issuers price a combined $3.68 billion face amount of junk.

However, with the Delta SkyMiles deal – a collaborative effort involving both the high yield and investment grade syndicate desks – Wednesday's total jumps to $9.68 billion.

Delta Air Lines Inc. and SkyMiles IP Ltd. priced an upsized $6 billion two-part senior secured bullet notes transaction (Baa1//BBB).

The deal was upsized from $4 billion, and was heard to be playing to a staggering $30 billion of orders, a trader said.

It included an upsized $2.5 billion (from $2 billion) tranche of 4½% five-year notes that priced at the tight end of downwardly revised talk.

The deal also featured an upsized $3.5 billion (from $2 billion) tranche of 4¾% eight-year notes that also priced at the tight end of downwardly revised talk.

The new Delta par-pricing notes performed a steep climb in the secondary, late Wednesday.

The 4½% notes due 2025 traded to 101¾ bid, 102¼ offered, and the 4¾% notes due 2028 traded to 102 bid, 102½ offered, the trader said.

Delta was the latest air carrier to put its customer loyalty program up as collateral to entice investors into deals that might not otherwise clear the hangar, as the coronavirus pandemic continues to wreak havoc on travel-related sectors.

In late June United Airlines Holdings, Inc. brought $3.8 billion of Mileage Plus Holdings, LLC/Mileage Plus Intellectual Property Assets, Ltd. 6½% senior secured notes due June 2027.

In early September Spirit Airlines, Inc. priced $850 million of 8% first-lien senior secured notes due 2025 (Ba3//BB+).

As with Delta, both of those deals came backed by assets related to the carriers' customer loyalty programs, and were said to have played to huge demand.

Investors have taken a view that these bonds are over-collateralized, and cheap, a trader said.

Meanwhile Wednesday's action in the new issue market left a $3 billion announced calendar to clear ahead of the coming weekend (see related stories in this issue).

On the rise

Specialty Building Products’ 6 3/8% senior notes due 2028 and Cheniere Energy’s 4 5/8% senior secured notes due 2028 were in focus on Wednesday with both issues trading up to a 102-handle in high-volume activity.

Specialty Building’s 6 3/8% senior notes due 2028 traded as high as 103¼ during Wednesday’s session.

However, they were changing hands in the 102 3/8 to 102¾ context heading into the market close.

The notes had more than $76 million in reported volume.

Specialty Building Products priced an upsized $600 million issue of the 6 3/8% notes at par on Tuesday.

The issue size increased from $575 million.

The yield printed 12.5 basis points tighter than the 6½% to 6¾% yield talk.

Cheniere Energy’s 4 5/8% senior secured notes due 2028 also continued to gain.

After a strong break, the notes continued to rise and were changing hands in the 102½ to 102 5/8 context heading into the market close.

There was more than $93 million of the bonds on the tape during Wednesday’s session.

The notes closed the previous session at 101 bid, 101½ offered.

Cheniere Energy priced an upsized $2 billion issue of the 4 5/8% notes at par on Tuesday.

Pricing came at the tight end of yield talk in the 4¾% area. The deal doubled in size and was initially launched as a $1 billion offering.

Qorvo at a premium

While the notes did not reach the same heights as some other recent deals, Qorvo’s 3 3/8% senior notes due 2031 were trading at a premium in high-volume activity on Wednesday.

The 3 3/8% notes traded in a range of par 1/8 to par 5/8 and were changing hands in the par 3/8 to par ½ context heading into the market close, a source said.

About $53 million of the bonds were on the tape heading into the market close.

The lack of movement in the notes was attributed to their tight pricing and the abundance of supply.

Qorvo priced a $700 million issue of the 3 3/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 3½ area. Initial talk was in the mid-to-high 3% area.

Cablevision active

Cablevision Lightpath’s two tranches of senior notes were active on Wednesday, although the secured tranche shaved off most of its premium heading into the market close.

Cablevision’s 5 5/8% senior notes due 2028 (Caa1/B) traded in a range of par to 102¼ with the notes gaining strength as the session progressed, a source said.

The 5 5/8% notes were changing hands in the 101¾ to 102¼ context heading into the market close. The bonds were active with more than $72 million in reported volume.

The 3 7/8% senior secured notes due 2027 (B1/B+) traded as high as 101 7/8 on Wednesday. However, the notes lost most of their premium as the session progressed.

They were changing hands in the par 1/8 to par ½ context heading into the market close, a source said.

The bonds saw more than $52 million in reported volume during the session.

Altice at par

Altice’s 5 1/8% senior secured notes due 2029 were largely hovering around par heading into Wednesday’s close.

The notes were seen ending the day at par ¼, a market source said.

The bonds were active with more than $48 million in reported volume.

Altice France priced a $475 million tranche of the 5 1/8% notes at par on Tuesday as part of a dual-currency offering that also included a €500 million tranche.

$163 million Tuesday inflows

The dedicated high-yield bond funds had $163 million of net inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $118 million of inflows on the day.

Actively managed high-yield funds saw $45 million of inflows on Tuesday, the source said.

With only Wednesday's daily fund flows numbers remaining to go into the tally the combined funds are tracking $450 million of net inflows for the week the Wednesday's close, according to the market source.

Indexes gain

Indexes continued their upward momentum on Wednesday.

The ICE BofAML US High Yield index gained 16.2 bps with the year-to-date return now 0.657%.

The index was up 9.7 bps on Tuesday and 4.7 bps on Monday.

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

The index was up 41 bps on Tuesday and 25 bps on Monday.

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