Crescent Energy adds on; McAfee losses mount; Wesco gains; Spirit Airlines up on acquisition

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 7 – The domestic high-yield primary market saw one add-on price during Monday’s session and several more join the forward calendar.

Crescent Energy Finance LLC, formerly known as Independence Energy Finance LLC, priced an upsized $200 million add-on to the Independence Energy Finance 7¼% senior notes due May 1, 2026 (B2/B+).

Meanwhile, it was another soft day in the secondary space as the 10-year Treasury yield again surpassed the 1.9% threshold.

The yield traded as high as 1.94% before closing the day at 1.921%.

While the market gained some steam in the late afternoon, it still ended the day with a weak tone, a source said.

Losses continued to mount for Condor Merger Sub, Inc.’s (McAfee Corp.) recently priced 7 3/8% senior notes due 2030 (Caa2/CCC+) with the notes trading down to a 98-handle in high-volume activity.

While the secondary space continued to struggle on Monday, topical news lifted some outstanding issues.

Wolverine Escrow’s junk bonds (Wesco Aircraft Holdings Inc.) were on the rise on Monday following news the company, which does business as Incora, hired restructuring advisers to help address its near-term debt.

Spirit Airlines, Inc.’s 8% senior notes due 2025 were also posting gains following Frontier Group Holdings Inc.’s acquisition of the company.

Friday’s primary

A modest-but-active session saw one deal price in the dollar-denominated high-yield primary market.

Crescent Energy Finance LLC, formerly known as Independence Energy Finance LLC, priced an upsized $200 million add-on to the Independence Energy Finance 7¼% senior notes due May 1, 2026 (B2/B+) at 101 in a drive-by.

The issue price came on top of price talk.

The issue size increased from $150 million.

There were also announcements of a couple of deals that were expected to be in the market at least overnight.

McAfee losses mount

Losses continued to mount for McAfee’s new 7 3/8% senior notes due 2030 with the notes again dropping down to a 98-handle.

The 7 3/8% notes were down about 5/8 point to change hands in the 98 3/8 to 98 5/8 context throughout Monday’s session.

There was $37 million in reported volume.

The 7 3/8% notes have struggled since the $2.02 billion issue, which priced at par on Feb. 3, broke for trade.

The notes also traded on a 98-handle during last Friday’s session but gained steam as the session progressed and closed the day wrapped around 99.

The 7 3/8% notes were the latest leveraged buyout financing deal to struggle in the secondary.

athenahealth (Minerva Merger Sub, Inc.) 6½% senior notes due February 2030 (Caa2/CCC/CCC+) traded on a 97-handle for much of Monday’s session, although they gained strength alongside the broader market heading into the close.

The 6½% notes traded as low as 97 3/8 on Monday but were changing hands in the 97½ to 98 context heading into the close.

There was $41 million in reported volume.

Incora gains

Incora’s (formerly Wesco Aircraft) capital structure made large gains on Monday following news the company had hired restructuring advisers.

The aerospace parts company’s 8½% senior notes due 2024 gained 1¼ points during Monday’s session.

The notes traded as high as 88½ but stood poised to close the day at 86, a source said. They were active with more than $20 million in reported volume.

The 8½% notes gained ¾ point last Friday to close last week at 84¾.

Incora’s 9% senior notes due 2026 gained more than 2 points. They traded as high as 87½ in intraday activity but were changing hands in the 85½ to 86 context heading into the close.

There was $11 million in reported volume.

Incora formed through the merger of Wesco Aircraft with Platinum Equity’s portfolio company Pattonair in 2020.

The company hired financial adviser PJT Partners Inc., restructuring advisers Alvarez & Marsal and restructuring counsel Milbank LLP, The Wall Street Journal reported.

The company has $2.075 billion in outstanding junk bonds and reported an EBITDA of $80 million for the 12 months ending September 2021.

Incora’s junk bonds dropped to the low 80s following its September earnings report

Spirit Airlines gains

Spirit Airlines 8% senior notes due 2025 were on the rise following news Frontier Airlines would acquire the company in a cash and stock deal valued at $6.6 billion.

The 8% notes rose almost 2 points and stood poised to close the day at 109 5/8 following the news, according to a market source.

The merger would be a credit positive for Spirit, a source said.

While the deal is expected to close in the second half of 2022, it is facing a tough regulatory backdrop.

$1.25 billion Friday outflows

The dedicated high-yield bond funds sustained $1.25 billion of net outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $1.125 billion of outflows on the day.

Actively managed high-yield funds saw $125 million of outflows on Friday, the source said.

Year-to-date the cash flows of the dedicated high-yield bond funds are negative-$11.6 billion, the market source said.

Indexes

The KDP High Yield Daily index sank 15 points to close Monday at 63.28 with the yield 4.94%. The index posted a cumulative loss of 20 points on the week last week.

The CDX High Yield 30 index rose 4 basis points to close Monday at 106.12.

The index posted a cumulative loss of 56 bps on the week last week.

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