Morning Commentary: Springleaf, Virtu bring drive-bys; Charter, Hexion trade higher

By Paul A. Harris

Portland, Ore., June 26 – The extremely busy drive-through window of the high-yield primary market opened again on Wednesday, as two new quick-to-market deals appeared.

Virtu Financial LLC plans to drive by with $525 million of seven-year first-lien senior secured notes.

Initial price talk is in the 5½% area, a trader said.

J.P. Morgan Securities LLC, RBC Capital Markets LLC and Jefferies LLC are the joint bookrunners.

And Springleaf Finance Corp. plans to price a $300 million add-on to its 6 1/8% senior bullet notes due March 15, 2024 (expected ratings Ba3/BB-).

Initial price talk has the deal coming at a reoffer price of 107.

Goldman Sachs & Co. LLC is the left lead bookrunner.

Meanwhile, among deals announced earlier, Hannon Armstrong Sustainable Infrastructure Capital Inc. talked its $300 million offering of green eligible five-year senior notes (BB+/BB+) to yield in the 5½% area.

Books close at 3 p.m. ET on Wednesday, and the deal is set to price thereafter.

Wells Fargo Securities LLC is the left bookrunner.

Also on deck for Wednesday is Fairstone Financial Inc. with a $300 million offering of five-year senior notes (B1/B), talked on Tuesday to yield 8% to 8¼%.

Meanwhile, pending official word from the dealers, the Allied Universal Holdco LLC $1.55 billion deal, featuring secured and unsecured notes, is shaping up consistent with other similarly structured recent two-part deals, with demand falling heavily upon the secured tranche, a trader said.

The $500 million tranche of seven-year senior secured notes (B3/B-/BB-), with initial talk 6¾% to 7%, is heard to be two-times oversubscribed.

The $1.05 billion eight-year senior unsecured notes (Caa2/CCC/CCC+), with initial talk at 250 basis points to 300 bps behind secured notes, is heard to have a book that is right around the tranche size.

Proceeds from the concurrent term loan may end up being shifted to the secured notes tranche, the trader added.

Secondary market

Junk was up ¼ point in the early going on Wednesday, a trader said.

Most of the June 24 week's massive $7.3 billion of issuance (all of it coming on Monday and Tuesday) was trading well, the source said.

The new Hexion Inc. 7 7/8% senior notes due July 2027 (Ba3/B-) were up half a point to as much as a point from new issue price on Wednesday morning, the source said.

The $450 million issue priced at par on Tuesday.

The Charter Communications, Inc. add-on notes were also trading above issue price.

The CCO Holdings LLC and CCO Holdings Capital Corp., subsidiaries of Charter Communications, add-on paper to the 5 3/8% senior notes due June 1, 2029 (expected ratings B1/BB) were 102¼ bid, 102¾ offered, the trader said.

The upsized $750 million deal (from $500 million) priced on Tuesday at 102.

However, the William Lyon Homes Inc. 6 5/8% senior notes due July 2027 were lagging new issue price and were quoted at 99 3/8 bid, 99 7/8 offered, unchanged from Tuesday.

The $300 million issue priced at par on Monday.

Mixed Tuesday flows

The daily cash flows to the dedicated high-yield bond funds were mixed on Tuesday, according to a market source.

High-yield ETFs sustained $123 million of outflows on the day.

However, actively managed high-yield funds saw $50 million of inflows on Tuesday, the source said.

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