GoDaddy prices; CNO moves up; Sprint gains; Tronox drops; $1.27 billion fund outflows

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 30 – While the domestic high-yield primary market’s pace remained slow on Thursday, one deal did clear the forward calendar.

Go Daddy Inc. priced a $600 million issue of 8.5-year senior notes (B1/B+) at par to yield 5¼% on Thursday.

Meanwhile, the secondary space was volatile on Thursday and largely moving in line with equities as they seesawed between gains and losses.

New paper was in focus and performing well in the secondary space.

GoDaddy’s new notes were trading at a premium after breaking for trade.

CNO Financial Group Inc.’s recently priced 5¼% senior notes due 2029 were also trading well above their issue price in high-volume activity.

Sprint Corp.’s junk bonds were active and making gains following the latest development in its merger with T-Mobile and the launch of its 5G network.

However, Tronox Ltd.’s 6½% senior notes due 2026 shaved off several points following the company’s investor day.

Energy names were also taking a hit as crude oil futures dropped by more than 4%.

Market technicals also continued to show signs of weakness with another billion-dollar outflow recorded for the week through Wednesday’s close.

High-yield mutual funds and exchange-traded funds saw an outflow of $1.27 billion for the week ended Wednesday. The space has seen four outflows in the past six weeks.

GoDaddy prices, trades higher

GoDaddy priced a $600 million issue of 8.5-year senior notes (B1/B+) at par to yield 5¼% on Thursday, the first straight-out dollar-denominated junk deal to price in the post-Memorial Day market.

CNO Financial, which priced earlier in the week, was split-rated.

Memorial Day being the traditional spring-summer boundary in the bond market, GoDaddy is thus the first junk deal of summer.

It yielded at the tight end of the 5¼% to 5 3/8% yield talk. Initial talk was 5¼% to 5½%.

GoDaddy’s new paper was in focus and trading up in high-volume activity after pricing.

The new paper was seen at par ½ bid, 101 offered shortly after breaking for trade, according to a market source.

The notes were trading at par bid, par ¼ offered heading into the Thursday close, another source said.

The 5¼% notes were in focus with more than $39 million in reported volume by the late afternoon.

CNO at a premium

CNO Financial’s newly priced 5¼% senior notes due 2029 were making gains in the secondary space. The notes were quoted at par 7/8 bid, 101 3/8 offered.

They gained about 5/8 point during Thursday’s session and stood poised to close the day around 101 1/8, according to a market source.

More than $45 million of the bonds were on the tape during Thursday’s session.

There continued to be good demand for the notes with the deal oversubscribed during bookbuilding, sources said.

CNO priced an upsized $500 million issue of the 5¼% notes at par on Wednesday.

Pricing came tight to talk for a yield of 5¼% to 5½% and in line with early guidance in the low to mid 5% area, sources said.

Sprint gains

Sprint’s junk bonds were on the rise in active trading on Thursday following the latest development in regulatory approval for its merger with T-Mobile and the launch of its 5G network.

Sprint’s 7 1/8% senior notes due 2024 traded up about 1 point.

They were moving around during Thursday’s session with most trades between 103½ and 104½, a market source said.

The notes were seen changing hands at 104¼ in the late afternoon with about $17 million of the bonds on the tape, another source said.

Sprint’s longer duration 8¾% senior notes due 2032 also gained 1 point.

They were seen at 114¼ bid, 114¾ offered with about $9 million in reported volume by the late afternoon.

News broke late Wednesday that the Department of Justice may ask T-Mobile and Sprint to create an additional wireless carrier with their network as a condition of regulatory approval for the merger.

News of the regulatory hurdle was followed by Sprint’s launch of its 5G network in four cities.

Tronox drops

Tronox’s 6½% senior notes due 2026 were losing ground in high-volume activity on Thursday following its investor day.

The notes traded down almost 2 points. They stood poised to close the day 95 3/8, according to a market source.

More than $23.5 million of the bonds were on the tape by the late afternoon.

The mining and inorganic chemical company announced a potential understatement of liabilities in its acquisition of chemical and mining company Cristal’s TiO2 business.

Energy drops

Energy names were taking a hit on Thursday as crude oil futures slid more than 4%.

Chesapeake Energy Corp.’s 8% senior notes due 2027 dropped almost 2 points on Thursday. The notes traded down to 90½, a market source said.

More than $18 million of the bonds were on the tape by the late afternoon.

California Resources Corp.’s 8% senior notes due 2022 continued to trade down on Thursday.

The notes dropped another 1½ points, a market source said.

They were seen at 72¼ bid, 72½ offered in the late afternoon with about $16 million on the tape by the late afternoon.

The barrel price of WTI crude oil continued its downward spiral on Thursday, settling at $56.41, a decrease of $2.40 or 4.08%.

Crude oil futures were trading down based on domestic inventory data and continued trade war worries.

Big ETF outflows

High-yield ETFs sustained a whopping $1.05 billion of daily outflows on Wednesday, the most recent session for which data was available at press time, according to market sources.

It is among the largest daily outflows sustained by junk ETFs on record, a source said.

Of those Wednesday high-yield ETF outflows the iShares iBoxx $ High Yield Corporate Bd (HYG), itself, saw $700 million of outflows, its biggest daily outflow since Dec. 20, 2018's $864 million outflow.

Actively managed high-yield funds saw $55 million of outflows on Wednesday.

News of Wednesday's daily flows surfaced a few hours before a report that the combined junk funds sustained $1.27 billion of outflows in the week to Wednesday's close, according to Lipper US Fund Flows.

Because of the manner in which certain numbers are reported, most of Wednesday's big outflow from the junk ETFs did not show up in that $1.27 billion outflow which Lipper reported on Thursday, but will rather be tallied the following week which ends with the Wednesday, June 5 close, the source added.

Indexes mixed

Indexes were mixed on Thursday with some posting losses, others gains and others remaining largely flat.

The KDP High Yield Daily index dropped 6 basis points to close Thursday at 69.59 with the yield now 5.95%.

The index dropped 21 bps on Wednesday and was down 4 bps on Tuesday after posting a cumulative loss of 24 bps on the week last week.

The ICE BofAML US High Yield index gained 13.7 bps with the year-to-date return now 7.941%.

The index sank 39 bps on Wednesday dropping below the 8% threshold, and gained 7 bps on Tuesday.

The index shot past 8% returns in early April, which is where it has largely remained.

The CDX High Yield 30 index was largely flat on Thursday. It slid 1 bp to close Thursday at 105.25.

The index dropped 24 bps on Wednesday and was down 27 bps on Tuesday after a cumulative loss of 58 bps on the week last week.

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