WPX Energy, TRI Pointe, Meritor price; secondary ‘on fire’; new deals trade up

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 3 – The throttle on the new issue engine in the hard-rallying high-yield market remained wide open on Wednesday, sources said.

In addition to straight-out junk deals, high-yield investors were eyeing crossover deals and select high-grade paper that was expected to come with substantial coupons.

Wednesday’s session had drive-by deals from WPX Energy, Inc., TRI Pointe Group Inc., and Meritor, Inc.

Core & Main LP priced a $250 million add-on to its 6 1/8% senior notes due Aug. 15, 2025 (Caa2/existing CCC+).

Service Properties Trust priced an upsized $800 million issue of split-rated five-year senior notes (Baa3/BB+).

High-yield investors were also eyeing Seagate Technology plc’s split-rated 10-year notes (Baa3/BB+/BBB-), AerCap's 6½% five-year senior notes (Baa3/BBB/BBB-), and a two-part offering (Baa3/BBB-/BBB) in the market from Steel Dynamics, sources said.

Meanwhile, the secondary space continued it upward momentum on Wednesday with buyers outnumbering sellers in the market.

“Things are on fire right now. As soon as something is up for sale, it gets snatched up,” a source said.

While there was good demand for higher quality names in the front end of the curve, new issues continued to dominate the tape.

The onslaught of new paper from Tuesday’s session was active on Wednesday with the majority performing well.

Citgo Petroleum Corp.’s 7% senior notes due 2025 (B3/B+/BB), MGM Growth Properties Operating Partnership LP and MGP Finance Co-Issuer, Inc.’s 4 5/8% senior notes due 2025 (B1/BB-/BB+), Endeavor Energy Resources LP and EER Finance Inc.’s 6 5/8% senior notes due 2025 (B1/BB-/BB+), and Tenet Healthcare Corp.’s 4 5/8% senior notes due 2028 (B1/BB-/B+) were all trading with large premiums in the aftermarket.

While above par, Altice USA Inc.’s two-tranche offering saw little movement.

Wednesday’s session

WPX Energy priced a $500 million issue of eight-year senior notes (B1/BB-/BBB-) at par to yield 5 7/8%.

The deal, which was heard to have been playing to $3 billion of demand late Wednesday morning, priced 12.5 basis points through the 6% to 6¼% price talk. Initial was in the mid 6% area.

TRI Pointe Group priced an upsized $350 million issue of eight-year senior bullet notes (Ba3/BB-) at par to yield 5.7%.

The issue size increased from $300 million.

The yield came through yield talk in the 5 7/8% area. Initial was in the low 6% area.

Crossover accounts were heard to be active in the deal, a trader said.

Meritor priced a $300 million issue of five-year senior notes (B2/BB-/BB-) at par to yield 6¼%.

The yield printed at the tight end of the 6¼% to 6½% yield talk. Initial talk was in the high 6% area.

Core & Main LP priced a $250 million add-on to the CD&R Waterworks Merger Sub, LLC (HD Supply Waterworks, Ltd.) 6 1/8% senior notes due Aug. 15, 2025 at 98.76 to yield 6.407%.

The issue price came on top of price talk.

The add-on notes will become fungible with the existing notes. The fungibility was added after the deal was announced to the market, earlier Wednesday, as a non-fungible add-on.

Split-rated

Service Properties Trust priced an upsized $800 million issue of split-rated five-year senior notes at par to yield 7½%.

The deal, which was upsized from $500 million, was heard to be playing to as much as $7 billion of demand, and soared into the secondary market where the bonds were trading at 104¼ bid, 104¾ offered late Wednesday afternoon, traders said.

The yield printed through yield talk in the 7¾% area. Earlier talk was in the 8% area.

The transaction was run in a collaborative effort by the investment-grade and high-yield syndicates, sources said.

The notes will be traded on the high-yield desk, a trader said.

In addition to the above, high-yield investors were showing some interest in the Seagate Technology split-rated 10-year notes (Baa3/BB+/BBB-), AerCap's 6½% five-year senior notes (Baa3/BBB/BBB-), and a two-part offering (Baa3/BBB-/BBB) in the market from Steel Dynamics, sources said.

European primary

And in England, Virgin Media priced an upsized £500 million of eight-year vendor financing notes (B1/expected B/expected B+) at par to yield 4 7/8% on Wednesday.

The issue size increased from £400 million.

The yield printed at the tight end of yield talk in the 5% area.

The calendar

In the wake of Wednesday's action one deal remained on the active forward calendar.

NMI Holdings, Inc. is in the market with a $300 million offering of five-year senior secured bullet notes (Ba2/BB) expected to price by the end of the week.

Initial guidance has the notes coming to yield in the mid-to-high 8% area

Citgo in focus

Citgo’s 7% senior notes due 2025 were among the most actively traded issues during Wednesday’s session with the notes trading at a steep premium to their issue price.

The 7% notes were marked at 101 5/8 bid, 101 7/8 offered late Wednesday afternoon.

They were changing hands at 101¾ heading into the market close.

There was more than $117 million in reported volume during Wednesday’s session.

While the maker of transportation fuels is from the embattled energy sector, the notes are secured, have a short duration and carry a decent coupon, sources said.

Citgo priced an upsized $1.125 billion issue of the 7% notes at par on Tuesday.

The issue size increased from $750 million

The yield printed at the tight end of the 7% to 7¼% yield talk.

Endeavor Energy outperforms

Endeavor Energy’s 6 5/8% senior notes due 2025 outperformed in the secondary space on Wednesday with the notes climbing to a 102-handle.

The 6 5/8% notes were changing hands at 102½, bid 102¾ offered in the late afternoon. The bonds saw more than $70 million in reported volume.

The oil and gas company is also from the embattled energy sector.

While the notes are unsecured, they are a higher quality credit and the notes carry a “pretty solid” coupon, a source said.

The energy sector has also rallied in recent weeks with WTI crude oil futures back above $35 a barrel.

Endeavor Energy priced an upsized $600 million issue of 6 5/8% five-year senior notes (B1/BB-/BB+) at par to yield 6.622%.

The issue size increased from $500 million.

The yield printed tighter than the 6¾% to 7% yield talk. Initial guidance was in the low 7% area.

MGM Growth trades up

MGM Growth Properties’ 4 5/8% senior notes due 2025 were also putting in a strong performance in the aftermarket.

The notes traded up to a 101-handle and were marked at 101¼ bid, 101½ offered in the late afternoon, a source said.

The notes were active with more than $80 million in reported volume heading into the market close.

The real estate investment trust for properties operated by MGM Resorts International is a good credit with good assets, a market source said.

With the gaming sector on the rebound and names with lesser quality assets starting to catch a bid, the deal was solid with a decent bond structure and price.

“There’s a lot of upside if things snap back to normal,” a source said.

MGM Growth priced an upsized $800 million issue of the 4 5/8% notes at par on Tuesday.

The issue size increased from $500 million.

The yield printed tighter than the 4¾% to 5% yield talk. Initial price talk was in the 5¼% area.

Tenet gains

Tenet Healthcare’s 4 5/8% senior notes due 2028 were also trading with a healthy premium in high-volume activity.

The 4 5/8% notes were wrapped around 101 on Wednesday, a source said.

The notes were strong out of the gate and were marked at par ½ offered, 101 bid soon after pricing on Tuesday.

Tenet priced a $600 million issue of the 4 5/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 4¾% area.

Altice above par

While the majority of deals to price on Tuesday were trading with at least a 101-handle, new paper from Altice USA was stuck on a par-handle.

Altice’s 4 1/8% senior guaranteed notes due 2030 stood poised to close Wednesday at par 3/8, according to a market source.

There was about $80 million in reported volume during Wednesday’s session.

The 4 5/8% senior unsecured notes due 2030 were changing hands in the par to par ½ context throughout Wednesday’s session and stood poised to close the day at par 1/8, sources said.

The bonds saw more than $28 million in reported volume.

Altice has a huge and complicated capital structure and “in general is a different kind of issuer,” a source said.

Altice USA priced a $1.725 billion two-tranche offering on Tuesday.

The deal included a $1.1 billion tranche of the senior guaranteed 4 1/8% notes and a $625 million tranche of the 4 5/8% senior unsecured notes, both of which priced at par.

The 4 1/8% notes printed at the tight end of yield talk in the 4¼% area.

The 4 5/8% notes printed at the tight end of yield talk in the 4¾% area.

$2.5 billion Tuesday inflows

For the second consecutive day cash inflows into the dedicated high-yield bond funds topped $2 billion, according to a market source.

The combined funds had $2.5 billion of inflows on Tuesday, following Monday's $2.03 billion of inflows.

High-yield ETFs had $1.78 billion of inflows on Tuesday.

Actively managed high yield funds had $790 million of inflows on the day, the source said.

With Wednesday's fund flow numbers remaining to be calculated the combined funds were already tracking a mammoth $5.75 billion of net inflows for the week to Wednesday's close.

Should that figure materialize – and it will almost certainly be higher – it would represent the fourth weekly inflow in the past 10 weeks to number among the five highest weekly inflows on record, the market source said.

Indexes gains continue

Indexes continued their upward momentum on Wednesday.

The KDP High Yield Daily index gained 60 basis points to close Wednesday at 65.96 with the yield now 6.33%.

The index was up 41 bps on Tuesday and 11 bps on Monday.

The ICE BofAML US High Yield index gained 96.7 bps with the year-to-date return now negative 3.715%.

The index was up 73.7 bps on Tuesday and 29.4 bps on Monday.

The CDX High Yield 30 index gained 94 bps to close Wednesday at 101.68. The index was up 139 bps on Tuesday and jumped 106 bps on Monday.

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