Primary prices $3.24 billion in 5 tranches; NRG on tap; risk-on in secondary; Tenneco gains continue

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 16 – The high-yield primary market generated a heavy news flow on Monday with four issuers pricing five junk-rated, dollar-denominated tranches with a combined face amount of $3.24 billion.

Hilton Worldwide Holdings Inc., Rackspace Technology Global Inc., GFL Environmental, Inc. and Meritor Inc. all priced drive-by offerings.

NRG Energy, Inc. plans to price $3.83 billion of debt securities in five tranches on Tuesday, which will include $1.465 billion of junk-rated notes.

Meanwhile, it was another risk-on day in the secondary space as positive data from Moderna’s Covid-19 vaccine clinical trial pushed the overall market higher.

The cash bond market was up ½ to ¾ point as the Dow Jones industrial average and S&P 500 closed at record highs.

However, in contrast to last Monday when Pfizer announced positive results from its vaccine trial, buying fervor in the secondary space was subdued.

The relatively light volume in the space was partly attributed to the active calendar of new issuance, which accounts were waiting for, and, partly, due to a clearer picture related to the vaccine’s timeline, a source said.

With several drive-by deals set to price later in the afternoon, “new issues are the focus,” a source said.

Several recent deals continued to trade up alongside the broader market.

Tenneco Inc.’s 7 7/8% senior secured notes due 2029 (Ba3/B/BB) remained in demand with the note’s upward momentum continuing.

While volume was light, Tervita Corp.’s 11% senior secured second-lien notes due 2025 (B3/CCC+) were trading above their discounted issue price.

Stericycle Inc.’s 3 7/8% senior notes due 2029 (BB-/BB) remained active with the notes again on the rise alongside the broader market.

Monday’s primary

The high-yield primary market generated a heavy news flow on Monday.

Four issuers brought a combined five junk-rated, dollar-denominated tranches with a combined face amount of $3.24 billion.

All four issuers appeared at the drive-through window.

Two of the four upsized their deals.

Executions tended to be scorching, with three of the four issuers pricing their deals inside of talk.

Hilton Worldwide Holdings, which brought the two-part deal, priced both tranches at the wide ends of talk.

The deal in question, an upsized $1.9 billion amount (from $1 billion) of senior notes (Ba2/BB) featured $800 million of 3 ¾% 8.5-year notes and $1.1 billion of 4% 10.5-year notes, both coming at par.

Demand for the Hilton paper built rapidly, according to a trader who added that by mid-to-late morning demand for both tranches was already approaching their final sizes.

Rackspace Technology Global priced a $550 million issue of 5 3/8% eight-year senior notes (Caa1/B-) 12.5 basis points inside of talk.

Early on the Rackspace book was also heard to be in good shape, the trader said.

GFL Environmental priced an upsized $500 million issue (from $400 million) of 4% eight-year senior notes (B3/B-) at 99.171 to yield 4 1/8%, 12.5 bps inside of talk.

And Meritor priced a $275 million issue of 4½% eight-year senior notes (B1/BB-/BB-) 25 bps inside of talk.

Meritor was playing to at least $650 million of orders, a trader said.

NRG on tap

NRG Energy showed up with $3.83 billion of debt securities in five tranches, which it expects to price on Tuesday.

The high-yield portion of the deal features $1.465 billion of senior notes (expected ratings Ba2/BB+) in two tranches. A tranche of 10.25-year notes is whispered at 4%, and a tranche of 8.25-year notes is whispered 25 bps inside of the 10.25-year notes.

NRG is concurrently bringing investment grade secured notes and a private placement (see related stories in this issue).

Tenneco on a tear

Tenneco’s 7 7/8% senior secured notes due 2029 continued to gain in active trading on Monday following last Friday’s blowout that saw the deals bid up 4 to 5 points on the break.

The 7 7/8% notes rose to a 105-handle and were marked at 105 bid, 105½ offered, a source said.

They closed out last Friday at 104½ bid, 105 offered.

“With a 7 7/8% coupon, they’re getting snapped up,” a source said.

The notes carried a large yield for secured paper and Tenneco is a solid credit, the source said.

The vehicle parts manufacturer priced a $500 million issue of the 7 7/8% notes at par on Friday.

The yield printed at the tight end of final talk for a yield of 7 7/8% to 8%. Talk tightened from earlier talk in the 8¼% area.

Initial guidance placed in the notes in the high 8% area.

The deal was heard to have played to $4 billion in orders.

Tervita at a premium

While volume in the name was light, Tervita’s 11% senior secured second-lien notes due 2025 were trading at a premium to their discounted offer price.

The notes were seen changing hands in the 99¾ to par ½ context during Monday’s session, a source said.

However, there was only $5 million in reported volume.

While the yield on the notes was hefty, the notes did not play to strong demand in the primary or secondary markets.

“People are being cautious when it comes to triple Cs,” a source said. “Most accounts are avoiding lower quality paper.”

Tervita priced a $500 million issue of the 11% notes at 99 to yield 11.53% on Friday.

The yield printed more than 40 bps beyond the wide end of yield talk in the 11% area.

Earlier guidance was for a yield in the 10% area.

Stericycle gains

Stericycle’s 3 7/8% senior notes due 2029 continued to gain in active trading on Monday.

After closing out last Friday wrapped around 102, the notes were trading in the 102¼ to 103¼ context on Monday.

The recent issue from the medical waste disposal company was on the rise alongside the broader market.

With the company a solid double B credit, the notes have performed well since pricing at par on Nov. 9.

They quickly rose to 102, which is where they have largely remained.

There is plenty of money to put to work in the market and solid B and BB credits have been in demand, a source said.

$196 million Friday inflows

The dedicated high-yield bond fund saw $196 million of net inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $219 million of inflows on the day.

However actively managed high-yield funds sustained $25 million of outflows on Friday, the source said.

Indexes rise

Indexes continued to gain on Monday after all closed the previous week with cumulative gains.

The KDP High Yield Daily index gained 14 points to close Monday at 67.51 with the yield now 5.07%.

The index posted a cumulative gain of 20 points on the week last week.

The ICE BofAML US High Yield index again blew past 3% year-to-date returns on Monday.

The index gained 36.6 bps on Monday with the year-to-date return now 3.13%.

The index posted a cumulative gain of 47.2 bps on the week last week.

The index initially shot past the 3% threshold last Monday following news of Pfizer’s Covid-19 vaccine clinical trial.

However, the index gave back some of its gains as the week progressed and closed out last week on a 2-handle.

The index was brushing up against negative returns as recently as two weeks ago.

The CDX High Yield 30 index rose 75 bps to close Monday at 107.87.

The index posted a cumulative gain of 113 bps on the week last week.

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