D&B, Studio City on tap; Altice, Lions Gate, Tenet improve; Western Digital jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 25 – After a flurry of activity that saw $7 billion price in eight deals earlier in the week, the high-yield primary market took a breather on Friday.

However, the activity is expected to resume in the coming week with $2.2 billion on the active forward calendar.

Dun & Bradstreet Corp. is expected to price its $1.35 billion two-tranche offering and Studio City Co. Ltd. is expected to price its $425 million offering of five-year senior notes.

Meanwhile, the secondary space was firm on Friday with the overall market up ¼ point, a market source said.

The new paper continued to dominate activity in the secondary space with the deals to price during Thursday’s session trading at a premium to their issue price.

Altice USA Inc.’s 6½% senior notes due 2029 (Ba2/BB-) dominated activity with the notes trading up to 1 point above their issue price.

Lions Gate Capital Holdings LLC’s 6 3/8% senior notes due 2024 (B2/B) were also active with the notes also trading at a premium to their issue price.

Paper that priced in the past week remained major volume movers in the secondary space, although most were little changed from their previous levels.

Tenet Healthcare Corp.’s 6¼% senior notes due 2027 continued to improve in secondary trading with the notes now trading at a slight premium to their issue price.

Outside of the new paper, Western Digital Corp.’s split-rated 4¾% senior notes due 2026 (Baa3/BB+) jumped in active trading despite an earnings miss.

A breather

The revived new issue market which cranked out a $7 billion burst of issuance during the holiday-abbreviated week that began Tuesday, after spending late November through mid-January in a persistent vegetative state, took a breather on Friday.

The January-February crossover week gets underway with a $2.2 billion active forward calendar.

It includes the Dun & Bradstreet two-part buyout deal: $500 million of 7.5-year senior secured notes (expected ratings B2/B/BB) via lead left bookrunner BofA Merrill Lynch with initial price talk in the 7% area and $850 million of eight-year senior unsecured notes (expected ratings Caa2/CCC/B-) via lead left bookrunner Citigroup Global Markets Inc. with initial talk in the 10¼% to 10½% area.

Also, Studio City Co. is selling $425 million of five-year senior notes (B+) via Deutsche Bank Securities Inc. Initial talk is in the mid to high 7% area.

Altice dominates

Altice USA’s new 6½% senior notes due 2029 dominated activity in the secondary space with the notes trading at a premium to their issue price.

The 6½% notes were quoted at par ¾ bid, par 7/8 offered in the midafternoon. They were trading in a range of par 7/8 to 101 shortly before the market close, according to a market source.

More than $203 million of the bonds were on the tape by the late afternoon.

Altice USA priced an upsized $1.5 billion issue of the 6½% notes at par in a Thursday drive-by.

The issue size increased from $1 billion.

The yield printed at the tight end of the 6½% to 6¾% yield talk, which came toward the wide end of initial guidance in the mid-6% area.

Lions Gate trades up

Lions Gate’s 6 3/8% senior notes due 2024 were also trading at a premium to their issue price in the secondary space.

The notes were quoted at par ¼ bid, par ¾ offered in the midafternoon, according to a market source.

The notes continued to gain strength into the afternoon and were trading between par ½ and par 5/8 shortly before the market close, a market source said.

More than $48 million of the bonds were on the tape by the late afternoon.

Lions Gate priced an upsized $550 million issue of the 6 3/8% notes at par in a Thursday drive-by.

The deal size increased from $400 million.

The yield printed at the tight end of yield talk in the 6½% area and tighter than initial talk in the 6½% to 6¾% area.

Tenet improves

Tenet Healthcare’s 6¼% notes due 2027 continued to improve in active trading on Friday. The notes gained another ¼ point to close Friday at par 3/8, according to a market source.

More than $26 million of the bonds changed hands during Friday’s session.

The notes have largely been wrapped around par in the secondary space after briefly dipping below par on Wednesday.

Tenet Healthcare priced an upsized $1.5 billion issue of the 6¼% notes at par in a Tuesday drive-by.

Western Digital jumps

Western Digital’s 4¾% senior notes due 2026 jumped in active trading on Friday, despite an earnings miss.

The 4¾% notes gained 2 points to close Friday at 91, a market source said. More than $36 million of the bonds changed hands during Friday’s session.

Western Digital reported non-GAAP earnings per share of $1.45, which fell short of analyst expectations for earnings per share of $1.49.

Revenue also missed with a reported $4.23 billion in the second quarter versus analyst expectations for revenue of $4.25 billion.

However, the jump in the notes was due to the company’s expectation of increased revenue in the second half of the year.

The fundamentals of the company were looking stronger, a market source said.

Mixed Thursday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, according to a trader.

High-yield ETFs sustained $299 million of outflows on the day.

However actively managed high-yield funds saw $30 million of inflows on Thursday, the trader said.

News of Thursday's daily flows trails a Thursday afternoon report that the combined junk bond funds sustained $264 million of outflows in the four-session, holiday-shortened week to Wednesday's close, according to Lipper US Fund Flows.

Indexes gain

Indexes posted gains on Friday, a strong day for the market. However, indexes were mixed on the week with some seeing a cumulative gain and others posting losses.

The KDP High Yield Daily index gained 2 basis points to close Friday at 68.80 with the yield now 6.48%.

The index gained 2 bps on Thursday after dropping 6 bps on Wednesday and 10 bps on Tuesday.

The index was down 12 bps on the week.

The ICE BofAML US High Yield index rose 25.7 bps with the year-to-date return now 3.905%. The index was down 5.3 bps on Thursday, 2.6 bps on Wednesday and 19.3 bps on Tuesday.

The index was down a cumulative 1.5 bps on the week.

After closing 2018 with a year-to-date return of negative 2.265%, the index catapulted past 3% returns in the first two weeks of 2019.

The CDX High Yield 30 index rose 41 bps to close Friday at 105.14. The index gained 42 bps on Thursday and 12 bps on Wednesday after a 59 bps drop on Tuesday.

The index saw a cumulative gain of 36 bps on the week.

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