QVC, Innophos, Arconic join forward calendar; Delphi skyrockets on buyout; recent deals rebound

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 28 – While no deals cleared the market on Tuesday, the domestic high-yield primary market’s forward calendar continued to grow with three issuers starting roadshows.

Arconic Inc. is on the road with a $400 million offering of eight-year second lien secured notes, Innophos Holdings Inc. is marketing a $300 million offering of eight-year senior notes (Caa1/B-), and QVC, Inc. is marketing a $500 million split-rated offering of seven-year senior bullet notes (existing Ba2/existing BBB-/confirmed BBB-).

Meanwhile, the secondary space firmed on Tuesday as the market recovered from a sell-off on Monday sparked by growing concern over the coronavirus.

Delphi Technologies plc’s 5% senior notes due 2025 skyrocketed in high-volume activity following news BorgWarner would buy out the auto-parts maker.

Several names were on the rebound on Tuesday following Monday’s sell-off.

Station Casinos LLC’s 4½% senior notes due 2028 (B3/B-), Navient Corp.’s 5% senior notes due 2027 (Ba3/B+/BB) and Altice’s new 6% senior notes due 2028 (Caa1/CCC+) all popped back above par.

Albertsons Cos. Inc.’s 4 7/8% senior notes due 2030 also rebounded after Monday’s sell-off with the notes hitting their highest level since pricing.

Superior Energy Services Inc.’s 7 1/8% senior notes due 2021 jumped following news the company had amended its exchange offer for the notes.

Calendar builds

The Tuesday session failed to generate issuance.

However, the market regained its legs, somewhat, trailing a Monday session that saw 31 basis points of widening in the high yield index, the biggest such move since last August, according to a market source.

The coronavirus news was apparently causing people to pare risk positions, the source said.

The Tuesday primary market session did see a buildup in the active forward calendar.

Arconic started a roadshow on Monday in New York for a $400 million offering of eight-year second-lien secured notes.

Initial guidance has the deal, which is scheduled to price on Feb. 6, coming to yield in the low 7% area.

Innophos Holdings started a roadshow on Tuesday for a $300 million offering of eight-year senior notes (Caa1/B-).

Early whisper has the deal coming with a nine-handle yield.

Pricing is set for Feb. 5.

In the crossover market, QVC started a roadshow on Tuesday for a $500 million split-rated offering of seven-year senior bullet notes (existing Ba2/existing BBB-/confirmed BBB-).

The deal, which is coming in a high-yield execution set to price late this week, comes with early guidance in the 5¼% area.

Delphi skyrockets

Delphi Technologies’ 5% senior notes due 2025 were in focus on Tuesday with the notes skyrocketing more than 25 point in the high-volume activity.

The 5% notes traded as high as 111½ during Tuesday’s session but stood poised to close the day at 110.

With more than $100 million in reported volume, the notes dominated activity in the secondary space.

The 5% notes were trading in the mid-80s on Monday, a market source said.

The notes saw a meteoric rise following news BorgWarner Inc. would acquire Delphi in an all-stock transaction that values Delphi at $3.3 billion.

BorgWarner, an Auburn Hills, Mich.-based automotive and industry components and parts supplier, bought out Delphi in a move to position itself as a leading parts supplier to an automotive industry that is shifting to hybrid and electric vehicles, a source said.

BorgWarner is an investment grade company.

Moody’s Investors Service downgraded Delphi last week due to the company’s elevated leverage.

BorgWarner expects a 2019 gross debt to adjusted EBITDA ratio of 1.6x at the closing of the deal, according to a company news release.

The acquisition is expected to close in the second half of 2020.

Rebound

With markets firm as fear of the coronavirus waned, several names were on the rebound on Tuesday.

Station Casinos’ recently priced 4½% senior notes due 2028 popped back above par after sinking below during Monday’s session.

The notes were up about 3/8 point and stood poised to close the day at par ¼, according to a market source.

More than $22 million of the bonds were on the tape by the late afternoon.

Station Casinos priced an upsized $750 million issue of the 4½% notes at par last Friday.

Navient’s 5% senior notes due 2027 also regained their premium in active trading.

The notes rose a little over 1 point to close the day at par ¼. They closed out Monday just shy of 99.

The notes saw a strong break after pricing at par on Jan. 23 but quickly lost steam and closed out last week just shy of par.

Altice’s 6% senior notes due 2028 also jumped back above par after trading on a 99 handle during Monday’s session.

The 6% notes stood poised to close Tuesday at par 1/8. The notes were second only to Delphi Technologies on the volume chart with $40 million in reported volume by the late afternoon.

Altice priced a $1,225,000,000 tranche of the 6% notes at par on Jan. 23 as part of a €2.9 billion equivalent three-tranche megadeal.

While the notes traded up after breaking for trade, they closed out last week below par.

Albertsons’ new heights

After tumbling back down to par on Monday, Albertsons’ 4 7/8% senior notes due 2030 regained their strength and traded up to a new high on Tuesday.

The 4 7/8% notes gained ¾ point and closed out Tuesday at 102¼, their highest level since pricing.

The new height comes after Monday’s sell-off where the notes lost most of their premium and traded as low as par before closing the day at 101½.

Albertsons priced a $1 billion tranche of the 4 7/8% notes at par on Jan. 22 as part of a $2.35 billion three-tranche megadeal.

Superior Energy’s amendment

Superior Energy’s 7 1/8% notes due 2021 jumped in active trading following news the company had reached an agreement to amend its exchange offer for the notes.

The notes were up more than 5 points to close the day at 87¾, according to a market source.

Superior Energy announced Monday evening that it had reached an agreement with some holders of the 7 1/8% notes to raise the amount accepted in the exchange and increase the interest rate on the notes offered in the exchange, amongst other conditions.

Under the terms of the new agreement, the company will exchange up to $635 million of the $800 million outstanding of the 7 1/8% notes.

The notes will be exchanged for $250 million of new senior second lien secured notes issued by Spieth Newco Inc., which will bear interest of 9¾%, $250 million of new senior second lien secured notes to be issued by SESI, which will bear interest of 8¾%, and $141.35 million in cash, according to a company news release.

Funds see $625 million Monday outflows

The dedicated high-yield bond funds sustained a hefty $625 million of outflows on Monday, the most recent session for which data was available at press time, according to a market source.

The breakdown had the high-yield ETFs see $385 million of outflows on the day, following record daily outflows of $1.73 billion last Friday (the previous record daily outflow was $1.61 billion on Oct 9, 2018).

Actively managed high-yield funds sustained $240 million of outflows on Monday, the source said.

With three of the present week's five sessions in the tally, the combined funds are tracking $2.26 billion of net outflows for the week that will conclude with Wednesday's close, the market source added.

Indexes rebound

Indexes were on the rise on Tuesday after launching the week with losses.

The KDP High Yield Daily index rose 3 points to close Tuesday at 71.32 with the yield now 5.12%.

The index sank 34 bps on Monday.

The ICE BofAML US High Yield index popped back to the green on Tuesday after dropping into negative territory the previous session.

The index gained 39.9 bps with the year-to-date return now 0.113%. The index plunged 61.9 bps on Monday.

The CDX High Yield 30 index jumped 63 bps to close Tuesday at 108.77. The index tumbled 70 bps on Monday.

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