United megadeal a ‘blowout’; primary prices $3.65 billion; TransDigm lags

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 13 – Four dollar-denominated high-yield tranches from four issuers, totaling $3.65 billion, priced on Tuesday, as news volume in the primary market continued to be heavy.

Meanwhile, the secondary space was largely unchanged on Tuesday with inflationary data doing little to rattle investors.

New paper continued to dominate the tape although the deals to price during Monday’s session had a lackluster reception in the aftermarket.

TransDigm Inc.’s 4 7/8% senior subordinated notes due 2029 (B3/B-) were lagging their issue price in intraday activity, although they stood poised to close the day flat.

Midwest Gaming Borrower LLC’s 4 7/8% senior secured notes due 2029 (B3/B+) started the day flat although they improved as the session progressed.

Outside of recent issues, Telesat’s 6½% senior notes due 2027 were trading off on the heels of the company’s latest offering.

Tuesday

Altice France SA (B2/B) priced the session's biggest tranche, a $2.5 billion amount of 5 1/8% eight-year senior secured notes, that came at par.

And they went no place special, according to traders who had them par bid, par ¼ offered, and later par ¼ bid, par ½ offered, agreeing in general that the deal was “priced to perfection,” which was reflected in lackluster trading.

The telecom also priced €400 million of 4% notes, in the same pass at the market.

Telesat LLC priced a $500 million issue of 5 5/8% senior secured notes due Dec. 6, 2026 (B1/BB-) at par, slightly inside of talk, in a deal heard to have been playing to $1.8 billion of demand early Tuesday afternoon.

Also CrownRock LP priced a $400 million issue of 5% eight-year senior notes (B2/BB-) at par, 12.5 basis points inside talk, playing to a book heard to be around three-times oversubscribed.

Ready for liftoff

Meanwhile on Tuesday United Airlines (UAL) set price talk and moved up timing on a $5.5 billion two-part bullet megadeal that market sources are characterizing as a massive blowout.

The announced senior secured notes offer (Ba1/BB-/BB), now on deck to price Wednesday, is heard to be playing to demand amounting to as much as five-times deal-size, implying a book bursting with orders edging toward the $30 billion mark, sources say.

And the active forward calendar grew apace (see related stories in this issue).

Looking up the track for blocking signals that might slow the high-balling high-yield train, sources strained their eyes far into the distance on Tuesday.

The sentiment, roundabout, was that the new deal machine will continue to crank hard.

“We're two- to three weeks ahead of an earnings blackout,” a trader noted.

On a longer timeline, the Fed continues to signal that it will remain dovish, the source added.

We may not see any increases in interest rates before 2022.

And there is a feeling that as many as four rate hikes in the run-up to 2023 are already priced in.

TransDigm lags

TransDigm’s 4 7/8% senior subordinated notes due 2029 were lagging their issue price in intraday activity, although they stood poised to close the day flat.

The 4 7/8% notes traded as low as 99 5/8 during the session.

However, they stood poised to close the day at par.

There was more than $60.75 million in reported volume heading into the market close.

While the notes priced at the wide end of talk, it was still too tight for the credit, a source said.

The aerospace manufacturer priced a $750 million issue of the 4 7/8% notes at par on Monday.

Pricing came at the wide end of the 4¾% to 4 7/8% yield talk but tight to initial guidance in the 5% area.

Midwest Gaming improves

While Midwest Gaming’s 4 7/8% senior secured notes due 2029 started the day flat, the notes improved as the session progressed.

The 4 7/8% notes were wrapped around par early in the session.

However, they were changing hands in the par 3/8 to par 5/8 context heading into the market close, a source said.

The notes were in focus with more than $83 million on the tape.

Midwest Gaming priced a $750 million issue of the 4 7/8% notes at par on Monday.

Pricing came in the middle of yield talk in the 4 7/8% area.

Telesat drops

Telesat’s 6½% senior notes due 2027 dropped almost 3 points in active trading after the company announced a new offering of secured debt.

The 6½% notes dropped down to a 98-handle in active trading and stood poised to close the day at 98¼.

There was about $18 million in reported volume.

The 6½% notes closed Monday at 101 1/8, a source said.

The 6½% notes were under pressure with Telesat’s latest offering burying it in the capital structure, the source said.

The 6½% notes are unsecured and have a longer maturity than the satellite broadcaster’s newly priced long-five-year senior secured notes.

Monday fund flows

High-yield ETFs sustained a hefty $819 million of outflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds, however, were squarely in the green, posting $305 million of inflows on the day.

The combined funds are tracking $543 million of net outflows in the week that will conclude with Wednesday's close, the market source said.

Indexes mixed

Indexes were mixed on Tuesday after starting the week on soft footing.

The KDP High Yield Daily index shaved off 3 points to close Tuesday at 69.51 with the yield now 3.96%.

The index was down 6 points on Monday.

The CDX High Yield 30 index rose 7 bps to close Tuesday at 109.59.

The index was down 12 bps on Monday.

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