Ball, Spirit Airlines price; Spirit Aero outpaces; Nielsen; Coinbase’s junk bonds suffer

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 9 – Drive-by issuers Ball Corp. and Spirit Airlines, Inc. priced new paper in the junk bond market on Wednesday.

Meanwhile, it was a heavy day in the secondary space with the cash bond market down ½ to ¾ point as the meltdown in crypto dragged down broader markets.

News that crypto exchange Binance was walking away from its acquisition of FTX “hit the whole market going out,” a source said.

However, despite the rough tape, new and recent deals were performing well in secondary activity.

Spirit AeroSystems Inc.’s new 9 3/8% senior secured first-lien notes due 2029 (Ba2/BB-) outperformed on Wednesday with the notes rising to a 101-handle as the broader market fell.

While the notes closed well off the high of the day, Neptune BidCo US Inc./Nielsen Holdings plc’s 9.29% senior secured notes due 2029 (B2/B/BB) maintained a premium to their heavily discounted issue price.

DISH Network Corp.’s 11¾% senior secured notes due 2027 (Ba3/B+) were largely unchanged in active trading with the notes also holding above their discounted issue price.

Outside of new paper, Coinbase Global, Inc.’s senior notes (Ba2/BB) continued their downfall as FTX’s demise cast doubt over the crypto exchange’s future.

$1.35 billion drives by

Two drive-by issuers issued a total face amount of $1.35 billion in Wednesday's primary market.

Ball Corp. priced a $750 million issue of 6 7/8% long five-year senior notes (Ba1/BB+) at par to yield 6.879%, near the tight end of yield talk in the 7% area.

Late Wednesday the notes were heavily offered (no buyers), trading at 99¾ bid, par 1/8 offered, according to a sellside source who reported hearing that the deal played to around $3 billion of demand.

And Spirit Airlines, Inc. priced an upsized $600 million issue (from $500 million) of notes, mirroring the Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd. 8% senior secured first-lien notes due Sept. 20, 2025 (Ba2//BB+), at 98.5 to yield 8.599%.

The issue price came at the rich end of the 97.5 to 98.5 price talk.

The notes were wrapped around 99 in active trading at Wednesday's close, according to a sellside source who added that demand was heard to be around $1.5 billion.

In the wake of those two deals one offering remained on the active forward calendar at Wednesday's close.

Pegasus Merger Co./Tenneco Inc. is attempting to place $1 billion of six-year senior secured notes (B2/B-), in the market with early guidance specifying a coupon of 8% at a discount to yield 12%, and expected to price before the end of the week.

There has been no news since last week on the deal to fund the buyout of Tenneco by Apollo. And market sources, pointing to the fact that the buyout deal was struck before the ravages of inflation and geopolitical turbulence came into full force in the capital markets, are saying that the bond offer has hit headwinds.

While the market awaits news on the Pegasus/Tenneco offer, early November has unmistakably seen a vigorous reactivation of the new issue bourse, sources say.

The figures bear that out.

Issuance thus far in the Nov. 7 week comes to $6.01 billion.

With one session remaining to play out ahead of the extended holiday weekend, the present week's issuance already represents the biggest issuance weekly total to clear the market since the week that began on May 30, which saw $6.55 billion.

Should the primary market remain open there is a $100 billion pipeline of new issue business, according to a bond trader who specified that, even if market conditions remain optimal, not all of that business will necessarily materialize before the end of 2022.

Issuance for the year 2022, $104.6 billion to Wednesday's close, remains anemic in the extreme, compared to the gargantuan totals posted during the 2010 to 2020 era.

Spirit AeroSystems takes off

Spirit AeroSystem’s 9 3/8% senior secured first-lien notes due 2029 outperformed on Wednesday with the notes rising to a 101-handle as the broader market fell.

The 9 3/8% notes were changing hands in the 101¼ to 101¾ context heading into the market close.

The notes offered a chunky yield for first-lien secured notes, a source said.

“That’s pretty secure paper,” a source said. “It’s a pretty good port in a storm compared to everything else going on.”

In a deal that was heard to be 3x to 4x oversubscribed, Spirit AeroSystems priced an upsized $900 million, from $800 million, issue of the 9 3/8% notes at par.

The yield printed at the tight end of talk.

However, the notes priced well wide of the BB index, which was trading with a yield of about 7½%.

Nielsen at a premium

Nielsen’s 9.29% senior secured notes due 2029 were putting in a solid secondary market performance on Wednesday despite the rough tape.

While the notes closed off highs of the day, they maintained a premium to their discounted issue price.

The 9.29% notes traded up to a 93-handle and were changing hands in the 93¼ to 93½ context in early trade.

However, the notes gave back much of their gains and were wrapped around 92½ at the market close, a source said.

Neptune BidCo priced a $1.96 billion issue of 9.29% senior secured notes due 2029 (B2/B/BB) at 92.294 to yield 11% on Tuesday.

The issue price came rich to the 91.23 to 92.29 price talk and the yield printed at the tight end of the 11% to 11¼% yield talk.

The deal was the latest leveraged buyout transaction to price with proceeds backing the buyout of Nielsen Holdings.

DISH holds

DISH’s recently priced 11¾% senior secured notes due 2027 held their ground on Wednesday with the notes relatively unchanged as the broader market fell.

The 11¾% notes remained in the 98½ to 99 context.

While the deal played to tepid demand during bookbuilding, the notes were cheap and were expected to hold up well in secondary market activity.

DISH priced a $2 billion issue of the 11¾% notes at 98.171 to yield 12¼% on Monday.

Coinbase falls

Coinbase’s senior guaranteed notes continued to fall on Wednesday as investors fled cryptocurrencies amid continued carnage in Bitcoin surrounding crypto exchange FTX’s collapse.

Coinbase’s 3 3/8% senior notes due 2028 sank another 3 points to close Wednesday at 55 with the yield now 15¼%.

The notes have fallen about 8 points in two sessions.

Coinbase’s 3 5/8% senior notes due 2031 fell another 2 points to close the day on a 50-handle with the yield about 13 3/8%.

The notes have sunk 7 points over the past two session.

The carnage in Bitcoin continued on Wednesday with the digital currency falling another 12% to a new 52-week low of $16,074.49 shortly after the close of U.S. equity markets.

News broke late in the day that Binance was walking away from its acquisition of FTX, a deal struck on Tuesday to help FTX through a liquidity crunch.

Binance stated that upon due diligence the problems at FTX were beyond its ability to help.

The announcement sent further shockwaves through markets already reeling from FTX’s sudden collapse.

FTX’s sudden demise has cast doubt over Coinbase’s future, a source said.

Fund flows

Actively managed high-yield funds sustained $159 million of daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs were positive on the day, posting $49 million of inflows on Tuesday, the source said.

The combined funds are tracking $1.4 billion of net inflows for the week that concludes with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index fell 26 points to close Wednesday at 50.71 with the yield now 8%.

The index shaved off 1 point on Tuesday after rising 7 points on Monday.

The ICE BofAML US High Yield index fell 52 basis points with the year-to-date return now negative 13.455%.

The index shaved off 1.1 bps on Tuesday after rising 11.4 bps on Monday.

The CDX High Yield 30 index sank 84 bps to close Wednesday at 98.43.

The index was down 17 bps on Tuesday after gaining 33 bps on Monday.

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