E.W. Scripps prices; TPC joins calendar; Horizon, MTS gain; Olin improves; Masonite lags

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 12 – The domestic high-yield market rounded out the week with one deal pricing and another joining the forward calendar.

In a significantly oversubscribed offering, E.W. Scripps Co. priced an upsized $500 million issue of eight-year senior notes (B3/B-/B) at par to yield 5 7/8%.

TPC Group Inc. announced plans to roll out a $930 million offering of five-year senior secured notes (expected ratings B2/B/B-) on a Monday investor conference call.

TPC joins a growing calendar that includes Sinclair Broadcast Group Inc.’s $4.88 billion megadeal and Aberdeen-based Ithaca Energy Ltd.’s $700 million offering of five-year senior notes (B3/B/B+).

Meanwhile, new paper was in focus in the secondary space although their performance remained mixed.

MTS Systems Corp.’s 5¾% senior notes due 2027 (B3/B+) continued to post gains in the secondary space.

Horizon Pharma USA, Inc.’s 5½% senior notes due 2027 (B1/B+) were also trading at a large premium to their issue price.

After a lackluster start in the secondary space, Olin Corp.’s 5 5/8% senior notes due 2029 (Ba1/BB+) saw slight improvement and were wrapped around par on Friday.

However, Masonite International Corp.’s 5 3/8% senior notes due 2028 (Ba3/BB+) weakened on Friday with the notes at times lagging their issue price.

E.W. Scripps upsized and tight

E.W. Scripps crossed the finish line commendably on Friday.

The Cincinnati-based broadcasting and digital media company priced an upsized $500 million issue of eight-year senior notes (B3/B-/B) at par to yield 5 7/8%.

The issue size was increased from $400 million.

The yield printed at the tight end of yield talk in the 6% area.

The deal, to help fund the acquisition of TV stations from the Nexstar Media Group Inc./Tribune Media merger divestitures and repay debt, was heard to be playing to $1.9 billion of orders on Thursday, at initial guidance in the low-to-mid 6% area, according to an investor.

Morgan Stanley & Co. LLC, Wells Fargo Securities LLC, SunTrust Robinson Humphrey Inc., BofA Securities Inc., Fifth Third Securities Inc., PNC Capital Markets LLC and U.S. Bancorp Investments Inc. were the joint bookrunners.

Hot market, but..

Conceding that the capital markets are staging a vigorous rally, with junk riding along in the slipstream, an investor said that it is an unloved rally.

Abiding by the maxim “Don't fight the Fed,” the investor, speaking on background, professed 100% certainty that the Federal Open Market Committee (FOMC) will produce a 25 basis points cut in its benchmark Fed Funds rate, when the committee meets late this month.

It's what's generating that expected cut that's troubling, the investor said.

Federal Reserve chairman Jerome Powell told Congress during the past week that inflation has been running below the FOMC's 2% target, while expressing concerns about trade tensions and global growth.

And while an expected cut in interest rates has increased risk appetites, economic fundamentals have been prompting those considering the riskiest assets toward caution.

Trucking surveys are down, consumer confidence is declining and capital expenditures have been declining, the investor said.

What the economy in the United States, and beyond, needs is some clarity in the ongoing trade skirmishes, especially between China and the United States, the source asserted.

The week ahead

The July 15 week will get underway to a decent announced calendar of junk offerings.

On Friday, TPC Group announced plans to roll out a $930 million offering of five-year senior secured notes (expected ratings B2/B/B-) on a Monday investor conference call.

The debt refinancing deal is set to conduct a roadshow through the July 15 week.

BofA Securities Inc., Citigroup Global Markets Inc., Wells Fargo Securities LLC, Deutsche Bank Securities Inc. and Goldman Sachs & Co. LLC are the joint bookrunners.

TPC Group joins Sinclair Broadcast Group, on the high-yield road with a $4,875,000,000 two-part offering of notes in secured and unsecured tranches.

Issuing via its indirect, wholly owned subsidiaries Diamond Sports Group LLC and Diamond Sports Finance Co., the Baltimore-based broadcaster plans to place $2.55 billion of seven-year senior secured notes (Ba2) with initial guidance of 6% to 6¼%, and $2,325,000,000 of eight-year senior unsecured notes (B2) with initial talk of 7¼% to 7½%.

The roadshow wraps up on July 18.

Also, Aberdeen-based Ithaca Energy is doing a roadshow for a $700 million offering of five-year senior notes (B3/B/B+) with initial guidance in the 10% area.

MTS gains again

MTS System’s newly priced 5¾% senior notes due 2027 continued to post gains in the secondary space.

The notes were seen at 101 7/8 bid, 102¼ offered on Friday, sources said.

They were continuing to post gains after a strong start on Thursday.

The notes quickly jumped to 101 5/8 bid, 101 7/8 offered after breaking for trade.

MTS Systems priced an upsized $350 million issue of the 5¾% notes at par on Thursday.

The yield printed on the low end of final yield talk in the 6% area.

The deal was upsized to $350 million from $300 million.

Horizon Pharma at a premium

Horizon Pharma’s 5½% senior notes due 2027 were trading at a large premium to their issue price on Friday.

The notes were seen at par ¾ bid early in the session by one source.

Another source pegged the notes at par 7/8 bid, 101¼ offered.

Horizon Pharma priced an upsized $600 million issue of the 5½% notes at par on Thursday.

The yield printed in the middle of yield talk in the 5½% area and at the tight end of initial guidance in the 5 5/8% area.

The deal size was increased from $500 million.

Olin improves

After a lackluster start in the secondary space, Olin’s 5 5/8% senior notes due 2029 improved on Friday.

The notes were seen at par bid, par 3/8 offered during Friday’s session, according to a market source.

They were seen dipping below par soon after breaking for trade on Thursday.

Olin priced a $750 million issue of the 5 5/8% notes at par on Thursday.

The yield came in the middle of the 5½% to 5¾% early guidance.

Masonite weakens

Masonite’s 5 3/8% senior notes due 2028 were weaker in secondary trading on Friday with the notes, at times, lagging their issue price.

The 5 3/8% notes were seen at par 1/8 bid early in the session, a market source said.

Another source pegged them at 99¾ bid, par ¼ offered. The notes were largely wrapped around par after breaking for trade on Thursday.

Masonite priced a $500 million issue of the 5 3/8% notes at par in a Thursday drive-by.

The yield printed at the tight end of yield talk in the 5½% area. Sources attributed the notes’ lackluster performance in the secondary space to their tight pricing.

Mixed Thursday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time, according to an investor.

High-yield ETFs sustained $319 million of outflows on the day.

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

News of Thursday’s daily flows trails a Thursday afternoon report that the combined funds saw $619 million of net inflows during the week to the Wednesday, July 10 close, according to Lipper US Fund Flows.

Indexes gain

Indexes closed Friday with gains although all posted cumulative losses on the week.

The KDP High Yield Daily index gained 2 bps to close Friday at 71.83 with the yield now 5.41%.

The index gained 1 bp on Thursday, shaved off 1 bp on Wednesday, dropped 12 bps on Tuesday and was flat on Monday.

The index was down 10 bps on the week.

The ICE BofAML US High Yield index gained 2.2 bps on Friday with the year-to-date return now 10.325%.

The index dropped 7.2 bps on Thursday, gained 18.4 bps on Wednesday, dropped 14.8 bps on Tuesday and shaved off 1.8 bps on Monday.

The index was down 3.2 bps on the week.

The CDX High Yield 30 index gained 11 bps to close Friday at 107.49. The index dropped 28 bps on Thursday, was down 22 bps on Wednesday, gained 12 bps on Tuesday and fell 38 bps on Monday.

The index saw a cumulative loss of 65 bps on the week.

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