Junkland: RingCentral prices; Tenneco eyed; Cushman at a premium; Solenis above water

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 11 – RingCentral Inc. unexpectedly awoke the high-yield primary market on a sleepy summer Friday and priced its $400 million offering of seven-year senior notes (B1/BB/BB) on an accelerated timeline.

The accelerated pricing left just one deal on the active forward calendar heading into the weekend – Tenneco Inc.’s $1.75 billion offering of 8% senior secured notes due November 2028, which is heard to be coming at a deep discount.

Meanwhile, the secondary space was either side of unchanged in muted activity on Friday as market players digested the latest piece of inflationary data.

The Producer Price Index report came in hotter than expected, a foreboding sign for a market that has largely expected an end to Federal Reserve rate increases.

The data comes on the heels of a Consumer Price Index report which came in below expectations but still reflected an uptick in price pressures.

While the market is widely anticipating a pause in September, the Fed’s decision in November is in question with some now forecasting a return to rate hikes, a source said.

With the macro picture still in doubt and the majority of deals to price over the past week largely finding their levels, trading volumes were thin during Friday’s session although there remained pockets of activity.

Cushman & Wakefield U.S. Borrower, LLC’s 8 7/8% senior secured notes due 2031 (Ba3/BB) were trading at a strong premium to their discounted issue price in heavy volume.

Olympus Water US Holding Corp.’s (Solenis) 9¾% senior secured notes due 2028 (B3/B-) held on to the strong gains made the previous session with the company’s first earnings report since its acquisition of Diversey besting expectations.

However, earnings were not positive for Akumin Inc. whose junk bonds were under pressure on Friday following news the company was forming a special committee to evaluate its capital structure.

RingCentral accelerates

RingCentral unexpectedly priced its new bonds on what was going to be a sleepy summer Friday, as it accelerated timing on its $400 million issue of seven-year senior notes and priced them at par to yield 8½%, at the tight end talk.

The issue was heard to be playing to $500 million of demand on Friday morning, a trader said.

When it was announced early in the week, RingCentral’s offer had been scheduled to remain in the market into the week ahead.

RingCentral pushed the week’s issuance total above the $5 billion mark ($5.1 billion), making the Aug. 7 week the busiest thus far in the 2023 third quarter, and the first one to top $5 billion since mid-June.

Tenneco eyed

Tenneco is scheduled to run the high-yield road through Tuesday, marketing its $1.75 billion offering of 8% senior secured notes due November 2028, a revival of efforts to replace bridge financing backing the buyout of the company by Apollo, which became hung up on dealer balance sheets due to market conditions late last year.

Initial price talk has the Tenneco notes coming deeply discounted, at 85 to 86, resulting in a 12% all-in yield.

Demand for the revived Tenneco bonds built early to $1.5 billion, and sat there for a while, a trader said on Friday.

Investors said it had to come at a deeper discount, the source added.

However, late in the week demand pushed higher, the source said, adding that demand was heard to be around $2.3 billion, heading into the weekend.

And that’s kind of the story of the market, right now, the trader said.

“Issuers got the momentum back.

“Every deal has been oversubscribed, and a lot of them have been jammed,” the trader said.

The poster child, according to sources, is the $1.45 billion issue of TransDigm Inc. 6 7/8% senior secured notes due December 2030 (Ba3/B+) which priced at par on Wednesday.

It was trading Friday morning at or just above issue price: par bid, par 1/8 offered, hence it has held its value in the secondary market, they concede.

However, they add, ultra-tight pricing left no room for the deal to run in the secondary.

One senior trader referred to TransDigm as a “par-lock” deal.

Syndicate bankers counter that clients would soon look elsewhere for an underwriter if they were to learn that points were left on the table for the market.

Cushman at a premium

Cushman & Wakefield’s 8 7/8% senior secured notes due 2031 held on to their strong gains in active trade on Friday.

The notes were largely unchanged after a strong break and continued to trade in the par 3/8 to par 5/8 context, a source said.

They were wrapped around par ½ heading into the close.

There was $46 million in reported volume.

Cushman & Wakefield priced a downsized $400 million, from $500 million, issue of the 8 7/8% notes at 99.293 to yield 9% on Thursday.

The yield came at the tight end of tightened talk for a yield of 9% to 9 1/8%; price talk was initially 9¼% to 9½%.

The deal was heavily oversubscribed and played to about $2.6 billion in demand, a source said.

Solenis earnings

Solenis’ 9¾% senior secured notes due 2028 held on to their par handle on Friday, marking the first time the notes have traded above their issue price since hitting the secondary space in late May.

The 9¾% senior notes continued to trade in the par to par ½ context on Friday after a 3-point bounce the previous session.

The notes have largely traded on a 97-handle since mid-July.

However, the notes bounced above par on Thursday after the manufacturer of specialty chemicals posted its first earnings report since completing its acquisition of Diversey.

“It was a big beat for the pro-forma business,” a source said.

Solenis priced a $1.7 billion tranche of the 9¾% notes at par on May 24 as part of its leveraged buyout of the hygiene, infection prevention and cleaning solutions.

However, the notes struggled during bookbuilding and in the aftermarket with the notes sinking below par on the break and never recovering.

Akumin forms committee

Akumin’s senior notes were under pressure on Friday following weak earnings and news the company was forming a committee to examine its strained capital structure.

The outpatient radiology and oncology solutions company’s 7½% senior secured notes due 2028 (Caa1/B-) fell 3½ points in heavy volume.

They were changing hands in the 62½ to 63 context heading into the market close with the yield about 19½%, according to a market source.

There was $11 million in reported volume.

Akumin’s 7% senior secured notes due 2025 (Caa1/B-) fell 2 points to close the day at 68¼ with the yield about 27%.

The company reported disappointing earnings with revenue down 3.8% and adjusted EBITDA of $26.5 million down 31% year over year, a source said.

The company also announced it was forming a special committee to review its capital structure.

Akumin has been eyed as a potential default risk due to its heavy debt load, a source said.

Fund flows

The dedicated high-yield bond funds sustained $233 million of net daily cash outflows on Thursday, according to a market source.

High-yield ETFs had $199 million of outflows on the day.

Actively managed high-yield funds sustained $34 million of outflows on Thursday, the source said.

News of Thursday’s daily cash flows follows a Thursday afternoon report that the combined funds sustained $559 million of net outflows during the week to the Wednesday, Aug. 9 close, according to fund-tracker Refinitiv Lipper.

It was the third consecutive weekly outflow from the junk funds, and the sixth outflow in the past seven weeks, representing net outflows of $1.1 billion for that interval, according to the market source.

Indexes

The KDP High Yield Daily index was off 16 basis points to close Friday at 50.23 with the yield 7.55%.

The index was down 10 bps on Thursday after adding 3 bps on Wednesday, 5 bps on Tuesday and 2 bps on Monday.

The index was down 16 bps on the week.

The ICE BofAML US High Yield index fell 23.3 bps with the year-to-date return now 6.606%.

The index was up 15.7 bps on Thursday, 19 bps on Wednesday, 5.5 bps on Tuesday and 17.2 bps on Monday.

The index posted a cumulative gain of 34.1 bps on the week.

The CDX High Yield 30 index added 5 bps to close Friday at 102.68.

The index was up 10 bps on Thursday and 2 bps on Wednesday after falling 23 bps on Tuesday and 26 bps on Monday.

The index posted a cumulative loss of 32 bps on the week.

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