Junk: Veritext, Rain Carbon price; CDK volatile; TriNet flat; funds out $1.01 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 3 – The high-yield new deal machine continued to crank on Thursday in spite of turbulence in the capital markets, with Treasury yields spiking in the wake of Fitch’s Tuesday downgrade of the USA’s long-term foreign-currency rating.

Two issuers raised a total of $950 million, each one printing a single tranche of secured notes.

Both deals came at the tight ends of talk.

Veritext priced a downsized $500 million issue (from $720 million) of VT TopCo, Inc. seven-year senior secured notes (B2/B/B+) at par to yield 8½%.

The deal was heard to be playing to $1.2 billion of demand on Thursday morning, according to a trader who had the notes at par ¾ bid, 101 offered late Thursday.

Elsewhere, Rain Carbon Inc. priced a $450 million issue of six-year second-lien senior secured notes (B3/B) at par to yield 12¼%.

Those notes broke sharply higher, going out Thursday at 102 bid, 102¼ offered, according to a trader who added that the premium speaks to demand that appeared to build late.

“There are plenty of investors who like secured, high-coupon debt,” the trader remarked.

Allocations were heard to be a mixed bag, the source said, adding that some accounts were apparently blanked.

Meanwhile Greystar Real Estate Partners, LLC began a roadshow on Thursday for a $400 million offering of seven-year senior secured notes.

The deal is in the market with initial guidance in the 8% area, and pricing is set for Monday.

Since early in the week, market watchers have expected to hear details on a telegraphed $750 million offering of five-year senior secured notes from SeaWorld Parks and Entertainment Inc., which have been pre-marketed at 6 3/8% to 6½%.

The Orlando, Fla.-based theme park and entertainment company kicked off a $665 million term loan B due 2028 (Ba2/BB) on a Tuesday lender call.

The bond deal is something of a question mark, a sellside source said on Thursday.

Investors are not crazy about the deal at 6½%, and the company is known to be price-sensitive, the source added.

Secondary has volatile day

Meanwhile, it was a volatile day in the secondary space with the market opening the day down ¼ point but rebounding to close the day flat, sources said.

While the high-yield market stabilized on Thursday, selling continued in Treasuries, particularly in longer-duration Treasuries with the 10-year yield closing the day at 4.17%, marking its highest level in 2023.

CDK Global’s new 8% first-lien notes due 2029 (B2/B+) were volatile alongside the broader market with the notes giving back all gains made on the break but paring their losses into the close.

However, TriNet Group, Inc.’s 7 1/8% senior notes due 2031 (Ba2/BB) were unmoved by the volatility in the broader market with the notes un-budged from their issue price.

While new and recent issues saw the heaviest volume in the secondary space, earnings drove the largest price movements – both to the downside and the upside.

CommScope Holding Co., Inc.’s senior notes (Caa1/CCC+) plunged 6 to 7 points on Thursday after the company missed expectations with earnings and cut its forward guidance.

However, Sabre Corp.’s senior notes (B3/B-) were among the best performers of the session after a large earnings beat.

Meanwhile, high-yield mutual funds and exchange-traded funds continued to see outflows with $1.01 billion leaving the space in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

CDK volatile

CDK Global’s new 8% first-lien senior secured notes due 2029 were volatile on Thursday.

The notes opened the day down ½ point with the notes giving back all gains made on the break to trade at par.

However, they gained steam as the session progressed to pare their losses and close the day in the par ¼ to par ½ context, a source said.

There was $72 million in reported volume.

CDK Global priced a $755 million issue of the 8% notes at par to yield 8.003% on Wednesday.

The yield came tight to the 8% to 8¼% yield talk. Early guidance was in the low-to-mid 8% area.

The notes saw a strong break and closed the previous session at par ½ bid, par ¾.

TriNet flat

TriNet’s 7 1/8% senior notes due 2031 were unmoved by the market volatility on Thursday.

The notes were wrapped around par in active trade, a source said.

They closed the day in the 99 7/8 to par 1/8 context.

There was $41 million in reported volume.

TriNet priced a downsized $400 million, from $500 million, issue of the 7 1/8% notes at par on Wednesday.

The deal was heard to have played to tepid demand with the yield pricing at the wide end of talk in the 7% area.

CommScope plunges

CommScope’s senior notes were the largest losers of Thursday’s session with the notes sinking 6 to 7 points following earnings.

CommScope’s 8¼% senior notes due 2027 plunged 6½ points to close the day at 68, according to a market source.

The yield climbed to 21½%.

There was $27 million in reported volume.

CommScope’s 5% senior notes due 2027 also sank 6½ points by the market close.

They ended the day at 59½ with the yield climbing to 21¾%.

There was $4 million in reported volume.

CommScope’s senior notes saw heavy selling after the network infrastructure provider posted a large earnings miss and cut its forward guidance.

CommScope reported adjusted EBITDA of $259.5 million versus analyst expectations of $322 million.

The company also cut its annual EBITDA forecast to range of $1.15 billion to $1.25 billion.

Sabre rises

Sabre’s senior notes were among the major gainers of Thursday’s session after an earnings beat.

The global technology company’s 11¼% senior notes due 2027 jumped 4 points to close the day at 91, according to a market source.

The yield fell to 14%.

There was $9 million in reported volume.

Sabre’s 7 3/8% senior notes due 2025 gained 3 points to close the day at 92¼ with the yield 11 5/8%.

There was $11 million in reported volume.

Sabre beat expectations with revenue of $738 million and adjusted EBITDA of $73 million.

Indexes

The KDP High Yield Daily index fell 23 basis points to close Thursday at 50.10 with the yield now 7.59%.

The index was down 18 bps on Wednesday and 17 bps on Tuesday after inching up 2 bps on Monday.

The ICE BofAML US High Yield index was down 27.8 bps with the year-to-date return now 5.899%.

The index fell 43.3 bps on Wednesday and 30.6 bps on Tuesday.

The CDX High Yield 30 index fell 8 bps to close Thursday at 102.66.

The index was down 44 bps on Wednesday and 36 bps on Tuesday.

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