Caesars, PGT price; megadeals on deck; Allegheny, SNF, RLJ, Ball at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 10 – Two drive-by deals came to the high-yield market on Friday, capping off a $6.5 billion post-Labor Day week.

Caesars Entertainment Inc. priced an upsized $1.2 billion issue of eight-year senior notes (Caa1/CCC+) and PGT Innovations, Inc. priced an upsized $575 million issue of eight-year senior notes (B2/B+).

The coming week is expected to be a big one with two megadeals already on the forward calendar.

ASP Unifrax Holdings, Inc.’s $1.2 billion offering of senior notes and the Solenis, formerly Ashland Water Technologies, $2.4 billion equivalent two-tranche offering are expected to price next week, in addition to a slew of familiar high-yield names.

The deals to come have been heavily oversubscribed leaving accounts to compete for allocations, sources said.

New issuance caused an uptick of activity in the secondary space with the secondary market expected to become increasingly more active alongside the new issue calendar.

New paper was performing well across the board.

However, Allegheny Technologies Inc.’s two tranches of senior notes (B3/B) outperformed with both tranches rising to a 101 handle in active trading.

RLJ Lodging Trust, LP’s 4% senior secured notes due 2029 (Ba3/BB-) were also putting in a strong performance.

While SNF’s two tranches of senior notes (Ba1/BB+) and Ball Corp.’s 3 1/8% senior notes due 2031 (Ba1/BB+) were trading at a premium to their issue price, they remained on a par-handle.

Friday’s primary

Two drive-by deals came to the high yield market on Friday, capping off a $6.5 billion post-Labor Day week.

That was significantly less than half of what market watchers had been expecting for the holiday-abbreviated week.

The high-grade market turned out gargantuan issuance during the post-Labor Day week and possibly sucked some of the air out of high yield, a bond trader reasoned.

On Friday, Caesars Entertainment priced an upsized $1.2 billion issue (from $1 billion) of 4 5/8% eight-year senior notes at par, inside of talk.

The deal was a blowout, market sources said.

At the time of the upsize it was playing to around $6 billion of demand, according to a trader.

And PGT Innovations priced an upsized $575 million issue (from $515 million) of 4 3/8% eight-year senior notes at par, at the tight end talk.

Week ahead

The week ahead gets underway with an active calendar in place, comprised of a pair of megadeals.

ASP Unifrax Holdings began a roadshow for a $1.2 billion offering of high-yield notes, in the wake of the Labor Day holiday weekend.

The deal includes $700 million of seven-year senior secured notes (B2/B-) with initial guidance in the high-5% area, and $500 million of eight-year senior unsecured notes (Caa2/CCC+) with initial guidance in the 8% area, and is expected to price in the middle part of the week.

Also, Solenis, formerly Ashland Water Technologies, is on the road with a $2.4 billion equivalent offering.

The deal includes $1.4 billion equivalent of seven-year senior secured notes (B2/B-) in tranches of dollar-denominated notes, initial guidance in the low 5% area, and euro-denominated notes, initial guidance in the low 4% area.

The deal also includes $1 billion equivalent of eight-year senior unsecured notes (Caa2) in tranches of dollar-denominated notes, initial guidance in the high 6% area to 7%, and euro-denominated notes, initial guidance in the high 5% area to 6%.

The week ahead is expected to be big, market sources say.

One issuance figure being pushed around on Friday for the Sept. 13 week is $15 billion, a trader said.

Aside from Unifrax and Solenis there were no specific issuer names at hand, sources said.

Names from the technology/telecom space are expected, the trader said, but conceded that it would be news if names from those spaces did not show up during a $15 billion-plus week.

One hand washes the other

Word in the market is that accounts were vigorously involved in some of the past week's deals anticipating a big calendar in the week to come, replete with some of the market's on-the-run names playing to big demand, meaning that some accounts will inevitably end up competing for allocations.

Wednesday's debut deal from pizza-maker Papa John’s International Inc., a $400 million issue of 3 7/8% senior notes due September 2029 (B1/BB-), was a case in point, a trader said.

Willingness to put in the work on a deal from a first-time issuer is apt to stand a fixed-income investor in good stead with the bookrunner's sales force, when the time comes to elbow one's way into the higher profile deals, the trader said.

Another bond trader, noting that $5 billion order books have been the rule, not the exception, in recent deals, posited that the present new issue market is not apt to favor those who wait.

Allegheny Technologies and SNF, both of which priced Thursday, saw big pile-ons, a trader said. People expressed interest, but wanted to see how price talk shaped up before committing. In the interim, dealers secured big anchor orders with the result being that the accounts whose interest hinged on price either received poor allocations or were locked out of the deal, altogether.

“If you don't get in these deals early you may not get in at all,” the trader said.

Allegheny outperforms

Allegheny’s two tranches of senior notes outperformed in the secondary space with both tranches trading up to a 101 handle.

The 4 7/8% senior notes due 2029 were changing hands in the 101 1/8 to 101 3/8 context throughout Friday’s session.

The 5 1/8% senior notes due 2031 were trading in the 101 5/8 to 101 7/8 context heading into the market close, according to a market source.

The offering was heavily oversubscribed with the notes offering a decent yield for the market, sources said.

Allegheny Technologies priced a $325 million tranche of the 4 7/8% notes and a $350 million tranche of the 5 1/8% notes at par on Thursday.

The 4 7/8% notes priced at the tight end of yield talk in the 5% area; the 5 1/8% notes priced at the tight end of yield talk in the 5¼% area.

Demand was heard to be $3.4 billion across both tranches.

RLJ trades up

RLJ’s 4% senior secured notes due 2029 were putting in a strong performance in the aftermarket.

The notes were marked at par ½ bid, 101 offered in the late afternoon.

RLJ Lodging priced a $500 million issue of the 4% notes at par on Thursday.

Pricing came at the tight end of the 4% to 4 1/8% yield talk.

Par handle

While the notes were putting in a solid performance, SNF’s newly priced tranches and Ball Corp.’s 3 1/8% senior notes due 2031 remained on a par handle in active trading.

SNF’s 3 1/8% senior notes due 2027 and the 3 3/8% senior notes due 2030 were largely at the same level in secondary market activity.

Both tranches were marked at par ¼ bid, par ¾ offered heading into the close, a source said.

SNF priced a $350 million tranche of the 3 1/8% notes and a $350 million tranche of the 3 3/8% notes at par on Thursday.

The 3 1/8% notes priced at the tight end of yield talk in the 3¼% area; the 3 3/8% senior notes priced at the tight end of yield talk in the 3½% area.

The deal was heard to be 3x to 4x oversubscribed.

Ball Corp.’s 3 1/8% senior notes due 2031 were marked at par ½ bid, par ¾ offered heading into the market close.

The canning supply company priced an upsized $850 million, from $750 million issue, of the 3 1/8% notes at par on Thursday.

The yield printed at the tight end of yield talk in the 3¼% area.

The deal was heard to be playing to $2 billion of demand.

Fund flows

High-yield ETFs snapped a two-day run of sizable outflows on Thursday, posting $141 million of inflows on the day, according to a market source.

In the preceding two session the ETFs saw outflows of $459 million and $519 million, respectively, for a two-day total of negative-$978 million.

Meanwhile, actively managed high-yield funds sustained $50 million of outflows on Thursday, the source said.

News of Thursday's daily flows follows a Thursday report that the combined funds saw $710 million of net inflows in the week to the Wednesday, Sept. 8 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

Indexes

The KDP High Yield Daily index gained 6 basis points on Friday to close the day at 70.46 with the yield now 3.51%.

The index was up 1 bp on Thursday, 1 bp on Wednesday and 1 bp on Tuesday.

The index saw a cumulative gain of 9 bps on the week.

The CDX High Yield 30 index shaved off 6 bps on Friday to close the day at 109.68.

The index was down 6 bps on Thursday, gained 12 bps on Wednesday and was down 16 bps on Tuesday.

The index was down 12 bps on the week.

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