Allied Universal, Sirius price; Hannon Armstrong, Fairstone skyrocket; funds add $3.09 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 27 – While activity in the domestic high-yield primary market was tame compared to the frenetic activity seen in the early part of the week, the Thursday session still saw two issuers price a respectable $2.35 billion in three tranches.

Allied Universal Holdco LLC priced an upsized $2.05 billion two-tranche offering.

Sirius Computer Solutions, Inc. priced a $300 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 11%.

While the forward calendar is thin heading into Friday, Canada's Alpha Auto Group remains in the market with its $225 million offering of five-year notes, which it may price before the week comes to a close.

Meanwhile, the secondary market was largely unchanged on Thursday as the risk on sentiment that drove markets higher in the previous week began to waver.

However, the deals that priced during Wednesday’s session skyrocketed in the secondary space.

Hannon Armstrong Sustainable Infrastructure Capital Inc.’s 5¼% senior notes due 2024 (BB+/BB+) and Fairstone Financial Inc.’s 7 7/8% senior notes due 2024 (B1/B) were both seen about 2 points above their issue price.

Charter Communications, Inc.’s subsidiaries CCO Holdings LLC and CCO Holdings Capital Corp.’s 5 3/8% senior notes due 2029 (B1/BB) were active and trading up to their previous levels prior to pricing an add-on.

Meanwhile, high-yield mutual funds and exchange-traded funds saw inflows that topped $3 billion for the third time year to date – $3.089 billion entered the space for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

Allied Universal upsizes secureds

Allied Universal Holdco priced an upsized $2.05 billion two-tranche offering at the conclusion of a roadshow.

The revised debt refinancing deal featured an upsized $1 billion tranche of seven-year senior secured notes (B3/B-/BB-) which priced at par to yield 6 5/8%.

The tranche size increased from $800 million after earlier being upsized from $500 million.

Proceeds were shifted from the concurrent seven-year covenant-lite first-lien term loan which was ultimately downsized to $2.02 billion from $2.52 billion.

The yield on the oversubscribed secured tranche came at the tight end of final yield talk in the 6¾% area and tighter than 6¾% to 7% initial guidance.

Allied Universal also priced $1.05 billion of 9¾% eight-year senior unsecured notes (Caa2/CCC/CCC+) at 98.641 to yield 10%.

The unsecured tranche came in line with talk that specified a coupon in the high 9% area, at a discount, to yield 10%.

However, the unsecured paper came wide of initial talk that had it pricing 250 to 300 basis points behind the secured tranche.

The unsecured notes also underwent covenant changes.

Credit Suisse Securities (USA) LLC was the left lead bookrunner.

Sirius comes wide

Sirius Computer Solutions priced a $300 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 11%.

The yield printed 25 bps beyond the wide end of the 10½% to 10¾% yield talk and well beyond initial price talk in the 10% area, a trader said.

Citigroup Global Markets Inc. was the left bookrunner.

Proceeds will be used to fund the leveraged buyout of Sirius Computer Solutions, a San Antonio-based provider of mission-critical IT infrastructure solutions, by Clayton, Dubilier and Rice (CD&R) from Kelso & Co.

The deal also underwent covenant changes bearing primarily upon how the company may incur additional debt and disburse cash.

There was give and take on the covenant package right up until the last minute, a trader said.

An anchor order specified a yield, possibly within the talk, but also specified covenant revisions.

Some of the revisions were not to the liking of CD&R who suggested the anchor order might care to take a walk, expressing confidence that the dealer would ultimately succeed in getting the bonds placed, notwithstanding the specified changes, the source recounted.

That the deal came 25 bps beyond the wide end of talk lends some credence to the notion that such a standoff took place, the trader added.

Friday

Thursday's action all but cleared the active new issue calendar.

One offer remains as possible Friday business, according to market sources.

In a deal that went radio silent for over a week, Canada's Alpha Auto Group remains in the market with a junk bond deal, a trader said.

The company conducted a roadshow for $225 million of five-year notes during the June 17 week.

There is an order for a revived Alpha Auto deal at 11%, the trader said.

Elsewhere, Virtu Financial is heard to have hit headwinds with its $525 million offering of seven-year first lien senior secured notes that had been expected to price in a Wednesday drive-by, a market source said.

Hannon Armstrong in focus

Hannon Armstrong’s 5¼% senior notes due 2024 were putting in a strong performance in the secondary space with the green-eligible bonds, at times, changing hands more than 2 points above their issue price.

The 5¼% notes were seen at 101 5/8 bid, 102 1/8 offered in the early afternoon. They were changing hands at 101 7/8 heading into the market close, sources said.

The notes were active with more than $30 million in reported volume by the late afternoon.

Hannon Armstrong priced an upsized $350 million issue of the 5¼% senior notes at par on Wednesday.

The issue size increased from $300 million and the yield came 12.5 bps inside of yield talk in the 5½% area.

Fairstone Financial trades up

Fairstone Financial’s 7 7/8% senior notes due 2024 were also putting in a strong performance in the secondary space with the notes more than 2 points above their issue price.

Fairstone was seen at 101 3/8 bid, 102 offered in the early afternoon and traded up to 102¼ heading into the market close, sources said.

However, trading of the new notes was light with only $12 million in reported volume on the tape.

The notes were strong out of the gate and traded up to 101½ soon after breaking for trade on Wednesday.

The deal, which priced at a discount, had an attractive yield, which sources attributed to its strong performance.

Fairstone Financial priced a $300 million issue of the 7 7/8% notes at 99.484 to yield 8%.

The yield printed at the low end of the 8% to 8¼% yield talk and inside of initial guidance in the low 8% area.

Charter returns

Charter subsidiary CCO Holdings’ 5 3/8% senior notes due 2029 were active with the notes returning to their previous level prior to the pricing of an add-on on Tuesday.

The 5 3/8% notes rose about 5/8 point on Thursday.

They were seen at 103¼ bid, 103¾ offered in the early afternoon and were changing hands around 103 heading into the market close, sources said.

More than $34 million of the bonds were on the tape by the late afternoon.

The notes were returning to their previous levels prior to Charter tapping the notes on Tuesday.

Charter priced an upsized $750 million add-on to the 5 3/8% notes at 102 in a Tuesday drive-by.

The initial size of the offering had been $500 million.

Prior to the add-on, the notes had been trading with a 103 handle.

Wednesday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Thursday, according to a market source.

High-yield ETFs sustained $13 million of outflows on the day.

Actively managed high-yield funds saw $25 million of outflows on Thursday, the source said.

News of Wednesday's daily flows preceded a Thursday afternoon report that the combined funds saw $3.089 billion of net inflows in the week to Wednesday's close, according to Lipper US Fund Flows.

As with Wednesday's daily flows, the final three of the most recent week's five sessions were mixed, and mainly flattish.

However, the first two sessions of the period saw massive daily inflows: $1.2 billion on Thursday, June 20, and $1.29 billion on Friday, June 21, the source said.

Indexes mixed

Indexes were again mixed on Thursday as they have been for much of the week.

The KDP High Yield Daily index shaved off 1 basis point to close Thursday at 70.78 with the yield now 5.47%.

The index dropped 2 bps on Wednesday, was down 3 bps on Tuesday and shaved off one bp on Monday.

The CDX High Yield 30 index gained 27 bps to close Thursday at 107.45.

The index was up 18 bps on Wednesday after dropping 49 bps on Tuesday and 15 bps on Monday.

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