Junk bond calendar grows; Perrigo drops on bid for HRA Pharma; Wesco sell-off accelerates

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 8 – While no deals cleared the domestic high-yield primary market on Wednesday, the forward calendar continued to grow.

ASP Unifrax Holdings, Inc. and Allegheny Technologies both began roadshows on Wednesday for two-tranche offerings.

Meanwhile, the secondary space remained unchanged on Wednesday despite the risk-off sentiment that pervaded other risk assets with equities closing the day firmly in the red.

Volume remained light with little selling in the market although there were pockets with some de-risking taking place, a source said.

Topical news remained a primary driver for activity in the space.

The sell-off in Wolverine Escrow’s junk bonds (Wesco Aircraft Holdings Inc.) intensified on Wednesday.

Perrigo Co. plc’s 3.15% senior notes due 2030 were under pressure after the company announced a $2.1 billion bid acquisition bid for HRA Pharma.

The primary

In its second post-Labor Day session the high-yield new issue market maintained the stately pace that it set on Tuesday.

Wednesday saw just a few deal announcements in the dollar market.

There were no drive-bys.

ASP Unifrax Holdings began a full roadshow for a $1.2 billion deal that includes $700 million of seven-year senior secured notes (B2) with initial guidance in the high-5% area, and $500 million of eight-year senior unsecured notes (Caa2) with initial guidance in the 8% area.

And Allegheny Technologies started a brief roadshow on Wednesday for a $650 million two-part public offering of senior notes (B3/B): eight-year notes whispered in the low-5% area, and 10-year notes whispered in the mid-5% area (see related stories in this issue).

Wesco Aircraft sells off

The sell-off in Wolverine Escrow’s junk bonds (Wesco Aircraft Holdings) accelerated on Wednesday.

The 8½% senior notes due 2024 dropped another 1¾ points to close the day at 87, according to a market source.

There was about $18 million in reported volume.

The 9% senior notes due 2026 were also down 1¾ points to close the day at 86½.

There was about $9 million in reported volume.

Both tranches have dropped more than 9 points since the company, which does business as Incora, reported earnings and announced the resignation of its chief financial officer.

Incora was formed through the merger of Wesco Aircraft with Platinum Equity’s portfolio company Pattonair in 2020.

Perrigo down

Perrigo’s 3.15% senior notes due 2030 were under pressure on Wednesday after the company announced plans to acquire HRA Pharma for $2.1 billion.

The 3.15% notes dropped almost 2 points in active trading.

The notes traded in a range of par ½ to 101 1/8 during Wednesday’s session. They were wrapped around 101 heading into the market close, according to a market source.

The notes closed the previous session at 102 5/8.

There was about $12 million in reported volume.

The pharmaceutical company announced on Wednesday that it was acquiring HRA Pharma in its pivot to self-care products from the generic drug industry.

The deal is expected to close in the first half of 2022.

Moody’s Investors Service downgraded Perrigo’s unsecured ratings to Ba1 from Baa3 in July. The downgrade was due to the belief that the company’s leverage will be high for several years.

ETFs: $459 million outflows

Climbing rates accelerated outflows from high-yield ETFS, which sustained a $459 million drain of cash on Tuesday, according to a market source.

Actively managed funds, meanwhile, were positive on the day, posting $97 million of inflows on Tuesday, the source said.

Indexes

The KDP High Yield Daily index gained 1 basis point to close Wednesday at 70.39. However, the yield was again unchanged at 3.54%. The index was also up 1 bp on Tuesday.

The CDX High Yield 30 index gained 12 bps to close Wednesday at 109.8.

The index shaved off 16 bps on Tuesday.

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