Builders FirstSource, Shea Homes trade up; Match, Parsley Energy flat; Uniti comes in

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 7 – The domestic high-yield primary market rounded out an active week quietly with the calendar thin heading into the Feb. 10 week.

The secondary space was also quiet with the market weak as equities and crude oil futures traded off.

While the market was soft, there was no rush to sell on the relatively light-volume day, sources said.

New paper continued to dominate activity in the secondary space. However, several recent deals saw a lackluster reception in the aftermarket.

Match Group’s newly priced 4 1/8% senior notes due 2030 (expected ratings Ba3/BB) were among the most actively traded issues in the secondary space. However, the notes were largely stuck at par.

Parsley Energy LLC’s 4 1/8% senior notes due 2028 were also largely wrapped around par in secondary market activity.

Of the deals to price during Thursday’s session, Builders FirstSource Inc.’s 5% senior notes due 2030 (B3/BB-) outperformed with the notes trading well above their issue price.

Shea Homes’ 4¾% senior notes due 2028 (B1/BB-) were also trading at a premium in secondary market activity.

While Uniti Group Inc.’s 7 7/8% senior notes due 2025 (Caa1/CCC/B) were trading well above their issue price on Thursday, the notes tumbled back down towards par in high-volume activity on Friday.

Thin calendar

A busy week in the primary market came to a quiet close on Friday.

One deal was in the market as a possible Friday execution.

Husky III Holding Ltd. had been on the road throughout the week with an aggressively structured $450 million offering of five-year senior PIK toggle holdco notes (Caa2/CCC) backing a dividend to its sponsor, Platinum Equity, sources say.

Early talk was in the 12% area.

However, recent conversations have taken place in the 12% to 13% range with the deal coming at a discount of as much as two points, a trader said on Friday morning.

Later in the day, another bond trader said that Husky was heard to possibly be coming with an all-in yield of 14%, including discount.

The market is also looking for concessions in the deal's covenant package, sources said.

However, there was no fresh word on the Husky deal as Friday afternoon wore on, a trader said.

Away from Husky, the Feb. 10 week is set to get underway to an empty active deal calendar.

Volatility related to coronavirus took hold of stock markets on Friday, as economists and fiscal officers continue to reckon the cost it might represent to the global economy.

Given such a backdrop, it's difficult to say what the week ahead will see in the way of new issue activity, a syndicate banker said, ending a brief call by forecasting “Cloudy with a chance of meatballs.”

Zayo Group Holdings Inc., now in the bank loan market with $5.06 billion equivalent of term loans, could be close at hand with over $2 billion of junk, according to an investor who plays both bonds and loans.

However, Zayo bonds are not necessarily business for the week ahead, the investor specified.

Match flat

Match’s 4 1/8% senior notes due 2030 were among the most actively traded issues during Friday’s session.

However, the notes fell flat.

The 4 1/8% were trading in the par to par 1/8 context during Friday’s session.

They popped a little from Thursday’s close when they ended the session below issue price at 99½.

However, the notes failed to go anywhere in the aftermarket.

The notes saw little buying interest, a market source said.

Match Group did not have great earnings and proceeds are being used to fund the spinoff of the company from IAC/InterActiveCorp.

“It seems like tight pricing for a name like that,” the source said.

Match priced a $500 million issue of 4 1/8% notes at par in a Thursday drive-by.

Initial price talk had the deal coming to yield in the 4½% area.

The deal was heard to be driven to the market by at least $250 million of reverse inquiry, a source said.

Parsley Energy flat

Parsley Energy’s 4 1/8% senior notes due 2028 were also largely wrapped around par in the secondary space, which sources attributed to their tight pricing.

Parsley Energy priced a $400 million issue of the 4 1/8% notes at par in a Thursday drive-by.

Pricing came on top of talk, which had been tightened from early talk in the 4 3/8% area. Initial guidance was in the mid-4% area.

The oil and natural gas company’s notes hit the secondary space as crude oil futures continued their downward spiral.

WTI crude oil futures settled at $50.32 on Friday, a decrease of 63 cents or 1.2%.

The week marked the fifth weekly decline for crude oil futures with WTI futures flirting with the $50 a barrel threshold.

Builders outperforms

Of the deals to price during Thursday’s session, Builders FirstSource’s 5% senior notes due 2030 outperformed.

The notes were changing hands in the 101½ to 102 context during Friday’s session.

Builders is a solid credit for a single B, had a 5-handle and is a building materials manufacturer, a source said.

“People like this type of name,” the source said.

Builders priced an upsized $550 million issue of the 5% notes at par on Thursday.

The deal was upsized from $500 million.

The yield printed at the tight end of the 5% to 5¼% yield talk, and tighter than the 5¼% to 5½% initial guidance.

It was heard to be as much as 5x oversubscribed, sources said.

Shea Homes trades up

Shea Homes’ 4¾% senior notes due 2028 were trading at a healthy premium in the secondary space on Friday.

The notes were changing hands in the par 3/8 to par 5/8 context Friday afternoon, a source said.

Shea Homes priced an upsized $450 million issue of the 4¾% notes in a Thursday drive-by.

The issue size increased from $375 million.

The yield printed tighter than the 5% to 5¼% initial guidance.

The deal was heard to have been partly driven to market by $175 million of reverse inquiry, a source said.

Uniti weakens

After trading on a 101 handle on Thursday, Uniti Group’s 7 7/8% senior notes due 2025 were coming in during Friday’s session.

The notes dropped almost 1 point and were changing hands in the par ¼ to par ¾ context in active trading, a market source said.

Uniti priced a $2.25 billion issue of the 7 7/8% notes at par on Wednesday.

However, the communications infrastructure REIT is facing litigation in relation to its lease agreement with former parent company Windstream Corp.

Both companies are scheduled to appear in court in March.

Hefty inflows to ETFs

High-yield ETFs saw $601 million of daily cash inflows on Thursday, according to market sources.

It was the second big daily inflow in a row for the junk ETFs, which saw $822 million of inflows on Wednesday.

Actively managed high-yield funds saw $150 million of inflows on Thursday.

News of Thursday's daily flows came on the heels of a Thursday afternoon report that the combined high-yield funds sustained $784 million of net outflows in the week to the Wednesday, Feb.5 close, according to information reported by Lipper US Fund Flows.

However, that outflow pales in comparison to the previous week's $2.87 billion outflow, the largest weekly outflow since last August.

The latest numbers pare year-to-date inflows for the combined high-yield funds to $95 million, the source said.

The cash flows of the high-yield ETFs, notwithstanding the big bursts on inflows on Wednesday and Thursday, are negative-$600 million for 2020 to Thursday's close, according to the market source.

Indexes

Indexes were soft on Friday. However, all closed the week with cumulative gains.

The KDP High Yield Daily index shaved off 3 points to close Friday at 71.55 with the yield now 4.93%.

The index was up 8 bps on Thursday, 19 bps on Wednesday and 6 bps on Tuesday after opening the week flat.

The index saw a cumulative gain of 30 bps on the week.

The CDX High Yield 30 index dropped 25 bps to close Friday at 109.05.

The index was down 7 bps on Thursday, rose 47 bps on Wednesday and 57 bps on Tuesday after a 6 bps drop on Monday.

The index saw a cumulative gain of 66 bps on the week.

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