Oldcastle prices; At Home pressured; Rite Aid up; Twitter active; junk funds out $4 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 14 – The only deal on the domestic high-yield primary market’s active calendar cleared the market on Thursday.

After facing intense headwinds, Oscar AcquisitionCo LLC (Oldcastle BuildingEnvelope) priced a downsized and restructured $585 million issue of eight-year senior unsecured notes (Caa1/CCC+) at a deep discount.

Meanwhile, the secondary space closed another volatile week on soft footing with the market down slightly following Wednesday’s rally.

Several offers-wanted-in-competition lists were circulating the market.

However, trading activity ahead of the holiday weekend was light with many calling an early end to the truncated week.

“The market is softer but no one’s dumping,” a source said.

Ambience Merger Sub, Inc.’s (At Home Group, Inc.) secured and unsecured notes were the exception with the notes down 2 to 6 points on earnings-related news.

However, Rite Aid Corp.’s senior notes improved following the pharmacy retail chain’s closely watched earnings report.

Twitter, Inc.’s senior notes saw another boost from Tesla Inc. chief executive officer Elon Musk after Musk made a takeover bid for the company.

However, the notes faded as the session progressed and closed the day largely unchanged.

Outflows continued to pressure the secondary space.

After logging two consecutive weeks of inflows, outsized outflows resumed with high-yield mutual and exchange-traded funds losing $4.03 billion in the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flows report.

Oldcastle clears

A bond issue from Oldcastle BuildingEnvelope, rendered conspicuous because it was the only deal in the market during Holy Week, and more conspicuous, still, because it faced intense headwinds, cleared the market on Thursday ahead of the early close and the long holiday weekend.

Issuing via special purpose vehicle Oscar AcquisitionCo LLC, the downsized $585 million issue of 9½% eight-year senior unsecured notes (Caa1/CCC+) priced at 92.19 to yield 11%, rich to price talk and tight to yield talk, but substantially wide of initial guidance in the mid-to-high 9% area.

There were also covenant changes.

It was heard to be oversubscribed at the final talk, according to a portfolio manager.

A sizable portion of the notes was heard to have been taken down in big orders from a small number of accounts, a sellside source said.

Away from the Oldcastle trade, liquidity in the junk bond market was extremely thin on Thursday with a lot of participants already having departed ahead of the holiday weekend, a sellside source said.

Also, investors seemed reluctant to take any substantial positions ahead of the extended weekend, the sellsider added.

Meanwhile the week ahead is a big question mark, a syndicate banker said, adding that there are double-B rated names that might show up to do a deal, but not if Treasuries widen out by 30 or 40 basis points.

At Home under pressure

At Home’s secured and unsecured senior notes were under pressure on Thursday with the notes losing 2 to 6 points, respectively, on earnings-related news.

“People are running for the hills,” a source said.

The home decor company’s 7 1/8% senior notes due 2029 (Caa1/CCC+) led losses in the secondary space with the notes falling 6 points in heavy volume.

The 7 1/8% notes fell to a 76-handle and were changing hands in the 76½ to 76¾ context heading into the market close, a source said.

The yield on the notes was about 12%.

There was $23 million in reported volume.

The 4 7/8 senior secured notes due 2028 (B1/B) were down 2 points in comparatively light volume.

The 4 7/8% notes were changing hands at 83 3/8 heading into the market close with the yield about 8 3/8%.

There was $8 million in reported volume.

At Home priced a $300 million issue of the 4 7/8% notes and a $500 million issue of the 7 1/8% notes at par in June 2021.

The leveraged buyout deal backed Hellman & Friedman’s acquisition of the company.

Rite Aid’s earnings

Rite Aid’s senior notes continued to gain following a better-than-expected earnings report.

Rite Aid’s 8% senior notes due 2026 (B3/CCC) gained a ½ point in active trading.

The notes were changing hands in the 90 3/8 to 90 7/8 context heading into the market close, a source said.

There was $18 million in reported volume.

The 7½% senior notes due 2025 gained 1 point to close Thursday at 91.

There was $13 million in reported volume.

Rite Aid’s senior notes reclaimed their previous levels after concern over earnings the previous week sparked a sell-off that drove the notes down 4 to 5 points.

The notes bounced back over the course of the week ahead of the highly anticipated report.

Rite Aid bested analyst expectations in its fourth-quarter earnings report and provided upbeat guidance.

The analyst that sparked the sell-off in Rite Aid’s capital structure the previous week warned the company would need to generate $400 million to $450 million in adjusted EBITDA to continue to operate.

Rite Aid issued 2023 guidance of adjusted EBITDA of $460 million to $500 million, according to a company news release.

Twitter active

Twitter’s capital structure saw another Musk-inspired boost on Thursday.

The 5% senior notes due 2030 and the 3 7/8% senior notes due 2027 each gained more than 1 point after Musk announced a hostile takeover bid for the company.

The 5% notes gained more than 1 point to trade up to a 99-handle early in the session.

However, the notes came in as the session progressed and were changing hands in the 98¾ to 99¼ context heading into the market close.

The social media company’s 3 7/8% senior notes due 2027 also gained about 1 point to close the day at 97¼.

The notes were more active than their higher coupon counterpart with $11 million in reported volume.

Musk announced early Thursday an unsolicited bid to take Twitter private for $54.20 per share valuing the company at $43 billion.

While market players were skeptical of the validity of the offer, it could force Twitter to consider another proposal from a friendlier partner, a source said.

Indexes

The KDP High Yield Daily index closed Thursday flat at 60.1 with a yield of 5.93%.

The index gained 10 points on Wednesday and 16 points on Tuesday after dropping 46 points on Monday.

The index posted a cumulative loss of 20 points on the week.

The ICE BofAML US High Yield index also closed Thursday flat with year-to-date returns negative-6.317%.

The index rose 7.3 basis points on Wednesday and 32.1 bps on Tuesday after falling 65.8 bps on Monday.

The index posted a cumulative loss of 26.4 bps on the week.

The CDX High Yield 30 index fell 15 bps to close Thursday at 104.01.

The index rose 26 bps on Wednesday and 3 bps on Tuesday after sinking 40 bps on Monday.

The index posted a cumulative loss of 26 bps on the week.

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