DaVita, Ardagh, Microchip price; Macy’s, Wesco on tap; Ford, U.S. Steel, Live Nation gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 26 – The domestic high-yield primary market was in high gear upon return from the holiday weekend, rolling out large offerings from well-known junk issuers, crossovers and fallen angels.

In drive-by action, DaVita Inc. priced a $1.75 billion issue, Ardagh Packaging Finance plc and Ardagh Holdings USA Inc. priced an upsized $1 billion, and Microchip Technology Inc. priced $1 billion of notes in a crossover trade.

The calendar also ballooned with offerings from Wesco Distribution Inc., Macy's Inc. and INTL FCStone Inc.

Meanwhile, the secondary space continued to grind tighter on Tuesday on optimism surrounding the reopening of the economy and the continued support of the Federal Reserve Board, a source said.

United States Steel Corp.’s 12% senior notes due 2025 (B2/B+) continued to gain in active trading with the deeply discounted notes topping par.

Ford Motor Co.’s three tranches of senior notes (Ba2/BB+/BBB-) continued to see upward momentum as the carmaker reopens its plants.

Live Nation Entertainment, Inc.’s 6½% senior notes due 2027 (Ba2/BB-) also continued to rise on optimism over a return to operations.

Tuesday’s drive-bys

Very early on Tuesday, as participants took their places following the extended Memorial Day weekend, dealers assuaged any apprehensions that an early summer lag might take hold of the high-yield primary market.

A busy Tuesday session saw well-known straight-out junk issuers, crossovers and fallen angels step in for a late-May pass at the market.

DaVita priced a $1.75 billion issue of 10-year senior notes (Ba3/B+) at par to yield 4 5/8% in a drive-by.

The yield printed at the tight end of yield talk in the 4¾% area.

The deal played to an order book that was more than double the deal size, and traded to par ½ bid, 101½ offered, a trader said.

Ardagh Packaging priced an upsized $1 billion amount of notes mirroring their 5¼% senior notes due Aug. 15, 2027 (Caa1/B/B) at 96.25.

The issue size increased from $600 million.

The non-fungible mirror issue came at the rich end of price talk in the 96 area, which was also the initial price talk.

The deal was going out 97 bid, 98 offered, a trader said.

In a crossover trade, Microchip Technology priced a $1 billion issue of 2.7% three-year senior secured notes (existing Baa3/existing BB+/confirmed BBB-) at a 245 basis points spread to Treasuries.

The spread came tight to spread talk in the 250 bps area. Initial talk was 275 to 287.5 bps.

In addition, the company launched a $1.2 billion tranche of 5.25-year unsecured notes (Fitch: BB+) at 4¼%, late Tuesday.

The unsecured tranche launched at the tight end of the 4¼% to 4½% price talk. Initial talk was in the 4¾% area.

Final terms on the unsecured notes were expected late Tuesday, however they were not available at press time, a trader said.

The calendar

Wesco Distribution started a roadshow on Tuesday for a $2.825 billion two-part offering of senior notes (B2/BB-/BB-).

The deal includes $1.825 billion of five-year notes, callable in two years at par plus 50% of the coupon, with initial guidance in the mid 7% area.

Wesco is also selling $1 billion of eight-year notes, callable in three years at par plus 50% of the coupon, with initial guidance in the high 7% area.

Macy's expects to price $1.1 billion of five-year senior secured notes on Wednesday.

Early guidance has the notes coming to yield in the high 8% area to 9%

And INTL FCStone plans to price a $350 million offering of five-year senior secured notes on Friday.

U.S. Steel tops par

United States Steel Corp.’s 12% senior notes due 2025 remained in focus in the secondary space with the deeply discounted notes topping par.

The notes were up more than 2 points to a 101-handle for the majority of the session, a source said.

While they traded as high as 101¾, they came in towards the market close and ended Tuesday’s session at par ¾.

The bonds had more than $30 million in reported volume heading into the market close.

The notes were trading for their yield, which was still about 11¾%, a source said.

U.S. Steel priced a $1 billion issue of the 12% notes at 94.665 to yield 13½% on May 21.

Ford in focus

Ford’s three tranches of senior notes remained active in the secondary space with the notes continuing to gain strength.

Ford’s 9 5/8% notes due 2030 rose 2 points to a 108-handle on Tuesday.

The 9% senior notes due 2025 traded as high as 105 on Tuesday.

However, the notes also came in to end the session up 1½ points at 103½, according to a market source.

The 8½% senior notes due 2023 rose 2 points to also close Tuesday at 103½.

Ford’s senior notes have largely struggled below par since pricing in mid-April.

However, the notes have steadily climbed over the past two weeks as the automaker reopens its shuttered plants and resumes operations.

Ford’s 2023 notes also meet the criteria for the Federal Reserve’s secondary market corporate credit facility.

The Federal Reserve intends to launch the facility next week where it has the option of buying individual junk bonds in the open market.

Live Nation gains

Live Nation’s 6½% senior notes due 2027 continued to gain in active trading in the secondary space.

The notes were up another 7/8 point to close Tuesday at 106 1/8, according to a market source.

More than $16 million of the bonds were on the tape by the late afternoon.

The 6½% notes have put in a strong performance since Live Nation priced the $1.2 billion issue at par on May 13.

The event promoter and venue operator has junk bonds that have performed poorly in the past, a source said.

However, the 6½% notes are secured. Much like the rebound seen in the gaming sector, the notes were posting gains on optimism surrounding a return to operations.

“People will go to concerts again,” a source previously said.

$778 million Friday inflows

The dedicated high-yield bond funds had $778 million of net daily inflows on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $560 million of inflows on the day.

Indexes

Indexes launched the week on strong footing after all posted cumulative gains the previous week.

The KDP High Yield Daily index was up 45 basis points to close Tuesday at 64.11.

The index had a cumulative gain of 129 bps on the week last week.

The ICE BofAML US High Yield index jumped 97.8 bps with the year-to-date return now negative 6.423%.

The index had a cumulative gain of 190 bps on the week last week.

The CDX High Yield 30 index jumped 171 bps to close Tuesday at 96.65.

The index had a cumulative gain of 234 bps on the week last week.

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