Morning Commentary: Ardagh brings $500 million drive-by; Tenet, Restaurant Brands gain

By Paul A. Harris

Portland, Ore., April 3 – The high-yield virtual primary market, which hit on all cylinders on Thursday, remained in action on Friday morning, sources said.

Ardagh Packaging Finance plc and Ardagh Holdings USA Inc. plan to price a $500 million offering of five-year senior secured notes in a drive-by.

Initial guidance has the notes coming with yield in the mid-to-high 5% area, a trader said.

Of Thursday’s burst of drive-by deals, the Restaurant Brands International Inc. (1011778 B.C. Unlimited Liability Co./New Red Finance, Inc.) 5¾% first-lien senior secured notes due April 2025 (existing ratings Ba2/BB+) were par 7/8 bid Friday morning.

Those notes broke to 101¼ on Thursday afternoon, according to a trader.

The $500 million issue priced at par, 12.5 basis points tighter than talk, playing to an order book that was three- to four-times oversubscribed, the trader said.

The new Tenet Healthcare Corp. 7½% senior secured first-lien notes due April 2025 (B1/BB-/B+) were 101 3/8 bid on Friday morning.

The upsized $700 million issue (from $500 million) priced at par and was also heard to be three- to four-times oversubscribed.

Looking back further into the business of the recently reactivated primary market, the Carnival Corp. 11½% first-priority senior secured notes due April 2023 (Baa2/BBB-), a high-grade rated deal that was priced on the high-yield desk, were seen as low as 99 1/8 bid, slightly above new issue price, on Friday morning, a trader said.

The massive, upsized $4 billion deal (from $3 billion) priced on Wednesday at 99 and was heard to have been as much as four-times oversubscribed and driven by $2.75 billion to $3 billion of reverse inquiry.

The trader, who spoke on Friday, called those reports of colossal demand into question, saying that the deal initially traded to 102 on Wednesday, possibly due to extensive support from the dealer, and continued to cascade lower and lower.

Away from recent issues, Friday action appeared focused on crossover and fallen angel names such as Occidental Petroleum Corp., the trader said.

Junk opened the New York session unchanged on Friday and then tumbled in line with equities, sources said.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 1.41%, or $1.06, at $74.10 per share at mid-morning.

Thursday inflows

The dedicated high-yield bond funds saw $504 million of net daily inflows on Thursday, according to a market source.

Actively managed high-yield funds saw $780 million of inflows on the day.

However high-yield ETFs sustained $276 million of outflows on Thursday, the source said.

News of Thursday’s daily flows trails a Thursday afternoon report from Lipper US Fund Flows that the dedicated junk funds saw a gargantuan $7.092 billion of net inflows in the week to the Wednesday, April 1 close.

That’s the biggest weekly inflow on record, market sources say.

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