Macy’s, Par Pacific price; Park Hotels adds; Microchip, DaVita in focus; Ardagh moves up

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 27 – New issue supply was steady on Wednesday with two deals and one add-on pricing.

All eyes were on recent fallen angel Macy's Inc. as it priced an upsized $1.3 billion offering.

The new paper dominated activity in the secondary space after freeing for trade and was well above its issue price.

Par Pacific Holdings, Inc. priced a $105 million issue at a discount.

And Park Hotels & Resorts Inc. priced an upsized $100 million add-on to its recently priced 7½% senior secured notes due June 1, 2025 (B1/BB-).

Meanwhile, the secondary space continued to grind tighter on Wednesday with plenty of buyers in the market, a source said.

The cash bond market was up another 0.5 to 0.75 point. “Everything’s moving in one direction,” the source said.

Growing optimism over the reopening of the economy was further fueled by news of additional stimulus.

New issues continued to dominate activity in the secondary space.

Microchip Technology Inc.’s newly priced 4¼% senior notes due 2025 (Ba2//BB+) and DaVita Inc.’s 4 5/8% senior notes due 2030 (Ba3/B+) had high-volume activity, in addition to Macy’s.

While new paper from Microchip was putting in a strong performance, DaVita’s new notes were trading with only a slight premium.

While volume was lighter, Ardagh Packaging Finance plc and Ardagh Holdings USA Inc.’s newly priced 5¼% mirror notes due 2027 (Caa1/B/B) were also trading well above their reoffer price.

Big book for downgraded Macy's

In Wednesday new issue action, Macy's priced an upsized $1.3 billion amount of five-year senior secured notes (Ba1/BB-/BB+) at par to yield 8 3/8%.

The issue size increased from $1.1 billion.

The yield printed 12.5 basis points through the 8½% to 8¾% yield talk. Initial guidance was in the high 8% area to 9%.

Following the upsize S&P Global Ratings lowered its rating on the issue by one notch, to BB- from BB, stating that the additional secured debt reduced the expected recovery value for the secured noteholders in S&P's simulated default scenario.

However, the upsize and resulting downgrade failed to significantly dampen investor demand for Macy's 8 3/8% notes, according to one market source who said that the $1.3 billion upsized deal played to $5.8 billion of investor demand.

The Wednesday session also saw a couple of small deals done as drive-bys.

Par Pacific Holdings priced a $105 million issue of 12 7/8% senior secured notes due Jan. 15, 2026 (B1/BB-) at 97.5 to yield 13.511%.

The coupon came on top of coupon talk. The issue price came at the rich end of price talk in the 97 area.

And Park Hotels & Resorts priced an upsized $100 million add-on to the Park Intermediate Holdings LLC 7½% senior secured notes due June 1, 2025 (B1/BB-) at 101.5.

The issue size increased from $50 million.

The issue price came at the rich end of the 101 to 101.5 price talk.

The calendar

Following Wednesday's action, a couple of deals remained on the active calendar.

Both are expected to clear ahead of the coming weekend.

Wesco Distribution Inc. is conducting a roadshow for $2.825 billion of senior notes (B2/BB-/BB-) in two tranches: $1.825 billion of five-year notes guided in the mid 7% area, and $1 billion of eight-year notes guided in the high 7% area.

And INTL FCStone Inc. is marketing $350 million five-year senior secured notes (Ba3/BB-) whispered with a 9½% all-in yield with 2 points OID.

Macy’s dominates

Macy’s 8 3/8% senior notes due 2025 dominated activity in the secondary space after freeing for trade. The notes priced in the early afternoon.

They had climbed to a 102-handle shortly before the market close and had more than $200 million in reported volume on the tape, a source said.

Microchip in focus

Microchip’s new 4¼% senior notes due 2025 were among the most actively traded issues in the secondary space on Wednesday.

The notes traded up to a 101-handle with strong buying interest buoying the notes.

They were marked at 101 1/8 bid, 101 5/8 offered in the late afternoon.

There was more than $140 million in reported volume by the late afternoon.

Microchip priced a $1.2 billion tranche of the 4¼% notes at par in a Tuesday drive-by. Pricing came at the tight end of the 4¼% to 4½% price talk.

Microchip priced the unsecured tranche as part of a two-part offering that also included a $1 billion tranche of three-year investment grade first-lien notes which priced at par to yield 2.7%.

DaVita active

DaVita’s 4 5/8% senior notes due 2030 also had high-volume activity. However, the notes were only trading with a slight premium.

The 4 5/8% notes launched the day trading in the par 5/8 to par ¾ context.

However, they weakened as the session progressed and were changing hands in the par 1/8 to par 3/8 context in the late afternoon.

The bonds had more than $161 million in reported volume by the late afternoon.

DaVita priced a $1.75 billion issue of the 4 5/8% notes at par in a Tuesday drive-by.

Pricing came at the tight end of yield talk in the 4¾% area.

The deal was heard to be as much as 2x oversubscribed.

Ardagh trades up

While volume was lighter, Ardagh’s 5¼% senior mirror notes due 2027 were putting in a strong performance in the secondary space.

The 5¼% notes were changing hands in the 98½ to 99 context in the late afternoon with about $38 million in reported volume, a source said.

Ardagh priced an upsized $1 billion issue of the 5¼% notes at 96.25 in a Tuesday drive-by.

Pricing came at the rich end of talk for a reoffer price in the 96 area. The deal size was increased from $600 million.

While the notes are non-fungible to the 5¼% senior notes due 2027 Ardagh initially priced in April, the mirror notes are essentially an add-on, a source said.

They share the same structure and covenants of the initial 5¼% notes.

The glass and metal packaging solutions company priced a $500 million issue of the 5¼% notes at par on April 3 and returned to the market on April 7 with a $200 million add-on that also priced at par.

The initial 5¼% notes have performed well in the aftermarket and were changing hands on a 104-handle on Wednesday.

$1.66 billion Tuesday inflows

The dedicated high-yield bond funds had a huge $1.66 billion of net daily inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $1.26 billion of inflows on the day.

Actively managed high-yield funds had $395 million of inflows on Tuesday, the source said.

With only Wednesday's daily fund flow numbers remaining to go into the tally the combined funds are tracking a whopping $5.7 billion of net inflows for the week to Wednesday's close, according to the market source.

Indexes gain

Indexes continued to gain on Wednesday.

The KDP High Yield Daily index was up 54 basis points to close Wednesday at 64.65 with the yield now 6.86%.

The index was up 45 bps on Tuesday.

The ICE BofAML US High Yield index gained another 36.8 bps with the year-to-date return now negative 6.055%.

The index jumped 97.8 bps on Tuesday.

The CDX High Yield 30 index gained 84 bps to close Wednesday at 97.49. The index jumped 171 bps on Tuesday.

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