Castlelake Aviation moves through quiet junk primary; secondary tone ‘softer’

By Cristal Cody and Paul A. Harris

Tupelo, Miss., Oct. 8 – An otherwise quiet pre-holiday Friday in the junk bond primary market saw Castlelake Aviation Ltd. price a $420 million issue of 5% senior notes due April 2027 (B2/B+/BB/Kroll: BB+) at par, in the middle of talk.

Overall secondary market tone stayed soft on Friday following the Labor Department’s September disappointing jobs report. The benchmark 10-year Treasury yield jumped 3 basis points to 1.605% after rising 4 bps on Thursday.

September’s nonfarm payroll employment rose by 194,000, much lower than the 500,000 analysts expected.

“Yesterday, everything was up – today, the market is softer, at least the high-yield market,” a source said. “Probably risk aversion.”

Energy junk bonds mostly were among the day’s winners in lighter secondary volume ahead of the Columbus Day holiday weekend.

West Texas Intermediate crude oil benchmark futures for November deliveries jumped $1.05 to settle the day at $79.35 a barrel.

Week ahead: Iliad and Brinks

The holiday-abbreviated week of Oct. 11 is set to get underway Tuesday with a sizable forward calendar in place.

European telecom Iliad Holdings SAS is in the market with a €3.6 billion equivalent four-part dollar/euro offering of senior secured notes (B2/B+).

The deal includes five-year notes and seven-year notes, with both maturities coming in tranches of $500 million minimum and €500 million minimum.

Iliad had been expected to price during the Oct. 4 week. However, timing was backed up into the week ahead, as order books have been slow to build, sources say.

Pricing is now expected on Wednesday, Oct. 13.

The timing is not necessarily an indication that the deal is struggling, a portfolio manager said on Friday.

“It's a large, complex, LBO transaction, and people are taking the time necessary to get their heads around it.”

Also in the week ahead, Monitronics International, Inc., which does business as Brinks Home, plans to price $1.1 billion of seven-year senior secured first-lien notes (Caa1/B-).

The deal is in the market with initial guidance in the 10% area, and is also expected to price on Wednesday.

The dollar-denominated high-yield new issue market, which saw $14 billion of issuance during the past week, and has been cranking at a clip of around $12 billion per week since Labor Day, is expected to maintain that strong, steady pace in the week ahead, sources say.

Bonanza holds

In the secondary on Friday, Bonanza Creek Energy, Inc.’s 5% senior notes due 2026 (B1/BB-/BB-) were “holding” stronger in thin trading, a source said.

The notes were quoted at 100¾ to the 100¾ area over the day.

The issue went out Thursday at 100½ bid, 101 offered.

Bonanza Creek and and post-merger entity Civitas Resources, Inc. sold $400 million of the notes on Tuesday at par to yield 5%, at the tight end of the 5% to 5¼% yield talk.

Harbour Energy trades

Harbour Energy plc’s 5½% senior notes due 2026 (BB-/BB) traded Friday at 99¾, 100 3/8, a source said.

The London-based oil and gas company priced $500 million of the notes on Thursday at par to yield 5½%.

The yield printed at the wide end of the 5¼% to 5½% yield talk. Initial guidance was in the low-to-mid 5% area.

Conduent better

Conduent Business Services, LLC and Conduent State & Local Solutions, Inc.’s 6% senior secured notes due 2029 (B1/BB-) were quoted Friday at 100½ bid on steady supply totaling $15 million, a market source said.

They picked up ½ point in trading on Friday.

The New York City-based provider of outsourcing services priced the notes Thursday in a $520 million offering at par.

The yield printed in the middle of official price talk and initial guidance set in the 6% area.

Frontier lower

Frontier Communications Holdings, LLC and Frontier Communications Parent, Inc.’s 6% second-lien secured notes due 2030 (Caa2/CCC+) were softer Friday at 99 5/8 on $22 million of paper traded, a source said.

The bonds had climbed Thursday to 100¼ bid, 100½ offered.

The Norwalk, Conn.-based telecom sold $1 billion of the notes on Tuesday at par, at the tight end of the 6% to 6¼% talk.

Sunoco dips

Sunoco LP and Sunoco Finance Corp.’s 4½% senior notes due 2030 (B1/BB-/BB) fell 1/8 point to trade at 100 3/8 bid during the session, a source said.

The notes saw $13.5 million of secondary volume.

The issuers priced $800 million of the notes on Tuesday at par, on the tight side of talk in the 4 5/8% area and inside of initial guidance in the high 4% area.

The Dallas-based master limited partnership, which provides wholesale fuel distribution services, dropped a proposed tranche of 10.5-year senior notes following the deal announcement.

$670 million Thursday inflows

The dedicated high-yield bond funds saw $670 million of net daily inflows on Thursday, according to a market source.

High-yield ETFs saw $580 million of inflows on the day.

Actively managed high-yield funds saw $90 million of inflows on Thursday, the source said.

News of Thursday's daily flows followed a Thursday report that the combined funds saw $294 million of net outflows for the week to the Wednesday, Oct. 6 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

The latest week's outflows follow a run of positive weekly flows seen in five of the six preceding week's, the market source said.

Indexes soften

The iShares iBoxx High Yield Corporate Bond ETF declined 26 cents to finish Friday at $86.76.

The KDP High Yield Daily index went out at 69.68 to yield 3.83%, compared to 69.69 and a 3.83% yield on Thursday, 69.68 and a 3.83% yield on Wednesday, 69.88 and a 3.76% yield on Tuesday and 69.90 with a 3.73% yield on Monday.

The CDX High Yield 30 index declined to 108.845 from 109.07 on Thursday, 109.017 on Wednesday, 109.04 on Tuesday and 109.12 at the start of the week.

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