Junk stampede continues: $3.62 billion prices; Sunoco adds; Rocket, ZF North America hold

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 17 – In a big Wednesday in the high-yield bond primary market, five issuers priced tranches of dollar-denominated junk, for a combined face amount of $3.62 billion.

Meanwhile, the secondary space firmed on Wednesday after selling pressure dragged year-to-date returns back into negative territory.

The cash bond market was up about 1/8 point as Treasury yields came in with markets adjusting to a higher-for-longer rate environment, a source said.

With the primary market pipeline once again buzzing, new issuance dominated the tape with the deals to price amid the heaviness of the previous session putting in solid performances.

Rocket Software Inc.’s 9% senior secured notes due 2028 (B3/B-/BB-) were holding above par despite some pushback during bookbuilding.

ZF North America Capital Inc.’s two tranches of green bullet notes (Ba1/BB+) also held on to a small premium in heavy volume.

Sunoco LP’s two tranches of senior notes (Ba3/BB/BB+) were the outperformers of the deals to price on Tuesday with both tranches adding in active trade, although they remained on a par handle.

$3.62 billion

In a drive-by, Jane Street Group, LLC and JSG Finance, Inc. priced an upsized $1.4 billion issue (from $1.25 billion) of seven-year senior secured notes (Ba2/BB/BB+) at par to yield 7 1/8%, in the middle of talk.

The rest of Wednesday’s action came at the conclusion of brief roadshows.

France-based Vallourec SA priced $820 million of eight-year senior notes (Ba2/BB+/BB+) at par to yield 7½%, 12.5 basis points inside of talk.

The deal was playing to $2 billion of demand on Wednesday morning, according to a trader who added that some accounts walked away when pricing discussions dropped below 7 5/8%.

Elsewhere Dublin-based Flutter Entertainment plc priced two tranches of Flutter Treasury DAC five-year senior secured notes (Ba1/BBB-/BBB).

A $525 million tranche priced at par to yield 6 3/8%, at the tight end of yield talk, and a €500 million tranche priced at par to yield 5%, 12.5 bps inside of talk.

Empire Communities Corp. priced a $475 million issue of five-year senior notes (B/B-) at par to yield 9¾%, at the tight end of talk.

And Tutor Perini Corp. priced a $400 million issue of 11 7/8% five-year senior notes (Caa1/CCC+) at 97.71 to yield 12½%.

The yield printed at the tight end of the 12½% to 12¾% yield talk. Price talk also specified that there would be an original issue discount.

The new Tutor Perini 11 7/8% notes traded to a premium, late Wednesday afternoon, when a trader spotted them at 98½ bid, 98 5/8 offered.

In the wake of Wednesday’s action three dollar deals are parked on the active new issue calendar.

At least one is expected to price before the end of the week.

Six Flags Entertainment Corp. and Six Flags Theme Parks Inc. are expected to price $850 million of eight-year senior secured notes (Ba2/BB) on Thursday.

Pending official talk, initial guidance has the notes coming to yield in the high-6% to 7% area.

The deal, which came into the market with $300 million of reverse inquiry, was heard to be playing to $1 billion of demand on Wednesday afternoon, a trader said.

In addition to the $2.45 billion of dollar-denominated business on the active calendar, there is a full slate of euro-denominated business, €1.73 billion, poised to price ahead of Friday’s close.

Rocket Software holds

In secondary trading, Rocket Software’s Tuesday-priced 9% senior secured notes due 2028 were holding above par in heavy volume on Wednesday despite seeing some pushback during bookbuilding.

The 9% notes were trading in the par to par ¼ context throughout the session, a source said.

There was $72 million in reported volume.

Rocket Software priced a downsized $800 million, from $1 billion, issue of the 9% notes at par on Tuesday.

The deal underwent investor-friendly covenant changes, a source said.

The downsize was not considered a good sign for the market.

The concurrent two-tranche multicurrency term loan was upsized – to $880 million from $735 million and €300 million from €250 million.

ZF at a premium

ZF North America’s two tranches of green bullet notes were also holding small premiums to their issue prices in active trade.

The 6 7/8% senior notes due 2032 and 6¾% senior notes due 2030 were both trading in the par 1/8 to par 3/8 context throughout the session, a source said.

ZF North America priced both an $800 million tranche of the 6¾% and a $700 million tranche of the 6 7/8% notes at par on Tuesday.

The 6¾% notes priced at the tight end of yield talk in the 6 7/8% area; the 6 7/8% notes priced at the tight end of yield talk in the 7% area.

The deal played to strong demand, particularly the shorter-duration tranche, with $3.7 billion in orders across both tranches, a source said.

Sunoco adds

Sunoco’s two tranches of senior notes were the outperformers of the deals to clear the primary market on Tuesday with both tranches adding as the market firmed on Wednesday.

Sunoco’s 7% senior notes due 2029 added 1/8 to ¼ point to trade in the par 3/8 to par 5/8 context, a source said.

There was $69 million in reported volume.

The 7¼% senior notes due 2032 were slightly outperforming their shorter-duration counterpart.

The notes were up about ¼ point to trade in the par ½ to par ¾ context, a source said.

There was $70 million in reported volume.

Sunoco priced a $750 million tranche of the 7¼% and a $750 million tranche of the 7% notes at par on Wednesday.

The 7¼% notes priced in the middle of yield talk in the 7¼% area; the 7% notes priced in the middle of yield talk in the 7% area.

The deal played to strong demand which was skewed towards the longer duration notes, a source said.

Fund flows

The dedicated high-yield bond funds sustained a hefty $725 million of net daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $555 million of outflows on the day.

High-yield ETFs sustained $170 million of outflows on Tuesday, the source said.

With only Wednesday’s daily cash flows remaining to go into the tally the combined funds are tracking a whopping $3.3 billion of net outflows on the week that was set to conclude with Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index added 9 basis points to close Wednesday at 49.32 with the yield now 7.37%.

The index was down 21 bps on Tuesday and 20 bps on Monday.

The ICE BofAML US High Yield index inched up 4 bps with year-to-date returns now negative 0.291%.

The index was down 40.7 bps on Tuesday and 27.2 bps on Monday.

The CDX High Yield 30 index shaved off 2 bps to close Wednesday at 105.17.

The index dropped 17 bps on Tuesday and 59 bps on Monday.

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