Cleveland-Cliffs, Hannon Armstrong, Six Flags price; Energizer adds-on; Spirit AeroSystems at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 15 – The domestic high-yield primary market remained active on Wednesday with four drive-by deals pricing.

Six Flags Theme Parks Inc. priced an upsized $725 million of five-year senior secured notes (Ba2/BB-).

Cleveland-Cliffs Inc. priced a $400 million issue of 9 7/8% senior secured notes due Oct. 17, 2025 (Ba3/B+) at a discount.

Hannon Armstrong Sustainable Infrastructure Capital, Inc. priced a $400 million issue of five-year senior notes (/BB+/BB+).

And Energizer Holdings, Inc. priced an upsized $250 million add-on to its 6 3/8% senior notes due July 15, 2026 (B2/B+).

Meanwhile, it was a soft day for the secondary space with equities in the red and WTI crude oil futures again dipping below $20 a barrel in intraday trading.

Despite the weakness in the market, the new issues continued to perform well in active trading.

While the notes were coming off their highs, Spirit AeroSystems, Inc.’s 7½% senior notes due 2025 (Ba2/BB-) continued to trade at a steep premium in high-volume activity.

Sabre GLBL Inc.’s newly priced 9¼% senior notes due 2025 (Ba3/B+) were also coming in after skyrocketing in the aftermarket.

However, the notes also remained well above their issue price.

As Cleveland-Cliffs prepped a new offering, the company’s 6¾% senior notes due 2026 were trading off.

While the overall market was soft on Wednesday, it was a good day for airlines with American Airlines Group Inc.’s 3¾% senior notes due 2025 jumping after reaching an agreement with the Treasury Department on the terms of its bailout.

Four drive-by deals

The drive-through window of the high-yield new issue market remained busy on Wednesday.

Six Flags Theme Parks priced an upsized $725 million issue of senior secured notes due July 1, 2025 (Ba2/BB-) at par to yield 7%.

The issue size increased from $665 million.

The yield printed at the tight end of the 7% to 7¼% yield talk. Initial talk was in the low 8% area.

Cleveland-Cliffs extended a big discount to investors as it priced a $400 million issue of 9 7/8% senior secured notes due Oct. 17, 2025 (Ba3/B+) at 94.50 to yield 11.243%.

The coupon came on top of coupon talk. The yield came slightly inside of the 11¼% to 11½% yield talk.

Hannon Armstrong Sustainable Infrastructure Capital priced a $400 million issue of 6% five-year senior notes (/BB+/BB+) in what it expects to be a “green” deal.

And Energizer Holdings priced an upsized $250 million add-on to its 6 3/8% senior notes due July 15, 2026 (B2/B+) at 102.25 in a Wednesday drive-by, according to a syndicate source.

The execution renders a 5.765% yield to worst and a 5.935% yield to maturity.

The issue size increased from $200 million.

The price came at the rich end of price talk in the 102 area.

Spirit AeroSystems in demand

Spirit AeroSystems’ 7½% senior notes due 2025 dominated activity in the secondary space with the notes trading at a steep premium to their issue price.

The notes traded in a range of par to 102¼ during Wednesday’s session.

However, the notes traded off their highs and were changing hands in the par ¾ to 101½ context heading into the market close, a market source said.

With more than $232 million in reported volume, the notes were among the most actively traded in the secondary space.

Spirit AeroSystems priced an upsized $1.2 billion issue of the 7½% notes at par in a Tuesday drive-by.

The yield printed at the tight end of the 7½% to 7¾% yield talk. Initial guidance was in the low 8% area.

The deal was heard to be heavily oversubscribed and was upsized from $1 billion.

Sabre comes in

Sabre’s 9¼% senior notes due 2025 were weakening in active trading on Wednesday.

The notes traded as low as 102 7/8 during the session but closed out the day at 103 7/8, according to a market source.

The notes remained active with $22 million in reported volume.

The 9¼% notes traded as high as 105 on Tuesday but closed the day at 104¾.

Sabre priced a $775 million issue of the 9¼% notes at par in a heavily oversubscribed deal on Monday.

Cleveland-Cliffs trades off

As Cleveland-Cliffs prepped a new offering, the Ohio-based iron mining company’s 6¾% senior notes due 2026 were trading off.

The notes dropped 1¾ points to 85¼ in active trading. More than $16 million of the bonds were on the tape by the late afternoon.

While the notes were yielding a little over 10%, Cleveland-Cliffs’ newest offering looked cheaper, a market source said.

The 6¾% notes are also secured and have a similar maturity to the company’s latest offering.

However, the yield on Cleveland-Cliffs new offering was higher, causing the 6¾% notes to trade off.

“It’s about relative valuation,” the source said.

American Airlines jumps

American Airlines’ embattled 3¾% senior notes due 2025 jumped in decent volume on Wednesday.

The 3¾% notes jumped almost 6 points to close the day at 70.

The notes were posting gains after the airline industry reached an agreement with the Treasury Department on the terms of its aid package.

American Airlines will receive a grant of approximately $5.81 billion.

As part of the grant, American Airlines will issue the Department of Treasury a low-interest senior unsecured term loan of $1.713 billion and warrants for the purchase of 13.7 million shares of the company with a strike price of $12.51.

American also intends to apply for a $4.75 billion term loan from the Treasury and issue warrants for an additional 38 million shares with a strike price of $12.51, according to an 8-K filing with the Securities and Exchange Commission.

American Airlines priced a $500 million issue of the 3¾% notes at par on Feb. 20.

$1.175 billion Tuesday inflows

The dedicated high-yield bond funds continued to see big daily cash inflows on Tuesday, according to a market source.

High-yield ETFs saw $850 million of inflows on the day.

Actively managed high-yield funds saw $325 million of inflows on Tuesday, the source said.

Tuesday's inflows follow the $2.82 billion of new inflows to the combined funds on Monday, and $1.63 billion of inflows last Thursday, according to the source.

With only Wednesday's daily flows remaining to go into the tally the combined funds are tracking a massive $5.9 billion of inflows for the week to Wednesday's close.

Should that total materialize it would represent the second largest weekly inflows in the history of the market, trailing the record $7.1 billion seen in the week to April 1, just two weeks ago, the market source said.

Indexes drop

Indexes were posting losses on Wednesday after a mixed start to the week.

The KDP High Yield Daily index dropped 14 bps to close Wednesday at 64.15.

The index gained 66 bps on Tuesday after dropping 11 bps on Monday.

The ICE BofAML US High Yield index dropped 48.9 bps with year-to-date returns now negative 9.131%.

The index was up 91.4 bps on Tuesday and 120.7 bps on Monday.

The CDX High Yield 30 index sank 201 bps to close Wednesday at 95.65. The index dropped 11 bps on Tuesday after sinking 109 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.