Sabre upsizes, prices; Genworth soars; New Fortress at a premium; Pike flat

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 20 – While only one deal cleared the domestic high-yield primary market on Thursday, the month has already broken the record for the highest volume for new issuance of any August in the history of the market.

Sabre GLBL Inc. priced a massively upsized $850 million issue of five-year senior secured notes (Ba3/B).

While the month has broken records, sources predict a slowdown in new deal activity in the week ahead.

Meanwhile, it was another sidewise day in the secondary space with the market largely unchanged.

New paper remained in focus albeit with different trajectories.

Genworth Mortgage Holdings, Inc.’s 6½% senior notes due 2025 (Ba3/BB-) were in focus on Thursday with the notes skyrocketing.

While coming in from their highs, New Fortress Energy Inc.’s 6¾% senior secured notes due 2025 (B1/B+) continued to trade with a healthy premium in the secondary space.

However, Pike Corp.’s 5½% senior notes due 2028 (B3/CCC+) fell flat in active trading.

For the first time in several weeks, high-yield mutual and exchange-traded funds saw their first outflow – $301 million left the space through Wednesday’s close, according to a Refinitiv Lipper Fund Flow report.

Sabre vastly upsized and tight

Sabre GLBL had Thursday's high-yield primary market spotlight to itself as it priced a massively upsized $850 million issue (from $300 million of five-year senior secured notes (Ba3/B) at the tight end of talk.

The deal had a valedictory feel to a New York trader who forecast that the late summer lull which typically overtakes the new issue market in August may have finally arrived, a couple of weeks, and nearly $50 billion later than usual.

An attempt to canvas syndicate sources on this subject appeared to support this trader's color, as some email messages engendered automatic “on vacation” bounce-backs.

Biggest August ever

Although the sound of crickets often pervades the high-yield primary market in August, the August 2020 new issue market would, by contrast, sound like a rocket engine at liftoff.

With seven market sessions remaining to be played out, August 2020 is by far the biggest August in the history of the market.

Its $46.2 billion of issuance in 74 tranches far outdistances the runner up, August 2012 which had $29.4 billion in 52 tranches.

Average August issuance, going back to and including 2010 is $18.2 billion.

Average deal volume is 34 tranches.

As it happens, the August crickets chirped their loudest in the high-yield primary market during August 2011, which put up the lowest numbers in the past decade with just $1.3 billion pricing in five tranches.

Genworth skyrockets

Genworth’s 6½% senior notes due 2025 skyrocketed in the aftermarket on Thursday.

The notes traded up to 102 in high-volume activity.

With more than $133 million on the tape, the 6½% notes were among the most actively traded of Thursday’s session.

The notes’ performance was attributed to their coupon, which was relatively hefty given the recent tightness of the market, a source said.

The mortgage insurance company priced a $750 million issue of the 6½% notes at par in a Wednesday drive-by.

Pricing came tighter than yield talk in the 6¾% area. Initial guidance was for a yield of 7% to 7¼%.

New Fortress trades up

New Fortress’ 6¾% senior secured notes due 2025 were trading with a healthy premium in the aftermarket.

While trading off their highs following a strong break, the 6¾% notes continued to trade in the par ½ to 101 context during Thursday’s session, a source said.

The notes traded to a high of 101 after breaking for trade on Wednesday.

While the company is from the embattled energy sector, the notes carried a decent coupon for secured paper.

The natural gas company priced a $1 billion issue of the 6¾% notes at par on Wednesday.

Pricing came at the tight end of yield talk in the 6 7/8% area.

The deal was upsized from $800 million.

Pike flat

Pike’s 5½% senior notes due 2025 fell flat in the aftermarket with the notes largely wrapped around par during Thursday’s session, a source said.

The notes were strong out the gate on Wednesday and traded to a high of 101 soon after breaking for trade.

However, the notes quickly lost steam and closed out the previous session at par ¼.

The notes continued to trade in the 99 7/8 to par ¼ context in high-volume activity on Thursday.

The pricing was tight, especially for low-rated unsecured notes.

The service provider to utility companies priced a $500 million issue of the 5½% notes at par on Wednesday.

Pricing came at the tight end of the 5½% to 5¾% yield talk.

$120 million Wednesday outflows

The dedicated high-yield bond funds sustained $120 million of net outflows on Wednesday, the most recent session for which data was available at press time, according to a market source.

The hemorrhaging took place among the high-yield ETFs which sustained $235 million of outflows on the day.

Actively managed high-yield funds, on the other hand, saw $115 million of inflows on Wednesday, the source said.

News of Wednesday's daily flows preceded a Thursday afternoon report that the combined funds sustained $301 million of net outflows in the week to Wednesday's close, according to the Refinitiv Lipper Fund Flow Report Newsline.

Indexes mixed

Indexes remained mixed on Thursday as they have been throughout the week.

The KDP High Yield Daily index gained 1 basis point to close Thursday at 66.72 with the yield now 5.55%. The index shaved off 1 bp on Wednesday, 3 bps on Tuesday and 9 bps on Monday.

The ICE BofAML US High Yield index shaved off 4.3 bps with the year-to-date return now negative 0.13%.

The index gained 3.7 bps on Wednesday and 7.5 bps on Tuesday after sliding 2.9 bps on Monday.

The CDX High Yield 30 index gained 16 bps to close Thursday at 104.57.

The index dropped 36 bps on Wednesday after gaining 29 bps on Tuesday and 48 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.