Triton Water, Nesco, Trinseo price; secondary volatile; Ferrellgas under pressure; T-Mobile flat

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 17 – The domestic high-yield primary market saw three deals price on Wednesday.

Nesco Holdings II, Inc. priced a $920 million issue of eight-year second-lien notes (B3/B); Triton Water priced an upsized $770 million issue (from $670 million) of eight-year senior notes (Caa1/CCC+); and Trinseo Materials Operating SCA priced a $450 million issue of eight-year senior notes (B2/B).

Meanwhile, it was a volatile day in the secondary space with the market heavy in the morning as the 10-year Treasury yield shot past 1.66% in anticipation of the Federal Reserve Board’s announcement following its two-day policy meeting.

“Everything was for sale,” a source said.

However, following Fed Chair Jerome Powell’s afternoon press conference, the market reversed course and buyers came out of the woodwork.

“Everything was bid up,” a source said.

While the broader market was volatile, T-Mobile US Inc.’s three tranches of senior notes (Ba3/BB) were not. The notes were flat at their issue price for the majority of the session.

However, T-Mobile’s five-year paper outperformed the other tranches and closed the day with a slight premium.

Ferrellgas, LP’s two tranches of senior notes (B3/B-) were under pressure in the secondary space.

While the notes were trading off their lows heading into the close, they were still both well below their issue prices.

However, Yum! Brands, Inc.’s 4 5/8% senior notes due 2032 (B1/BB-) and International Game Technology plc’s 4 1/8% senior secured notes due 2026 (existing ratings Ba3/BB) held on to their premiums during Wednesday’s session.

Wednesday’s primary

Three issuers priced single dollar-denominated tranches to raise a combined total of $2.14 billion in the Wednesday session of the high-yield new issue market.

The action unfolded following an early Wednesday spike in the yield of the 10-year Treasury which took it within shouting distance of 1.7%, creating turbulence in equities, before it fell back to just over 1.64% as Powell mollified the markets by indicating that the central bank's present accommodative policies remain appropriate, a trader recounted.

As far as the junk market goes, turbulence in Treasuries has caused fixed-income investors to be less interested in crossover paper and in long-duration high-yield bonds, the trader said.

That needn't have worried anyone working on Thursday's trio of deals, all of which came on the heels of brief roadshows, carrying credit ratings in the mid-to-low single-B to triple-C range.

Nesco Holdings priced a $920 million issue of 5½% eight-year second-lien notes (B3/B) at par, inside of talk.

Triton Water priced an upsized $770 million issue (from $670 million) of 6¼% eight-year senior notes (Caa1/CCC+) at par, at the tight end of talk.

The notes ripped on the break and were marked at 102½ bid, 103 offered heading into the close.

And Trinseo Materials priced a $450 million issue of 5 1/8% eight-year senior notes (B2/B) at par, in the middle of talk (see related stories in this issue).

T-Mobile flat

T-Mobile’s newly priced three tranches of senior notes moved in heavy volume in the secondary space.

Each tranche had more than $100 million in reported volume.

However, the notes had little movement in terms of price.

The 2 5/8% senior notes due 2026 were the best performing of the three tranches despite carrying the tightest coupon.

The notes were marked at par ¼ bid, par ½ offered heading into the close, according to a market source.

However, the 3 3/8% senior notes due 2029 and the 3½% senior notes due 2031 were both wrapped around par and stood poised to close the day at 99 7/8 bid, par 1/8 offered.

T-Mobile priced a $1.2 billion tranche of the 2 5/8% notes, a $1.25 billion tranche of the 3 3/8% notes and a $1.35 billion tranche of the 3½% notes at par on Tuesday.

The 2 5/8% notes priced at the tight end of yield talk in the 2¾% area; the 3 3/8% notes priced in the middle of yield talk in the 3 3/8% area; and the 3½% notes priced at the tight end of yield talk in the 3 5/8% area.

Ferrellgas under pressure

Ferrellgas’ two tranches of senior notes were under pressure during Wednesday’s session.

While the notes were trading off their lows heading into the close, both tranches were still well below their issue prices.

The 5 3/8% senior notes due 2026 and the 5 7/8% senior notes due 2029 followed the same trajectory.

“It was ugly, they both went straight down the hole,” a source said.

Hedge funds that were shorting the notes and flippers that got caught on the wrong side of the trade contributed to the selling pressure.

Bids as low as 97¼ were getting hit earlier in the session.

However, the notes improved dramatically alongside the broader market and both the 5 3/8% notes and 5 7/8% notes ran back up to 99 in the afternoon.

However, 99 appeared to be a new resistance level for the notes, a source said.

The 5 3/8% notes stood poised to close the day at 99 bid, 99½ offered.

The 5 7/8% notes stood poised to close the day at 98¾ bid, 99¼ offered.

Both tranches had about $100 million in reported volume during Wednesday’s session.

Ferrellgas priced a $650 million issue of the 5 3/8% notes and an $825 million issue of the 5 7/8% notes at par on Tuesday.

The 5 3/8% notes priced in the middle of the 5¼% to 5½% yield talk; the 5 7/8% notes priced in the middle of the 5¾% to 6% yield talk.

Yum! at a premium

Yum! Brands’ 4 5/8% senior notes due 2032 continued to trade at a premium despite the rough tape early in the session.

Yum!’s 4 5/8% senior notes due 2032 traded as low as par early in the session.

However, they bounced back and were marked at par 3/8, bid, par 5/8 offered heading into the close.

There was more than $90 million in reported volume.

Yum! is a strong credit and the notes are expected to improve on a stronger day for the market.

Yum! priced an upsized $1.1 billion, from $1.05 billion, issue of the 4 5/8% notes at par on Tuesday.

The yield printed in the middle of the 4½% to 4¾% yield talk.

International Game outperforms

International Game Technology’s 4 1/8% senior notes due 2026 were the outperformers of the deals to price during Tuesday’s session.

The 4 1/8% notes were wrapped around 101 heading into Wednesday’s close.

There was about $45 million in reported volume.

International Game Technology priced an upsized $750 million, from $500 million, issue of the 4 1/8% notes at par on Tuesday.

Sizable Tuesday outflows

The dedicated high-yield bond funds sustained approximately $1.13 billion of net outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $897 million of outflows on the day.

Indexes mixed

Indexes were mixed on Wednesday.

The KDP High Yield Daily index dropped 10 points to close Wednesday at 69.07 with the yield now 4.22%.

The index shaved off 3 points on Tuesday and 3 points on Monday.

The ICE BofAML US High Yield index dropped 23.8 bps with the year-to-date return now 0.242%.

The index was down 0.3 bps on Tuesday and 0.7 bps on Monday.

The CDX High Yield 30 index gained 26 bps to close Wednesday at 108.9.

The index dropped 14 bps on Tuesday after gaining 3 bps on Monday.

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