Primary prices whopping $7.4 billion; forward calendar grows; Tegna improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 9 – Nine issuers priced a combined 11 tranches of junk on Wednesday to raise a whopping $7.4 billion, as what has become a post-Labor Day torrent of new-issue business continued to play out.

Characteristic of a red-hot high-yield market, all 11 tranches priced at the tight ends of talk.

Six of the nine issuers upsized their offerings.

Five of those issuers came as Wednesday drive-bys (see related stories in this issue).

Meanwhile, trading activity in the secondary space remained muted with focus on the active pipeline of new deals.

While volume outside of new deals remained light, the market was strong as equities and crude oil futures recovered from Tuesday’s sell-off.

However, the wild fluctuations in equities were also sidelining trading activity.

“Yesterday people were digesting the move in equities and what it meant for credit,” a source said. “They come in today thinking they’ve figured it out and the market rips.”

While Wednesday was a strong day, some institutional buyers were starting to leave the space, which some expected to become a growing trend, a source said.

However, new paper remained in demand and continued to see strong breaks.

Tegna Inc.’s recently priced 4¾% senior notes due 2026 (Ba3/BB-) were improved in active trading on Wednesday after a lackluster reception in the secondary space on Tuesday.

Outside of the new paper, Staples Inc.’s 7½% senior notes due 2026 made large gains in active trading.

Tegna improves

Tegna’s 4¾% senior notes due 2026 improved on Wednesday after a lackluster break the previous session.

The notes were up almost 1 point.

They were marked at par ¾ bid, 101¼ offered at the market close, a source said.

The notes were among the most active in the secondary space with $60 million on the tape heading into the market close.

The notes were “getting hit on the way out the door” on Tuesday, ending the previous session below par, a source said.

The broadcasting company is a high-beta name and the notes’ lackluster performance on Tuesday was most likely due to general market conditions, sources said.

Tegna priced an upsized $550 million issue of the 4¾% notes in a Tuesday drive-by.

The yield printed at the tight end of the 4¾% to 5% yield talk. Initial guidance was in the 5% area.

The issue size increased from $400 million.

Staples gains

Staples’ 7½% notes due 2026 made large gains in active trading on Wednesday.

The notes were up almost 4 points to close the day at 93.

The notes were active with more than $20 million on the tape.

The rise in the notes was most likely the result of earnings, a source said.

$178 million Tuesday outflows

The dedicated high-yield bond funds sustained $178 million 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 sustained $288 million of outflows on the day.

However actively managed high-yield funds were positive, seeing $110 million of inflows on Tuesday, the source said.

As the market awaits a Thursday report from the Refinitiv Lipper Fund Flow Report Newsline, on the weekly cash flows of the various asset classes, the combined high-yield funds are tracking $288 million of net outflows in the week to Wednesday's close, a period of significant volatility in the stock market, the source said.

Indexes mixed

Indexes were mixed on Wednesday after all opened the week with losses.

The KDP High Yield Daily index was down 6 basis points to close Wednesday at 67 with the yield now 5.35%.

The index dropped 23 bps on Tuesday.

The ICE BofAML US High Yield index gained 14.4 bps with the year-to-date return now 0.436%.

The index was down 28.5 bps on Tuesday.

The CDX High Yield 30 index rose 61 bps to close Wednesday at 105.5.

The index sank 80 bps on Tuesday.

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