Venture Global sells upsized junk bond deal; Jefferies gains; Air Canada loses altitude

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 29 – Venture Global LNG, Inc. ruled the high-yield primary space on Thursday with a deal that nearly doubled in size from announcement to pricing.

Meanwhile, the secondary space was well bid on Thursday although volume remained light with new and recent deals continuing to dominate the tape.

Jefferies Finance LLC and JFIN Co-Issuer Corp.’s 5% senior notes due 2028 continued to gain in active trading on Thursday following a strong break the previous session.

However, Air Canada’s 3 7/8% senior secured notes due 2026 (Ba2/BB-/BB) continued to lose altitude after an initial jump out of the gate.

Outside of new issues, PBF Energy’s capital structure was making large gains in active trading after the petroleum refiner and supplier announced earnings.

Meanwhile, the trend of outflows was interrupted over the past week with high-yield mutual and exchange-traded funds adding $996 million through Wednesday’s close, according to the Refinitiv Lipper Fund Flow Report Newsline.

Thursday primary

Venture Global LNG, Inc. priced a massively upsized $2.5 billion amount (from $1.5 billion) of senior secured bullet notes (Ba3/BB) in two tranches on Thursday.

Both of them, $1.25 billion of 3 7/8% eight-year notes and $1.25 billion of 4 1/8% 10-year notes, priced tight to talk, at par.

The deal, the biggest from a debut issuer thus far in 2021, was substantially done in reverse inquiry, sources said.

In the crossover market Centene Corp. priced $1.8 billion of split-rated senior notes (Ba1/BBB-/BB+) in two bullet tranches: a $500 million add-on to the 2.45% senior notes due July 15, 2028 which priced at 100.875, rich to price talk in the 100.75 area, and $1.3 billion of 2 5/8% 10-year bullet notes which priced at par, on top of talk.

The transaction came off of the high-yield syndicate desk but made more sense for crossover investors and investment-grade accounts, in the opinion of one high-yield portfolio manager who passed on the deal, taking the view that from a high-yield perspective there is not enough value in Centene as it will be a while before it becomes investment grade, but it eventually will get there.

Investment-grade buyers, on the other hand, are getting nearly twice the spread they would get in an investment-grade deal, so their perspective is different, the investor added.

Away from the crossover and double-B upper tiers of the speculative-grade credit spectrum, Thursday had a pair of lower-rated junk deals cross the finish line bearing scratches and bruises indicative of investor pushback.

Akumin Inc. priced a downsized $375 million issue (from $500 million) of seven-year senior secured notes (B2/B-) at par to yield 7½%.

The yield printed at the wide end of the 7¼% to 7½% yield talk, and well wide of initial guidance in the high 6% area.

The order book was heard to be around deal-size on Thursday morning, a trader said.

And Allen Media LLC priced an upsized $350 million add-on (from $340 million) to its 10½% senior notes due Feb. 15, 2028 (Caa1/B-) at 98.5 to yield 10.824%.

The issue price came on top of revised price talk, but significantly cheap to earlier official talk of par to 101, and far below initial guidance in the 103 area, sources said.

In addition to the price concessions, a structural revision practically assured investors of a few extra seasons in the sun to clip the big Allen Media coupon. The first call premium, which comes into play in February 2023, was increased by a whopping 512.5 basis points, to 113 from 107.875.

Akumin and Allen Media followed a path to the high-yield woodshed beaten earlier in the week by Penn Virginia Corp. which priced its $400 million issue of 9¼% five-year senior notes (/B/B) at a discount to yield 9½%, at the wide end of talk. The deal also underwent covenant changes.

Thursday's action cleared the active dollar-denominated new issue calendar ahead of the coming weekend.

Jefferies gains

Jefferies’ 5% senior notes due 2028 continued to gain in active trading on Thursday following a strong break.

The 5% notes traded as high as 102 during Thursday’s session.

However, they were changing hands in the 101 3/8 to 101½ context heading into the market close, a source said.

There was more than $22 million in reported volume.

The 5% notes were marked at par 7/8 bid, 101 1/8 offered heading into Wednesday’s close.

Jefferies priced a $1 billion issue of the 5% notes at par on Wednesday.

Pricing came in the middle of yield talk in the 5% area.

Air Canada loses steam

Air Canada’s 3 7/8% senior secured notes due 2026 continued to lose steam on Thursday.

The 3 7/8% notes were changing hands in the par 1/8 to par 3/8 context at the end of the market day, a source said.

They closed out the previous session at par ¼ bid, par ½ offered.

The book for the offering was crowded and the notes saw a strong break, trading as high as 101.

However, with pricing tight, the notes “came back down to earth,” a source said.

PBF Energy’s earnings

While new paper continued to dominate the tape, PBF Energy’s senior notes also shared the spotlight with the notes making large gains in high-volume trading following the company’s earnings report.

PBF Energy’s 9¼% senior notes due 2025 were the most active of the capital structure.

They rose about 2 points to 93 1/8 in the late afternoon, according to a market source.

There was more than $19 million in reported volume.

PBF’s 6% senior notes due 2028 and 7¼% senior notes due 2025 were among the major gainers of Thursday’s sessions.

The 6% notes gained about 3½ points to close the day at 52½. The 7¼% notes were up about 3 points to 60.

The bump in the notes came after the petroleum refiner and supplier reported second-quarter earnings.

The numbers were good with the company beating analyst expectations, a source said.

Indexes mixed

The KDP High Yield Daily index rose 3 basis points to close Thursday at 70.23 with the yield now 3.66%.

The index was up 2 bps on Wednesday, was down 3 bps on Tuesday and up 3 bps on Monday.

The CDX High Yield 30 index rose 9 bps to close Thursday at 109.52. The index was up 8 bps on Wednesday after dropping 28 bps on Tuesday and 12 bps on Monday.

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