Alliant prices; Carnival at a premium; Summit, Polynt-Reichhold outperform in HY market

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 20 – One issuer, Alliant Holdings, navigated the dollar-denominated high-yield primary bond market on Wednesday, landing a downsized add-on transaction.

Meanwhile, recent issues were in focus in the secondary space after a deluge of more than $5 billion flooded the sector on Tuesday.

However, with the 10-year Treasury yield hitting its highest level since May and the market awash in new paper, several of the issues were putting in lackluster performances.

Avantor Funding, Inc.’s 3 7/8% senior notes due 2029 (B2/BB-/BB) were stuck at par in active trading, despite reports that the deal was heavily oversubscribed.

While Lamb Weston Holdings, Inc. two tranches of senior notes (Ba3/BB+) struggled below par early in Wednesday’s session, they caught a bid heading into the close and ended the day flat.

Carnival Corp.’s 6% senior notes due 2029 (B3/BB-/B+) were in focus with the notes trading at a premium to their issue price.

Summit Midstream Holdings LLC and Summit Midstream Finance Corp.’s 8½% senior secured notes due 2026 outperformed with the notes trading several points above their discounted issue price.

Polynt-Reichhold’s 5 3/8% senior secured notes due 2026 (B1/BB-) continued to gain after a strong break that propelled the notes to a 101-handle.

Dollar market: Alliant

A comparatively quiet session in the dollar-denominated high-yield new issue market saw one issuer, Alliant Holdings, price a two-part deal that downsized by $250 million.

It included a downsized $225 million add-on to the Alliant Holdings Intermediate, LLC/Alliant Holdings Co-Issuer, Inc. 4¼% senior secured notes due Oct. 15, 2027 (B2/B) that priced at 100.5 to yield 4.154%.

The tap decreased from $475 million, and came at the cheap end of the 100.5 to 100.75 talk.

The deal also included a $450 million tranche of new eight-year senior notes (Caa2/CCC+) that priced at par to yield 5 7/8%. The yield printed at the tight end of yield talk in the 6% area.

The shift of proceeds from the bonds, all of it extracted from the secured portion of the deal, increased the size of the concurrent term loan to $725 million from $475 million.

Upcoming

One deal, a $500 million offering of eight-year senior notes (expected ratings B3/B-) from Option Care Health, Inc. started a brief roadshow on Wednesday.

With initial guidance in the high 4% area, it is scheduled to price Friday.

As to the existing dollar-denominated active forward calendar it has been radio silence on the $1.1 billion offering of seven-year senior secured first-lien notes from Dallas-based home security alarm company Monitronics International, Inc. (Brinks Home), sources say.

It was initially in the market with guidance in the 10% area.

However, pricing has backed up significantly, with conversations taking placing in the elevens, according to market sources.

At the same time investors are pushing back against the deal's covenant package, they add.

Europe: Polynt-Reichhold

Five-year senior secured notes in three tranches priced Tuesday by Polynt-Reichhold, in issuance upsized to €1.35 billion from €1.3 billion, were higher on Wednesday morning, a London-based market source said.

The dollar-denominated 5 3/8% notes were 101.3 bid, 102.3 offered. Those notes were 101 1/8 bid, 101¼ offered on Tuesday afternoon. The upsized $760 million tranche (from $750 million) priced at par.

The euro-denominated 4 3/8% notes were par ¾ bid, 101¾ offered on Wednesday morning. The €325 million tranche priced at par.

The Euribor plus 437.5 bps notes were par 5/8 bid 101 5/8 offered. The €325 million floating-rate tranche also priced at par.

Idling

Avantor Funding’s 3 7/8% senior notes due 2029 fell flat in the aftermarket, despite the deal being heavily oversubscribed.

The 3 7/8% notes traded in a tight range of par to par ¼ during Wednesday’s session and were poised to close the day at par, a source said.

There was $48 million in reported volume.

Avantor priced an $800 million issue of the 3 7/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 4% area.

While the deal was heard to be three-times oversubscribed, Wednesday was a rough day for rate-sensitive names as the 10-year Treasury yield neared a six-month high.

Lamb Weston’s two tranches of senior notes also struggled.

The 4 1/8% senior notes due 2025 and the 4 3/8% senior notes due 2027 dropped below par for much of Wednesday’s session.

The 4 1/8% notes and 4 3/8% notes were trading at roughly the same level. Both dropped as low as 99 3/8 during the session but stood poised to close the day at par, a source said.

There was $93 million and $66 million in reported volume respectively.

Lamb Weston priced a $970 million tranche of the 4 1/8% notes and a $700 million tranche of the 4 3/8% notes at par on Tuesday.

The 4 1/8% notes priced at the wide end of the 4% to 4 1/8% yield talk; the 4 3/8% notes priced on top of yield talk, which saw the notes coming 25 basis points behind the 4 1/8% notes.

Carnival in focus

Carnival’s 6% senior notes due 2029 were in focus on Wednesday with the notes putting in a solid performance although they remained on a par-handle.

The 6% notes traded as high as 101 1/8 during the session although they came in as the session progressed.

The 6% notes were changing hands in the par 5/8 to par 7/8 context heading into the close, a source said.

There was more than $200 million in reported volume.

Carnival priced an upsized $2 billion, from $1.5 billion, issue of the 6% senior notes at par on Tuesday. The yield printed in the middle of yield talk in the 6% area.

Summit reaches

While several recent deals were struggling on Wednesday, Summit Midstream’s 8½% senior secured second-lien notes due 2026 were not among them.

The notes were trading several points above their discounted issue price of 98.5.

The 8½% notes traded as high as 101 1/8 and were changing hands in the par 5/8 to par 7/8 context heading into the close, a source said.

There was more than $33 million in reported volume.

Energy remained a hot sector on Wednesday as crude oil futures continued to climb.

WTI crude oil futures settled at $83.87, an increase of 91 cents or 1.1%, on Wednesday.

Summit priced a $700 million issue of the 8½% notes at 98.5 to yield 8.883% on Tuesday.

The coupon came at the tight end of the 8½% to 8¾% coupon talk. The issue price came rich to price talk of 98.

$914 million Tuesday inflows

High-yield ETFs had a hefty $914 million of daily inflows on Tuesday, their biggest daily inflows since June 23, according to a market source.

Actively managed funds saw $19 million of inflows on Tuesday.

The combined funds are tracking $2 billion of inflows for the week to Wednesday's close, the biggest since April.

However, should inflows of that magnitude surface when Lipper reports the weekly flows of the asset classes on Thursday afternoon, the funds would simply be recouping the previous week's $1.8 billion of outflows, which were the biggest outflows since June, the market source said.

Indexes

The KDP High Yield Daily index gained 1 point to close Wednesday at 69.43 although the yield remained unchanged for the second consecutive day at 3.84%. The index shaved off 1 point on Tuesday and 2 points on Monday.

The CDX High Yield 30 index gained 6 bps to close Wednesday at 109.39. The index gained 16 bps on Tuesday after slipping 5 bps on Monday.

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